I feel like over the past couple months the issues in Europe have dropped off the radar with China dominating the headlines. Unfortunately thinks are not improving across the pond. The article below outlines the issues Italy is having with its banking system. We all know that once the banking system goes watch out below!

This article is posted by Reuters earlier this morning.

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Some Monte Paschi customers withdraw savings as bank’s stock sinks

MILAN, Jan 20 (Reuters) – Some Monte dei Paschi customers have been pulling savings out of the Italian bank, its chief executive said on Wednesday, as it faces a crisis over a mountain of bad loans that has halved its market value this year.

CEO Fabrizio Viola did not say how much money savers had withdrawn, or when the outflow began, though he said the fall in deposits was “limited” and that the bank could cope with it as he sought to reassure customers and investors.

Italian bank shares have lost 20 percent so far this year as investors, already rattled about global economic growth, have sold out of a sector with low profitability and about 200 billion euros ($218 billion) of loans that are unlikely to be repaid.

Monte Paschi – Italy’s third-biggest bank – has lost the most ground as it is perceived to be the most vulnerable; it has the highest level of bad loans as a proportion of assets and was the worst performer in a 2014 health check of euro zone lenders.

The Tuscan-based bank’s stock, which had sunk 15 percent on Monday and 14.4 percent on Tuesday, was suspended from trading several times after falling 18.2 percent on Wednesday. The plunge helped dragged down all other Italian banking stocks, with Carige shedding 12.7 percent and Banco Popolare falling more than 6 percent.

“Of course clients turning to our local branches are worried about what they read,” Viola said in a statement.

“At present the size of the funding lost due to clients who decided to move part of their savings elsewhere is limited and anyway below levels seen during the previous crisis the bank faced in February 2013 which was overcome brilliantly.”

The 2013 crisis he was referring to was when the world’s oldest bank, already badly weakened by the euro zone debt crisis, was hit by a scandal about loss-making derivatives trades.

Monte Paschi’s bonds also suffered on Wednesday, with a September 2020 subordinated paper yielding 24 percent, up from 19 percent at Tuesday’s close and just above 10 percent on Friday.

A Milan bond trader said both retail and some institutional investors were trying to sell the bank’s debt. “Everyone is trying to get out. Retail for sure but I saw also a couple of fund managers today,” the trader said.

FRAGILE

Italian lenders’ huge pile of soured loans is tying up capital and holding back fresh credit that could support a fragile economic recovery in the country.

A boost to bank stocks from merger speculation following an overhaul of cooperative lenders last year has fizzled out as a deal has yet to materialise.

Monte Paschi was told by the European Central Bank to seek a buyer after the 2014 health check. It appointed UBS and Citi as advisers more than a year ago but has so far failed to find one.

A rescue of four small lenders at the end of last year carried out under new EU rules which imposed losses on shareholders and junior bondholders has meanwhile caused concerns among Italians, traditionally large holders of bank debt.

Since then, there have been concerns that customers could move money out of lenders perceived as weaker, to those banks considered stronger, say industry players.

“Over the past few days many have been wondering about the pace at which people closed their accounts and sold bank bonds,” said Giuseppe Sersale, a fund manager at Anthilia Capital Partners. “I wouldn’t call it a bank run but there are definitely outflows,” he added.

Viola said the plunge in Monte Paschi shares was not a reflection of the bank’s fundamentals, which he said had improved in the last quarter of 2015.

He said revenues rose both compared with the third quarter and from a year earlier while costs were cut, adding that liquidity levels at the end of 2015 were at their highest in four years and the bank’s capital base was adequate. The bank reports its annual results on Feb.5.

Viola said he was confident the bank would weather the current crisis and that the recent fall in the stock did not appear to be linked to sales of big stakes.

($1 = 0.9161 euros) (Additional reporting by Valentina Za and Danilo Masoni; Editing by Keith Weir and Pravin Char)