Exclusive: ECB rejects Monte Paschi's request for more time to raise cash - source

Fri Dec 9, 2016 3:11pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Silvia Aloisi and Paola Arosio

MILAN (Reuters) - The European Central Bank has rejected a request by Italy's Monte dei Paschi di Siena (BMPS.MI: Quote) for more time to raise capital, a source said on Friday, a decision that piles pressure on the Rome government to bail out the lender.

Italy's third-largest bank, and the world's oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euro ($5.3 billion) rescue plan in the face of fresh political uncertainty.

The ECB's supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.

The Italian government is likely to intervene in the next few days, possibly as early as this weekend, to bail out the bank to prevent it being wound down, banking sources said. Some bankers say the government could seize the opportunity to bolster other ailing Italian banks, not just the Tuscan lender.

A failure of the bank could erase the savings of thousands of retail investors, jolt the wider banking sector and spark a financial crisis in the euro zone's third-biggest economy.

The treasury declined to comment, but a government source said Rome was ready to use an emergency decree to authorize a bank rescue if necessary.

Monte dei Paschi said on Friday night that it had yet to receive an ECB response to its request for more time, and that it was pressing ahead with its private rescue plan. Its board met on Friday night and would resume deliberations on Sunday.

CEO Marco Morelli could still launch an 11th-hour attempt to raise money by reopening an offer for retail investors to swap 2.1 billion euros of subordinated bank debt into equity, a source familiar with the matter said. This is despite the market watchdog saying the offer is too risky for ordinary investors.   Continued...

The main entrance of the Monte dei Paschi bank headquarters is seen in Siena, Italy March 13, 2012.  REUTERS/Max Rossi/File Photo