Italian Bank Monte Paschi Wins Support from EU and Italy
European Union and Italy have agreed to provide help to ailing financial behemoth Banca Monte dei Paschi di Siena under tougher conditions. The conditions include more capital hike by the bank and stricter cost cutting. Italyâ€™s third largest bank is suffering due to higher exposure to bond investment and derivatives scandal.
European Competition Commissioner Joaquin Almunia has stressed that the Italian bank will have to raise more capital. The bank was planning to raise Euro 1 billion, but the new conditions expect the bank to raise at least two billion Euro. Additionally, Monte Paschi will have to reduce the Italian bond holding. The bank holds government bonds worth 29 billion at interest rate of 9 percent.
Monte Paschi reported quarterly loss of 279 million euro during the second quarter. The bank has registered fall in net interest income. Monte Paschi has collective loss of 7.9 billion euro during the past two year period.
The European commission is investigating the role of bank in anti-competitive market practices. Italy has been reluctant to nationalise banks with weak financial condition. The bank will have to sell the government bonds. However, the period for the said sale has not been decided yet.