FRANKFURT — Italy’s biggest bank reported a huge loss on Tuesday, foreshadowing the possibility that many financial institutions across Europe could be forced to acknowledge the full extent of their own problems under increased regulatory scrutiny.
The unexpectedly large fourth-quarter loss of $21 billion posted by the Italian bank UniCredit, which is based in Milan, came hours after the European Central Bank disclosed details of its plan to dig deeper into the books of banks operating across Europe.
The timing of UniCredit’s announcement appeared to be coincidental, but it highlighted the vulnerabilities still lurking within the balance sheets of many institutions more than five years after the financial crisis led to a recession from which Europe and its banks have still not fully emerged.
The ECB, newly empowered to oversee eurozone banks, plans to finish its review of institutions under its jurisdiction by October. Analysts say they expect more banks to soon write down the value of their bad loans and other troubled assets.
Mario Draghi, the central bank’s president, has warned that some banks may be declared insolvent and forced out of business. Italy’s banking industry in particular is thought to have many potentially problem cases, as that politically unsettled country continues to labor with chronically slow growth and entrenched special interests that have impeded efforts to overhaul the economy.
New York Times