Italy’s Monte dei Paschi di Siena may have to be nationalised unless it can raise more than twice as much capital as originally planned, to meet new EU requirements.
The bank must find an extra €2.5 billion to shore up its finances, the Government said, highlighting its continuing weakness after a huge derivatives scandal surfaced this year. The difficulties faced by Monte dei Paschi, which has strong local political and business links, are a microcosm of wider problems in Italy, where a tax fraud case against former Prime Minister Silvio Berlusconi could bring down the Government.
If the lender fails to raise enough funds, state aid given to the bank earlier this year would have to be converted into shares in the bank, EU Competition Commissioner Joaquin Almunia said after meeting Italy’s Economy Minister on Saturday.
The European Commission, under pressure to prevent taxpayers footing the bill for bank bailouts, demanded the tougher restructuring plan as a condition for its approval of the €4.1 billion Monte dei Paschi got from the state this year.
The capital increase, to be carried out in 2014, was previously expected to amount to €1 billion, while the new figure matches the lender’s current market capitalisation.
The world’s oldest bank said yesterday it expected to approve the new plan – the latest measure in a painful recovery process for the 540-year-old Tuscan lender – on September 24.
There’s no chance on the planet that they can raise €2.5 billion on the market within 12 months
Along with the derivatives scandal, Monte dei Paschi is at the centre of a judicial probe over its expensive acquisition of rival Antonveneta in 2008.
Known as “Daddy Monte” in Siena where it is the biggest private employer, the bank sits at the heart of local control and political patronage.
“There’s no chance on the planet that they can raise €2.5 billion on the market within 12 months. They are heading towards nationalisation,” Giuseppe Bivona, a former investment banker who has been advising consumer group Codacons in a series of lawsuits against Monte Paschi, said.
The stock, which was worth €3 at the time of the ill-fated Antonveneta buy and has lost 60 per cent of its value since the eurozone crisis began hitting Italian lenders two years ago, fell three per cent to €0.21 euro yesterday.
“I don’t see how the market could take the news well today. It will be difficult to find someone to shell out all that money,” a Milan trader said.
Monte dei Paschi’s biggest shareholder is a cash-strapped foundation, a charitable entity with close ties to local politicians in Siena, home to the bank’s ornate headquarters, and the surrounding Tuscany region.
The foundation has had to cut its stake in the bank to 33.5 per cent to pay back huge debts it had taken on to keep its grip on the lender, and is looking to further reduce its holding.