THE shockwaves from Brexit have been almost as severe on the Tiber as on the Thames. Markets fear that Britons’ vote to leave the European Union on June 23rd presages weaker growth in Europe and still-lower interest rates. That is not good for banks—and Italy’s, labouring under the EU’s heaviest bad-debt burden and tied to a frail economy, have been walloped (see chart). Shares in UniCredit, the biggest, have slid by one-third. Those of second-ranked Intesa Sanpaolo, though it is in far better shape, have shed 30%.

Most troubled is Italy’s third-biggest lender (and the world’s oldest): Monte dei Paschi di Siena, founded in 1472. Its shares tumbled on July 4th and 5th after the leak of a request from the European Central Bank for it to reduce its bad-loan pile from last year’s €46.9 billion ($52 billion), or 35% of all its lending, to €32.6 billion by 2018. (That was already the plan, said the bank, but the...Continue reading