Italy seeks to bor­row 20bn eu­ros to help bank­ing sec­tor

Kuwait Times - - BUSINESS -

The Ital­ian gov­ern­ment de­cided yes­ter­day to seek par­lia­men­tary ap­proval to bor­row 20 bil­lion eu­ros to un­der­write the sta­bil­ity of its wob­bly bank­ing sec­tor, start­ing with a likely bail-out of No 3 lender, Monte dei Paschi di Siena, as early as this week.

Monte dei Paschi, re­cently judged the weak­est of the Euro­pean Union’s ma­jor banks, needs to dis­pose of a moun­tain of bad loans and raise 5 bil­lion eu­ros in cap­i­tal by the end of this month or else face the risk of be­ing wound down by the Euro­pean Cen­tral Bank. Italy’s Econ­omy min­is­ter said on Mon­day the money it was seek­ing could be used to guar­an­tee ad­e­quate liq­uid­ity in the bank­ing sys­tem. “Th­ese re­sources could also be used as part of a pro­gram to boost cap­i­tal at banks,” he said in a press con­fer­ence.

A gov­ern­ment bailout could come as early as this week, if Monte dei Paschi fails to pull off its own pri­vately funded res­cue plan. But it could prove to be po­lit­i­cally ex­plo­sive for the week-old ad­min­is­tra­tion of Prime Min­is­ter Paolo Gen­tiloni, given that in­vestors are re­quired to bear losses un­der EU bailout rules.

Ear­lier on Mon­day, how­ever, the bank re­ceived some rare good news in re­la­tion to its fal­ter­ing res­cue plan. A key in­vestor that was re­con­sid­er­ing its com­mit­ment to the plan is­sued a state­ment say­ing that its con­cerns had been re­solved. “(Quaes­tio)... has agreed to ap­prove the Term Sheet for the se­nior bridge loan as agreed with the fi­nanc­ing banks,” the in­vestor, pri­vate bank res­cue fund At­lante, said.

At­lante has com­mit­ted to spend­ing 1.5 bil­lion eu­ros to buy some of Monte dei Paschi’s bad loans, de­spite hav­ing ex­pressed “deep reser­va­tions” in a Dec. 17 let­ter over the terms of a bridge loan that Monte dei Paschi had se­cured as part of the sale of bad loans. Even with At­lante’s com­mit­ment to par­tic­i­pate in the pri­vate res­cue bid, Monte dei Paschi is still not as­sured to raise enough money to avoid the need of a state bailout.

Its 5 bil­lion eu­ros cash call is meant to con­clude on Thurs­day, but is not un­der­writ­ten by a con­sor­tium of in­vest­ment banks. Monte dei Paschi shares closed be­fore both At­lante’s state­ment and the gov­ern­ment’s an­nounce­ment, hav­ing lost 11 per­cent and wiped out a week’s gains. — Reuters

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