Italy central bank approves Monte Paschi bailout request

Sat Jan 26, 2013 8:07pm EST
 

By Gavin Jones and Silvia Aloisi

ROME/MILAN (Reuters) - Italy's central bank on Saturday gave its approval to a request by scandal hit bank Monte dei Paschi di Siena for 3.9 billion euros ($5.3 billion) of state loans, the latest step in the battle to revive the ailing bank.

The Bank of Italy's backing was the final stage required to free up the financial help for Italy's third biggest lender, which this week revealed loss-making derivatives trades that could cost it about 720 million euros.

After a meeting that lasted most of Saturday, the central bank issued a brief statement to say its board had given "a favorable opinion" on the bailout. It gave no further details.

The scandal surrounding Italy's oldest bank has hit its share price and prompted questions about how the risky deals could have been hidden from regulators.

The issue has shot to the center of the campaign for a February 24-25 national election and politicians have blamed the Bank of Italy (BOI), led by current European Central Bank President Mario Draghi at the time of the deals, for failing to spot them.

At Saturday's meeting the BOI's four member board, chaired by Governor Ignazio Visco, had to judge whether the bank's current and future capital adequacy and stability were sufficient to receive the loans.

The Tuscan bank was forced to seek state aid last year for the second time since 2009 after becoming one of just four European lenders that failed to meet tougher capital requirements set by regulators.

Under the loan scheme the bank will issue 3.9 billion euros of bonds to the Italian Treasury, with just under half of these replacing 1.9 billion euros of existing state help.   Continued...

 
Monte Dei Paschi bank headquarters is pictured in Siena January 25, 2013. REUTERS/Stefano Rellandini