Tag Archives: Banking Capital and Liquidity Requirements

Italy’s MPS seeks to reduce legal risks as the EU considers the viability of the bank | Instant News


FILE PHOTO: The logo of the Monte dei Paschi bank in Siena is seen at the entrance of a bank in Rome, Italy, 16 August 2018. REUTERS / Max Rossi

MILAN (Reuters) – Italy’s Monte dei Paschi (MPS) said on Thursday it was working to reduce its legal risk as the European Union assessed the ability of state-owned banks to stay in business before opening up more public aid.

Italy saved the MPS in 2017 at a cost of 5.4 billion euros ($ 6.6 billion) to taxpayers. Now it stands ready to cover at least part of the 2.5 billion euro shortfall in lenders, but wants to first find a buyer for it.

MPS said it would proceed with a cash call if the merger failed to materialize.

In a statement on Thursday, it said that significant uncertainty was clouding its planned capital increase due to an assessment by the EU competition authority on the bank’s ability to stand on its own.

($ 1 = 0.8212 euros)

Reporting by Valentina Za; Edited by Gareth Jones

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Italy will continue to advance with sales of Monte dei Paschi under Draghi – sources | Instant News


ROME (Reuters) – Italian Prime Minister Mario Draghi’s new government aims to tackle troubled bank Monte dei Paschi by pushing a plan to re-privatize its losing lenders, said sources close to the matter.

FILE PHOTOS: People seen inside the bank of Monte dei Paschi in Siena in Rome, Italy August 16, 2018. REUTERS / Max Rossi

Rome spent 5.4 billion euros ($ 6.6 billion) in 2017 to rescue Tuscan banks, leaving the state with a 64% stake. MPS now needs another 2.5 billion euros to rebuild its capital reserves.

A sale would stop the MPS from becoming a permanent taxpayer drain and would allow Italy to fulfill its commitments to the European Union made at the time of the bailout.

With Italy’s change of government, there is speculation that Draghi, the former head of the European Central Bank, could use his cachet with European authorities to buy more time and delay the sale of MPS.

But a source briefed on the government’s plans said both Draghi and Economy Minister Daniele Franco intend to continue working to seal a merger deal for MPS with stronger rivals.

The prime minister’s office declined to comment.

Finding MPS buyers has proven difficult despite the ample incentives from the Ministry of Finance to sweeten the deal.

Italy has negotiated the sale of MPS to UniCredit but a change at the helm of Italy’s second-largest bank has halted talks.

New UniCredit CEO Andrea Orcel, who started his job after mid-April, may prefer other options in Italy’s consolidated banking sector, sources said.

With the sales prospect fading in the near future, MPS auditors have expressed concern about the bank’s financial future, said three people with knowledge of the matter.

The MPS is working to ensure auditors sign off on its accounts, a formality required for Thursday’s board meeting, the people said.

MPS declined to comment.

Annual losses at Tuscan banks jumped more than 60% to 1.7 billion euros last year.

Reported by Giuseppe Fonte in Rome and Valentina Za in Milan. Edited by Jane Merriman

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Monte dei Paschi Italia to open books for potential partners | Instant News


ROME / MILAN (Reuters) – Monte dei Paschi in Siena said it would give access to classified data to potential merger partners chosen by its advisers, as Italy goes ahead with plans to cut its holdings in the state-owned bank.

FILE PHOTOS: Entrance to the Monte dei Paschi headquarters in Siena, Italy, 27 October 2017. REUTERS / Stefano Rellandini / Photo Files

Confirming comments to Reuters from an earlier source on Monday, Monte dei Paschi (MPS) said his board had hired Credit Suisse to assist Mediobanca in the task of studying strategic options and exploring market interest for Tuscan banks.

Despite the chaos in the ruling coalition that risks triggering a government crisis, Italy’s Ministry of Finance is moving forward with plans to cut its 64% stake in MPS and fulfill promises made to the European Union as part of its 2017 bailout.

