Monte dei Paschi must close a deficit of 8 thousand mde: ECB – The Financial

The European Central Bank (ECB) asked the Italian bank Monte dei Paschi that you need to close a capital deficit of 8 thousand 800 million euros (9 thousand 200 million dollars), higher than the 5 billion euros estimated previously, informed the banking institution.

Friday, the Italian Government approved a decree for the rescue of Monte dei Paschi, after it failed to win the backing of investors for a desperate increase of capital by 5 billion euros.

The bank said on Monday that he had officially requested the Friday the ECB to move to a “recapitalization, as a precautionary measure.

The recapitalization prudential is a type of state intervention in a bank with problems, but that is still solvent. Involves a rescue initial on the part of investors and shareholders, although the Government may also buy shares or bonds under market conditions stipulated by the state aid scheme of the European Union.

In its response, the ECB said that the calculation of the capital that you think you need the bank on the basis of a deficit that arises from the test of solvency which is made in Europe to the major banks this year, in which Monte dei Paschi was the only Italian bank that did not meet the criteria in an adverse scenario.

The ECB noted that the bank is solvent, but explained that the liquidity position has deteriorated rapidly from the end of November and the 21st of December.

The European Commission said Friday that it would work with the Italian Government to establish the conditions for a bailout of Monte dei Paschi.

government Funds, as a last resort: Bundesbank

the president of The German bank Bundesbank Jens Weidmann, said that there should be strict conditions for the use of government funds in the rescue of the Italian bank Banca Monte dei Paschi.

"The government funds should be used as a last resort," said Weidmann in an interview with the German newspaper Bild.

Weidmann also said that the measures planned by the Italian government, should be applied only to banks that are healthy. "If you use government funds, these should be matched with public funds because of the high tax debt," he said.

he Considered that the Italian government wants to circumvent a system that the legislators of the European Union, spent years in build to ensure that investors, not taxpayers, pay the bill for banks in trouble.

“In principle, we have agreed on new rules. These mainly should protect the taxpayers and to pour the responsibility on the investors. Government funding is only offered as a last resource, therefore, the requirements are strict" he said.

The governments of the European Union used nearly 2 billion euros ($ 2.1 billion) in state aid for the rescue of the financial sector from 2008 to 2014. New rules enacted since the crisis make it difficult to much more state intervention, especially to shore up lenders viable.

With information from Reuters and Bloomberg.