Italy is preparing a state bailout for Monte dei Paschi di Siena (BMPS.MI) as the bank’s hopes of being saved by private funding fade following Prime Minister Matteo Renzi’s decision to quit, sources close to the matter said on Tuesday.
One of the sources said a government decree authorizing the deal could be rushed through as early as this weekend.
Monte dei Paschi must raise 5 billion euros ($5.4 billion) by the end of December to avert the risk of being wound down, but investors are reluctant to provide cash after Renzi lost a referendum on Sunday and announced plans to resign.
He is expected to leave office in days and could be replaced by his current economy minister or another leading politician. But an early election might be held next year, raising fears among investors that a maverick, anti-euro party could come to power.
Italy is likely to pump government money into Monte dei Paschi under a so-called precautionary recapitalization, three sources familiar with the situation said, to prevent the bank failing and triggering a wider banking crisis.
Such a crisis could destabilize the whole bank sector, burdened by 360 billion euros of bad loans, and inflict heavy losses on tens of thousands of ordinary Italians who hold junior bonds in the Tuscan bank.
via Reuters 
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.