UBS CEO says Italy bailouts were inevitable after new EU rules

by Dramelin 1:30 AM 0 comments

UBS Chief Executive Sergio Ermotti believes that the recent state bailout of Italian banks was unavoidable due to new rules on "bail-ins" from European authorities which would have affected retail investors in the country.
"No, it (the state bailout) should not happen that way but it was almost inevitable considering the fact that bail-in-able bonds, so highly risky bonds .
were placed with retail investors," he told CNBC last Thursday in an exclusive interview.
A bail-in is seen as an alternative to a bailout - the use of state funds to help out an ailing bank.
A bail-in is the rescue of a financial institution by making its creditors and depositors take a loss on their holdings.
The European Union drew up new rules which opted for the use of bail-ins after many years of state bailouts since the euro zone sovereign debt crisis which had left the taxpayer on the hook.
However, this new regime carries big political risks, especially in Italy where bonds of banking institutions are a popular asset for retail investors.
"I think that was a wrong decision to allow this (the bail-in rules) to happen a few years ago.
So it was almost inevitable, but politically speaking, and socially speaking (it) was not acceptable in my point of view to have retail bondholders to be bailed in," Ermotti added.