Rome has identified UniCredit as the ideal merger partner for MPS, sources said earlier, but Italy’s second-largest bank wants stringent terms to be met before considering the acquisition and has yet to sign a nondisclosure agreement.

The Ministry of Finance wants to see if Banco BPM, Italy’s third-largest bank which last year saw Rome as a possible partner of MPS, could be interested in entering the data space, said one of the sources.

Banco BPM could not immediately be reached for comment.

UniCredit, which is in the process of selecting a new chief executive after Jean Pierre Mustier decided to step down in April, will only consider a deal that does not affect its capital reserves.

They also want to ensure that an incentive package that Rome is preparing to facilitate sales will be approved in Brussels and Frankfurt, the sources said.

The UniCredit Board is expected to examine the list of candidates for CEO at a meeting on Wednesday before making a final decision in early February.

In the latest push to get the Milan-based bank to consider the deal, Rome is studying plans to divert at least 14 billion euros in non-performing loans from UniCredit to state-backed loan manager AMCO, sources said.

That could increase further to 20 billion to 21 billion euros, accounting for nearly all of UniCredit’s 22.7 billion euros in troubled debt at the end of September, one source added.

The Ministry of Finance has also set aside 1.5 billion euros to cover part of the capital shortfall of up to 2.5 billion euros in MPS.

The Siena-based bank will have to tell the European Central Bank in late January how it plans to fill the gap. The MPS said on Monday that it was pushing back around 10 days to January 28 a board meeting called for approving capital measures.

The tax cuts introduced by Rome for the 2021 merger would cost UniCredit a net profit of 2.4 billion euros if it took the losing MPS.

But the potential takeover is having resistance from within the bank as well as among some of UniCredit’s leading domestic investors.

To remove a major hurdle to a potential deal, Italy is working on a complex scheme requiring bail and a possible spin-off involving state-owned company Fintecna to deal with around 10 billion euros in claims, both in court and out of court, faced by MPS.

Reporting by Giuseppe Fonte and Valentina Za; Edited by Kirsten Donovan, David Evans and Jonathan Oatis

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UPDATE 2-Italy pursues treatment in January of a $ 3 billion Monte dei Paschi headache | Instant News


* The MPS says it needs 2.0-2.5 billion euros in capital

* Council to approve plans January 19 to raise capital

* The Ministry of Finance has discussed cooperation with UniCredit

* Financial confidence process towards deal can start in Jan (Adding details, context)

By Valentina Za, Giuseppe Fonte and Stefano Bernabei

MILAN / ROMA, 17 Dec (Reuters) – Italy’s Monte dei Paschi (MPS) says it will approve plans to meet capital requirements totaling up to 2.5 billion euros ($ 3.1 billion) in mid-January, as Rome struggles to find merger partners for state-owned banks.

The Italian Ministry of Finance has discussed possible cooperation with UniCredit and three sources with knowledge of the matter said a deal is still in progress, despite a decision by the CEO of the larger bank Jean Pierre Mustier to quit in April.

The Treasury Department believes it could start in January a process that would lead to a deal, one of the sources said, adding that reaching an agreement would take more time.

If talks with UniCredit fail, the Ministry of Finance has prepared a Plan B, sources said, without disclosing details.

Rome pumped 5.4 billion euros into the MPS as part of a 2017 rescue for Italy’s oldest bank and had to cut 64% of its stake under the terms of a bailout agreed with Brussels.

Finding a solution has become imperative after the MPS last month warned its capital ratio would breach a minimum threshold, and the European Central Bank said it would clarify in late January how it plans to fill the gap.

The MPS said its board would meet on January 19 to approve a plan requested by the ECB, under which the bank’s capital requirements would be set at between 2.0 billion and 2.5 billion euros.

Under a separate five-year plan approved by the MPS on Thursday, it expects to shave 2,670 net jobs and return to profit by 2023.

The Ministry of Finance will discuss this plan with the European Commission, which should remove any further use of state money.

