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EU Commission agrees to extend sale deadline for Monte dei Paschi
Global Banking & Finance Review®
Company
By Valentina Za and Giuseppe Fonte
MILAN (Reuters) -The European Commission on Tuesday approved revised restructuring targets for Italian bank Monte dei Paschi di Siena (MPS) and a new deadline for the government to sell its controlling stake.
Italy owns 64% of MPS following a 2017 rescue that cost taxpayers 5.4 billion euros. Rome is preparing to pump more money into the Tuscan bank to cover part of a 2.5 billion euro ($2.6 billion) capital raising based on the size of its stake.
The EU Commission said it had deemed acceptable Italy’s request for more time for the re-privatisation of the bank, after efforts to meet an initial end-2021 deadline failed last year due to the collapse in talks to sell MPS to rival UniCredit.
“The set of revised commitments adequately counterbalances the revision of the deadline,” the Commission said, without providing further details.
A person briefed on discussions with the EU said the deadline had been pushed back “by years” in order to give MPS time to revive its business.
In applying for the deadline extension, Italy has offered fresh restructuring pledges including staff cuts to lower operating costs and further disposals, the EU said.
More than a third of the money MPS intends to raise via the new share issue will be used to fund 3,500 voluntary employee exits this year, as the bank strives to triple its profit by 2024 under new Chief Executive Luigi Lovaglio.
Though it managed to sharply cut its bad loans since 2017, MPS has fallen short of the restructuring plan Italy agreed with the EU to clear the bailout, hit by low interest rates and Italy’s weak economy.
Volatile markets, where banking shares have been deeply hit by fears of an economic recession, make the capital raising a daunting prospect for MPS, with Italy’s snap elections in September further complicating matters.($1 = 0.9771 euros)
(Reporting by Valentina Za and Giuseppe Fonte; editing Federico Maccioni and Bernadette Baum)
The European Commission is the executive branch of the European Union responsible for proposing legislation, implementing decisions, and managing the day-to-day operations of the EU.
Capital raising is the process of gathering funds to finance a company's operations, projects, or growth, often through issuing stocks, bonds, or obtaining loans.
Restructuring refers to the process of reorganizing a company's structure, operations, or finances to improve efficiency, reduce costs, or address financial difficulties.
Financial stability is a condition where the financial system operates effectively, with institutions able to withstand shocks, maintain confidence, and support economic growth.
Monte dei Paschi di Siena is one of the oldest banks in the world, based in Italy, which has undergone various restructuring efforts to stabilize its finances.
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