Italy rescues Monte dei Paschi after it fails to get cash



Estimated read time: 2-3 minutes

This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.

ROME (AP) — The Italian government stepped in Friday to rescue Monte dei Paschi di Siena after Italy's third-largest lender failed to raise the 5 billion euros ($5.2 billion) it needed to stay afloat.

The government passed the decree early Friday, saying it was 100 percent guaranteeing the bank's retail customers with part of a 20 billion-euro fund approved by parliament to guarantee the stability of Italian banks.

"This will allow the bank to continue its industrial plan," Economy Minister Carlo Padoan said. "Italy's third-largest bank will finally return fully in force to operate in support of the Italian economy and in a context of full tranquility for its savers and its employees."

Shares in Monte dei Paschi were suspended Friday on the Milan stock exchange.

MPS said late Thursday it hadn't secured a key anchor investor to pump money in, and that its efforts to swap debt for equity had netted only 2.45 billion euros, setting the stage for the government bailout.

Under the decree, the government will temporarily support MPS by offering it capital under a formula agreed with the European commission called "precautionary recapitalization," under which the state offers assurances that the bank is solvent and that the government will get its money back.

Premier Paolo Gentiloni said the rescue plan achieves two "fundamental objectives" of the government: guaranteeing "as much as possible" MPS' clients and "making our banking system stronger."

He told a press conference that Friday would be an important day for MPS to "reassure its savers and its future."

The bank's troubles come amid broader concerns over Italy's banking system, which is weighed down by some 360 billion euros in bad loans.

Monte Paschi is by far the most vulnerable after it was listed as the worst-performer in this summer's European Union stress tests of banks.

The consumer advocate organization Codacons estimated the Italian bailout fund could cost each Italian family 833 euros.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

The Associated Press

    SIGN UP FOR THE KSL.COM NEWSLETTER

    Catch up on the top news and features from KSL.com, sent weekly.
    By subscribing, you acknowledge and agree to KSL.com's Terms of Use and Privacy Policy.

    KSL Weather Forecast