Italy criticizes ECB over Monte Paschi capital decision

Thu Dec 29, 2016 4:38pm EST
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By Silvia Aloisi and Balazs Koranyi

MILAN/FRANKFURT (Reuters) - Italy's economy minister has said the European Central Bank should have explained more clearly why it nearly doubled its estimate of the capital shortfall for the ailing bank Monte dei Paschi di Siena (BMPS.MI: Quote), which is being bailed out by the state.

In unusually critical comments of the euro zone's banking supervisor, Pier Carlo Padoan told a newspaper that the ECB's new capital target was the result of a "very rigid stance" in its assessment of the bank's risk profile.

"It would have been useful, if not kind, to have a bit more information from the ECB about the criteria that led to this assessment," Padoan told the financial newspaper Il Sole 24 Ore.

Monte dei Paschi, Italy's third biggest lender and the world's oldest, said on Monday the ECB had estimated its capital shortfall at 8.8 billion euros ($9.20 billion), compared with a 5 billion-euro gap previously indicated by the bank.

The higher capital requirement substantially increases the cost of the bank's rescue by the government after it failed to raise the 5 billion euros on the market.

The Bank of Italy said in a statement later on Thursday that based on its own calculations the Treasury may have to put up around 6.6 billion euros to salvage the lender, including 2 billion euros to compensate around 40,000 retail bond holders.

The size of the state intervention has raised concern that Italy's newly created 20-billion-euro bank bailout fund may not have enough money for other weak banks. The government says the fund is sufficient.

The rest of the money Monte dei Paschi needs will come from the forced conversion of its subordinated bonds into shares, in line with European rules on bank crises. The lender fared the worst in EU-wide banking stress tests published in July.   Continued...

A man walks in front of the Monte dei Paschi bank in Siena, central Italy, January 29, 2016. REUTERS/Max Rossi