Monte Paschi delays approval of new rescue plan

Tue Sep 24, 2013 2:46pm EDT
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By Silvia Aloisi and Stefano Bernabei

MILAN/ROME (Reuters) - The board of Monte dei Paschi di Siena (BMPS.MI: Quote), Italy's third biggest lender, delayed approval on Tuesday of a restructuring plan aimed at winning European Union approval for a 4.1 billion-euro ($5.5 billion) state bailout and averting nationalization.

The world's oldest bank was brought close to financial collapse by the euro zone debt crisis. It is engulfed in a judicial probe over its costly purchase of a rival in 2007 and loss-making trades in financial derivatives which it made in the deal's aftermath.

Under pressure from Brussels, the bank must embark on a toughened-up turnaround plan that includes a 2.5 billion euro capital increase in 2014 - more than twice the amount originally penciled by its managers.

EU Competition Commissioner Joaquin Almunia said this month that should Monte Paschi fail to raise the funds on the market, the government would have to convert into equity the state loans it gave to the bank in February, effectively taking it over.

The plan had been due to be approved on Tuesday but after a board meeting the bank said this had been postponed because of "the need for the European Commission to complete formal procedural aspects." No new date was given.

"There are details that still need to fall into place. The substance of the operation has been agreed," CEO Fabrizio Viola told reporters.

However, a source familiar with the matter told Reuters: "This is not a formal or procedural matter. There is one issue of substance on which the discussion (with the EU authorities) is still ongoing." The source did not elaborate.

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The Monte dei Paschi bank logo is seen on the main entrance of the bank's headquarters in Siena March 12, 2012. REUTERS/Max Rossi