Rome has earmarked 1.5 billion euros, but sources said it was unclear how much bank capital the Italian government could bear.

That’s important because UniCredit has made it clear that it will not agree to a deal that reduces its capital buffer, one source told Reuters.

In the latest push after two years of working to remove MPS from most of its problem loans, the Treasury Department last month hired Bank of America and Orrick to help it cut its holdings.

Advisors are looking at the MPS figures in detail before negotiations enter the crisis phase, two people said.

The bank’s capital reserves will be eroded by the clean-up of bad loans, which will close at the end of the year, and provisions for pending lawsuits posted in the third quarter after years of mismanagement and indictments of former executives.

The Ministry of Finance has also drawn up tax breaks for companies joining in 2021, which would require a net boost of 2.4 billion euros for MPS buyers. ($ 1 = 0.8155 euros) (Reported by Valentina Za in Milan, Giuseppe Fonte and Stefano Bernabei in Rome; Edited by Giulia Segreti, Jane Merriman and Alexander Smith)

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UPDATE 2-Italy pursues treatment in January of a $ 3 billion Monte dei Paschi headache | Instant News


* The MPS says it needs 2.0-2.5 billion euros in capital

* Council to approve plans January 19 to raise capital

* The Ministry of Finance has discussed cooperation with UniCredit

* Financial confidence process towards deal can start in Jan (Adding details, context)

By Valentina Za, Giuseppe Fonte and Stefano Bernabei

MILAN / ROMA, 17 Dec (Reuters) – Italy’s Monte dei Paschi (MPS) says it will approve plans to meet capital requirements totaling up to 2.5 billion euros ($ 3.1 billion) in mid-January, as Rome struggles to find merger partners for state-owned banks.

The Italian Ministry of Finance has discussed possible cooperation with UniCredit and three sources with knowledge of the matter said a deal is still in progress, despite a decision by the CEO of the larger bank Jean Pierre Mustier to quit in April.

The Treasury Department believes it could start in January a process that would lead to a deal, one of the sources said, adding that reaching an agreement would take more time.

If talks with UniCredit fail, the Ministry of Finance has prepared a Plan B, sources said, without disclosing details.

Rome pumped 5.4 billion euros into the MPS as part of a 2017 rescue for Italy’s oldest bank and had to cut 64% of its stake under the terms of a bailout agreed with Brussels.

Finding a solution has become imperative after the MPS last month warned its capital ratio would breach a minimum threshold, and the European Central Bank said it would clarify in late January how it plans to fill the gap.

The MPS said its board would meet on January 19 to approve a plan requested by the ECB, under which the bank’s capital requirements would be set at between 2.0 billion and 2.5 billion euros.

Under a separate five-year plan approved by the MPS on Thursday, it expects to shave 2,670 net jobs and return to profit by 2023.

The Ministry of Finance will discuss this plan with the European Commission, which should remove any further use of state money.

Rome has earmarked 1.5 billion euros, but sources said it was unclear how much bank capital the Italian government could bear.

That’s important because UniCredit has made it clear that it will not agree to a deal that reduces its capital buffer, one source told Reuters.

In the latest push after two years of working to remove MPS from most of its problem loans, the Treasury Department last month hired Bank of America and Orrick to help it cut its holdings.

Advisors are looking at the MPS figures in detail before negotiations enter the crisis phase, two people said.

The bank’s capital reserves will be eroded by the clean-up of bad loans, which will close at the end of the year, and provisions for pending lawsuits posted in the third quarter after years of mismanagement and indictments of former executives.

The Ministry of Finance has also drawn up tax breaks for companies joining in 2021, which would require a net boost of 2.4 billion euros for MPS buyers. ($ 1 = 0.8155 euros) (Reported by Valentina Za in Milan, Giuseppe Fonte and Stefano Bernabei in Rome; Edited by Giulia Segreti, Jane Merriman and Alexander Smith)

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