BMPS needs funding and its recapitalization process has to take place quickly to avoid a potential collapse of the third-largest bank in Italy and contagion to other banks.
The Italian banking system has been for a long time a drag in the country’s economy due to its high level of non-performing loans.
“With the economy turning around, nonperforming loans (NPLs) appear to be stabilizing at about 18 percent of loans, one of the highest in the euro zone,” the International Monetary Fund said in a report issues last summer.
“High NPLs are adversely affecting profitability—profit margins are among the lowest in Europe—and weighing on banks’ ability to extend credit,” the IMF added.
Credit Ratings agency Fitch said in a note on Tuesday that the referendum result could also damage plans for recapitalization of other Italian banks, including UniCredit.
That would “have negative implications for the broader banking sector, whose attractiveness with investors has already reduced significantly during 2016. The sector’s ability to access the institutional markets for funding and capital, which has become more difficult and expensive this year, could deteriorate further,” Fitch warned.