The Italian government is working on state bailout for Monte dei Paschi di Siena as the troubled bank teeters following Prime Minister Matteo Renzi’s decision to quit, according to Reuters reports.
Monte Paschi must raise $5.4 billion by the end of December to avert the risk of being shuttered.
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.
The bank’s chief executive, Marco Morelli, was in Frankfurt on Tuesday for talks with European Central Bank officials on the lender’s options, other sources said.
Another reason Morelli could have been in Frankfurt was to meet with Deutsche Bank officials as well. Former Deutsche executives have been charged with fraud for derivative positioning of the world’s oldest bank to make Monte Paschi’s books look better than they were when it bought another Italian bank in 2012.
Around the same time Monte Paschi’s Director of Communications David Rossi was found dead behind the headquarters of the Siena, Italy bank.
Italian authorities are still investigating Rossi’s death, which was first called a suicide by police, but which my reporting has exposed as a possible murder.