The Italian government is to pay 6.6 billion euros (US$6.9 billion) of the 8.8 billion euros bill for bailing out struggling Monte dei Paschi di Siena SpA (BMPS), the Italian central bank said on Thursday.
The European Central Bank, citing the need for recapitalization, on Tuesday raised the total capital required by more than 3 billion euros than had been judged necessary just one month earlier.
Explaining the higher cost of the bailout, the Italian central bank said in a statement that the public rescue plan was costlier than the original “market solution” directed at private investors.
The former plan was calculated at 5 billion euros, of which about 3 billion euros was meant to cover losses deriving from the sale of BMPS bad loans and 2 billion euros was to protect against an increase in “the coverage ratio of the unlikely-to-pay loans.”
However, in the case of BMPS “the immediate cost to the state” under the public option would amount to about 4.6 billion euros, the statement said.
“To this must be added the subsequent compensation of retail subscribers [about 2 billion euros] for a total of about 6.6 billion euros,” it said.
“The cost to entities other than the Italian state will be about 2.2 billion euros. Accordingly, the total cost amounts to 8.8 billion euros,” it added.
BMPS came last in the European Central Bank’s bank stress tests this summer. It has been forced to raise capital twice since 2014 and its share price has plunged 80 percent since the start of the year, meaning it faced an uphill battle to win over investors.
The European Commission on Thursday announced that it had given the go-ahead for a six-month extension — until June 30 next year — of a bank guarantee scheme, covering “liquidity support measures in favor of solvent credit institutions in Italy for use in case of need.”
“This means that regardless of circumstances, banks will have no difficulties in funding their operations and deposit access will be ensured at all times,” a commission spokesman said.
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