The European Central Bank today turned down a request from Monte dei Paschi for more time to meet capital requirements. With few options for closing its €5 billion capital shortfall, the bank requires decisive action before the ECB’s December 31 deadline. Italy might use the current political vacuum as an opportunity to close or drastically scale back the bank. It is an in-between period in which no prominent politician could be stuck with the blame for the bank’s failure.
The European Commission fined three international banks a combined €0.5 billion for their roles in manipulating the Euribor benchmark between 2005 and 2008.
U.S. banks are overextended in the energy sector, and the problem is not limited to coal mines and oil exploration. Bank of America and SunTrust Bank might end up owning the bankrupt La Paloma natural gas power plant in California after the plant found itself operating at a loss with unusually low energy prices. The power plant filed bankruptcy papers on Tuesday.
The economy of India is in crisis, facing a desperate shortage of cash after a government recall of 85 percent of the country’s currency a month ago. India today is seeing a run on the banks in a form the world has rarely seen, as depositors and holders of recalled currency wait in long lines to compete for the limited supply of new currency. Many workers have not been paid in weeks because there is no currency to pay them with. Small shops, with few shoppers, have furloughed their workers. In theory, the situation should improve over time as new currency is printed and put into circulation. On the other hand, as long as cash remains scarce, the need to hoard cash will discourage spending, and this can form a vicious circle that persists long after the level of cash is restored to a theoretically sufficient quantity. A month in, the lines at banks are no shorter and living conditions in India’s cities and villages continue to deteriorate.