MILAN, (MILLAT+APP/AFP) – The Italian government
approved a bailout plan to rescue the country’s struggling banks on Friday, with Monte dei Paschi di Siena (BMPS) likely the first in line to receive state aid.
The announcement by Prime Minister Paolo Gentiloni comes after Monte
dei Paschi, the world’s oldest bank, said it had failed to raise five billion euros ($5.2 billion) from the markets to shore up its capital base.
BMPS is at the centre of a crisis in Italy’s financial sector, which
includes some 700 banks and is buckling under the weight of bad loans estimated to total 360 billion euros.
The plan approved at a late-night cabinet meeting taps into a package
of up to 20 billion euros approved by parliament on Wednesday.
Finance Minister Pier Carlo Padoan said the funds would be
“sufficient to fulfil the needs as defined by stress tests” designed to determine whether a bank has sufficient capital.
BMPS said after the announcement it would seek to take advantage of
the bailout.
Italy’s third-biggest bank launched a bid to sell fresh shares this
week under plans to raise five billion euros to stay afloat.
BMPS announced on Thursday that the fundraising attempt had failed.
“It was not possible to attain the sum of five billion euros,” the
bank said in a statement, adding the operation had been hampered by a lack of so-called anchor investors.
The bank had already acknowledged late Wednesday that it had failed
to attract a cornerstone investor — a key sign of market confidence — after pinning its hopes on a big Qatari take-up.
A separate debt-for-equity swap offer to replenish the bank’s coffers
reaped just over two billion euros.
The plan additionally entailed selling off 27.6 billion euros in bad
loans.
Seeking to stop any runaway crisis in the banking industry, the
Italian government had made clear it was ready to step in if necessary.