Italy approves Monte dei Paschi bailout
Italy’s cabinet has approved a bailout of beleaguered lender Banca Monte dei Paschi di Siena after it failed to raise $5bn from private investors.
The news comes after the government was given the go-ahead earlier in the week for a €20bn fund to support the country’s troubled banking sector.
The bank confirmed overnight that it would receive the necessary “extraordinary and temporary financial support” from the bailout package.
Italian Prime Minister Paolo Gentiloni said earlier on Friday that his cabinet had approved the rescue and would be using part of the fund. He said the first step in the process will be to strengthen Monte dei Paschi’s ability to procure liquidity. In addition, Gentiloni said the bank can press on with a sale of state-backed bonds.
Monte dei Paschi said in a statement that its attempt to raise money from private investors had “not ended with success”.
“In particular, there were no manifestations of interest on the part of an anchor investor who could have put a significant investment in the bank and this negatively affected decisions of institutional investors,” it said.
Economy minister Pier Carlo Padoan said: ''This intervention will guarantee the capital requirement of Monte Paschi and will therefore allow the bank to proceed with its business plan, which European authorities will need to approve.
"It will be the third Italian bank which finally will return to operate at full throttle in support of the Italian economy and with the confidence of its savers and employees.''
IG's Joshua Mahony said: "The EU forced bail-in means that some 40,00 retail bond holders will have to take a hit in the process, which amounts to a large amount of unhappy voters. However, in the grand scheme of things, something has to be done to avoid contagion and with the bank better funded, they are likely to be able to raise capital more easily in the future."