BMPS reels from ECB dead­line re­ports

Kuwait Times - - BUSINESS -

MI­LAN:

Italy’s Monte dei Paschi di Siena saw its stock tum­ble more than 10 per­cent yes­ter­day over re­ports the ECB had de­nied it more time to raise the cash it needs to avoid be­ing wound down. The world’s old­est bank had on Wed­nes­day asked the Euro­pean Cen­tral Bank for two more weeks to find the funds, say­ing po­lit­i­cal in­sta­bil­ity cre­ated by Prime Min­is­ter Mat­teo Renzi’s res­ig­na­tion had left in­vestors re­luc­tant to com­mit funds. But the ECB’s su­per­vi­sory board was re­ported to have said no Fri­day, up­ping pres­sure on the Ital­ian gov­ern­ment to bail out the ail­ing in­sti­tu­tion to avoid a fi­nan­cial cri­sis in the eu­ro­zone’s third-largest econ­omy.

The board is be­lieved to have ruled two ex­tra weeks would be of lit­tle use in turn­ing around the historic bank. Both Monte dei Paschi di Siena (BMPS) and the ECB de­clined to com­ment when con­tacted by AFP. The Ital­ian bank’s new CEO Marco Morelli, who took over the reins in Septem­ber, had a meet­ing at the fi­nance min­istry on Fri­day to take stock, ac­cord­ing to a source close to the min­istry who de­clined to con­firm the re­ports of the ECB’s de­ci­sion.

The bank was due to hold a board meet­ing later Fri­day. The sav­ings of thou­sands of re­tail in­vestors would be lost if it went belly up. The coun­try’s third­biggest bank is try­ing to pull off a five bil­lion euro ($5.38 bil­lion) equity in­jec­tion and had re­quested an ex­ten­sion of a dead­line to find the money from the end of De­cem­ber to mid-Jan­uary. It has lost nearly 85 per­cent of its mar­ket cap­i­tal­iza­tion since the start of the year. It also emerged as the worst per­former from Euro­pean Bank­ing Au­thor­ity (EBA) stress tests in July.

Bank­ing cri­sis woes

Renzi’s res­ig­na­tion has added to deep wor­ries about the fail­ure of the Ital­ian bank­ing sec­tor - which fea­tures no fewer than 700 banks - to make mean­ing­ful progress to­wards con­sol­i­da­tion. Non-per­form­ing loans on their books amount to a com­bined 360 bil­lion eu­ros, roughly a third of the eu­ro­zone’s to­tal bad debt. Italy is in po­lit­i­cal limbo fol­low­ing Renzi’s crush­ing ref­er­en­dum de­feat on Sun­day. Pres­i­dent Ser­gio Mattarella is cur­rently hold­ing po­lit­i­cal con­sul­ta­tions to try and reach an agree­ment on who should be made care­taker PM.

The next gen­eral elec­tion had been sched­uled for early 2018 but could be brought for­ward by up to a year. Though Renzi’s cen­tre-left Demo­cratic Party (PD) is cur­rently lead­ing in the polls, the out­go­ing PM’s down­fall has opened the door to the pos­si­bil­ity of the pop­ulist antieuro Five Star move­ment com­ing to power. Among those in the run­ning for the top job are Fi­nance Min­is­ter Pier Carlo Padoan - a sea­soned econ­o­mist with the po­ten­tial to re­as­sure fi­nan­cial mar­kets and a jit­tery Europe - and For­eign Min­is­ter Paolo Gen­tiloni. Renzi, 41, is also be­ing touted as a pos­si­ble con­tender for his own job and could cite the BMPS prob­lem as a rea­son for him to stay on and en­sure the po­lit­i­cal sta­bil­ity needed to avert a bank­ing cri­sis. — AFP

MI­LAN: This photo taken on Jan 19, 2016 shows the logo of the Monte Dei Paschi di Siena bank. — AFP

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