As investors continue to watch Britain, and more specifically the pound nervously, wondering where the fall in value will end, across the channel a potentially even more concerning spectre is looming.

Italy’s banks have been a thorn in Europe’s side for many years, but now, with more uncertainty and concern following the Brexit vote, Italy’s financial sector has been forced into a potentially disastrous political corner.

Italy’s banks collectively have around $400 billion in bad loans, and have provisions in place for under half of that amount. With an adult employment rate lower than any EU country apart from Greece, and public debt at over 100% of GDP, Italy’s banks are likely to need a substantial cash injection in order to be sustainable, and not destroy any prospects for economic growth in the country. However, in Italy, it’s not going to be as simple as that.

Even in the event that Italy could somehow talk are divided and cynical European Union into coughing up billions of dollars, the cash injection itself would potentially be detrimental to average citizens. EU rules state that in order for a bank – any bank – to receive a bailout, bondholders must first take losses. In other words, those who have purchased bonds  will receive no return in exchange for the entity itself being saved. This rule was introduced based on the premise that bonds of this nature were only available to institutional investors, high net worth businesses and individuals who could afford to make the sacrifice. However, in Italy the rules are different and close to €2.5 billion in bank bonds are owned by retail investors. A cash injection to the banks would remove that amount from average citizen’s wallets.

But options are now limited, as global investors move away from Britain and Europe, and Italy is seen as something of a pariah in the financial world. Sophisticated investors are waiting to see if there is a limit to the economic turmoil, and if political figures are willing – or even able – to make any difference, or create some sense of stability in the troubled nation. Italy is home to Monte dei Paschi Siena, the world’s oldest bank, and if it were to fail, it could be seen as the symbolic death of the banking system as it stands today. Certainly, consideration must be given as to whether it’s the Eurozone or the structure of the banking systems in Europe that needs to be under review, but Italy may be left with little choice but to remove itself from a group of countries that no longer has the ability to offer it the support it needs.