Shares in troubled Italian bank Monte dei Paschi di Siena (MPS) plunged on Friday following news reports that the bank’s request for more time to raise new capital from investors had been rejected by regulators.
However, the bank said it had not received official notification and was planning to hold another board meeting today.
MPS had been given until the end of the month to raise 5 billion euros (US$5.28 billion) in capital. The bank asked the European Central Bank (ECB) for a delay until Jan. 20 due to political uncertainty ushered in by the resignation of Italian Prime Minister Matteo Renzi.
In a statement issued late on Friday after an emergency board meeting, the bank said it had not “received any communication” from the ECB and was continuing its normal activity as a result.
MPS shares fell 10.6 percent on Friday to 19.50 euros after being down as much as 16 percent and temporarily suspended from trading.
Renzi quit after voters rejected constitutional changes he backed. It appears that some investors were cautious about committing money to MPS while it was uncertain who would lead the government next.
Failure to obtain private capital would raise the possibility that the Italian government would have to bail out MPS.
A bailout threatens to be politically explosive because new EU rules could force losses on the bank’s bondholders as a condition of permitting state aid. Many of the bondholders are small retail investors who might not have been sufficiently aware of the risk of losing their money.
Losses inflicted on small investors could bolster popular support for Italy’s main anti-EU party, the Five Star Movement, which polls indicate could do well if early elections are held.
The volatility came as Italian President Sergio Mattarella continued sounding out political leaders about prospects for forming a new government. Friday’s consultations involved leaders of mostly smaller parties.
Mattarella meets with the heads of Italy’s major parties Saturday, including Renzi’s Democrats, who still hold a majority, and the Five Star Movement.
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