Italy is preparing to inject about 6,500 million to Monte dei Paschi – Investing.com Spain

By Stefano Bernabei and Silvia Aloisi

ROME/MILAN (Reuters) – The Italian Government will inject probably around 6,500 million euros for the rescue of the third largest bank in the country, Monte dei Paschi di Siena (MI:), more than initially expected, said Tuesday sources close to the matter.

The highest cost of the state bailout is due to the fact that the European Central Bank has revised the capital deficit of the bank in 8,800 million euros from a previous estimate of 5,000 million.

The bank asked for state aid -in the form of recapitalisation preventive – last week after their plan to capture 5,000 million euros from private investors to fail.

A capital injection of 6,500 million euros would give the Italian Government a stake of around 70 percent in the entity.

The 2,300 million euros remaining should get from the conversion into shares of subordinated bonds in the hands of institutional investors, as required by the new european regulation for dealing with banking crises.

A recapitalisation remand is a type of state intervention in a bank with difficulties is still solvent. This only means a rescue modest of investors, although the Government may buy stocks or bonds only in terms of the market backed by those in charge of state aid of the EU in Brussels.

Under the plan proposed by Italy, the Government will compensate around 40,000 investors who own some € 2,000 million in debt junior bank, which will convert their securities into shares.

retail investors will be able to change these actions for bonds senior and the State shall repurchase the shares of the bank. The plan needs the approval of the EU, which could take in to arrive between two and three months.

The ECB, which is the end of an inspection of the bank’s loan portfolio, maintained a tough stand on its capital deficit to be “on the safe side and to help restore confidence in the bank”, the sources said.

The bank toscano, the oldest in the world, will use one-third of the 20,000 million approved by the Italian Government to help institutions with problems.

The actions and titles of the bank have been suspended from trading until details of the rescue plan, as the price at which the Government will purchase the shares of the bank, are clarified.

Other entities expect to benefit from the support of the Government, including two regional banks – Popolare di Vicenza and Veneto Banca – and the entity Carige, based in Genoa.

legal Notice: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn’t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.