Italy said yesterday it was not planning any immediate steps to prop up troubled Banca Monte dei Paschi di Siena despite growing concern the country’s third largest bank may have to raise more capital or seek state aid.
“No intervention is expected in the coming hours. We are monitoring the situation as agreed with the European Union,” Treasury undersecretary Pier Paolo Baretta said yesterday.
Monte dei Paschi would hold an extraordinary board meeting today to address European Central Bank (ECB) requests on bad loans, a source close to the matter said.
Monte Paschi, saddled with €47bn ($52bn) of non-performing loans, is among the most exposed on a list of weak banks whose pile of bad debts and capital shortfalls are threatening contagion to other European Union nations.
It has been told by the ECB to slash these debts by 40% over three years.
The world’s oldest bank, which has already taken state aid, has already tapped investors for €15bn since 2008.
The bank was not available for comment yesterday.
Last month’s British vote hurt to leave the EU hurt investor appetite for bad debts, making it tougher and potentially more expensive for lenders to tackle the question.
Banking analysts estimate the ECB demands could require additional writedowns at Monte Paschi of around €4bn, forcing it to turn to the market or resort to state aid.
Shares in the bank, which fell around 30% on Monday and Tuesday, were up 9.8% at 1045 GMT.
On Tuesday Italian market watchdog Consob banned short selling on the stock for yesterday’s trading session.
The latest EU stress test results are due on July 29.
The EU’s bank resolution directive allows temporary state aid if a bank is found to have a capital shortfall under the stress test.
On Wednesday, German finance minister Wolfgang Schaeuble said in its talks with the European Commission Italy was not seeking any exceptions from EU banking rules. Morgan Stanley said Italy’s big economic contraction and bad loan portfolios made it most vulnerable to stress test fallout.
“We believe it is Monte dei Paschi that remains most at risk, and our analysis suggests it could be required to strengthen capital by €2-6bn,” the broker said in a research note.
A spokesman for UBI Banca reiterated yesterday the lender had no plans on the table for a tie-up with Monte dei Paschi after Il Messaggero newspaper said the government viewed it as an option.