Monte dei Paschi makes final push to raise €5bn

Trying to avoid a state bailout....

Monte dei Paschi makes final push to raise €5bn

Picture by Gregorio Borgia AP/Press Association Images

The world's oldest bank is pressing ahead with its plan to raise €5 billion before the year is out, as it seeks to avoid being bailed out by the Italian government.

The board of Monte dei Paschi di Siena, which is Italy's third largest bank, met on Sunday and decided that it would stick to its debt-for-equity swap offer which could see losses for retail investors holding up to €2.4bn of bonds.

Monte dei Paschi had asked the European Central Bank (ECB) for more time to secure the private investment, but failed to secure a proposed extension until January 20th. It is now counting on private investors to rescue it by December 31st. Thus far, there has been little interest in the private sector recapitalisation scheme from investors, though rumours continue to circulate that Qatar could come to the rescue.

If the bank collapses, it would threaten the stability of other financial institutions in Italy, including its biggest bank, UniCredit.

It was reported last week that Italy was preparing to take a €2bn controlling stake in Monte dei Paschi, after its future was thrown in doubt following former prime minister Matteo Renzi's defeat in a referendum on constitutional reform.

The bank was declared to be Europe's most in-danger financial institution after stress tests in July.

A source close to the board explained the current state-of-play to Reuters:

"There's still time. Qatar is in the game and available to put in the amount that is being talked about."

However, another source views the plan as a desperate move:

"The ECB has not responded yet. There's no government yet. The bank has got nothing to lose."