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Italian minister says no bail-in for troubled lender MPS

Xinhua, October 13, 2016 Adjust font size:

Italian Economy Minister Pier Carlo Padoan told the Lower House on Wednesday there will be no public intervention to rescue troubled lender Monte dei Paschi di Siena (MPS) and MPS would not need a bail-in either.

"There are no proposals for public support (of MPS), never mind nationalization," Padoan said.

Also on Wednesday, Italy's private Atlante (Atlas) Fund announced it has closed out its due diligence on MPS's securitized non-performing loans, and confirmed it will invest 1.6 billion euros in a mezzanine tranche as per conditions "agreed upon with MPS" set out in a July 29 meeting with the Tuscan bank.

The statement was made by Quaestio Sgr capital management firm, which set up Atlante along with the Cariplo Foundation earlier this year to aid struggling Italian banks hampered by toxic loans without infringing European Union rules against public aid.

MPS emerged as Europe's weakest bank in recent stress tests conducted by the European Central Bank(ECB) and is trying to convince investors to back a multi-billion-euro cash call -- its third in as many years -- as part of its turnaround program.

In July, the ECB approved a recapitalization plan for MPS, calling for a five-billion-euro capital increase and the securitization of 10 billion euros' worth of non-performing loans (NPLs) with help from Atlante.

MPS is also facing fresh uncertainty as to its executive ranks. Doubts have arisen as to whether its new CEO Marco Morelli, who was appointed in September, can pass the ECB's fit-and-proper test to be chief executive due to a 2013 fine he and other officials incurred while he was MPS deputy general manager.

On Tuesday, the Bank of Italy said Italian banks' non-performing loans amounted to 200.1 billion euros in August, meaning that the burden of NPLs has returned to the level of late 2015.

The Bank of Italy said that lending to households and non-financial companies rose by 0.7 percent in August compared to the same period last year, and by 0.4 percent compared to July.

The rise was driven by a 1.5 percent increase in loans to households in year-on-year terms. However, business lending dropped by 0.2 percent.

The Italian central bank said the average mortgage interest rate was 2.52 percent in August, up from 2.44 percent in July, the first rise in six months.

Several Italian banks have come under pressure on the financial markets after bad loans accumulated on their balance sheets during the economic crisis. (1 euro = 1.10 U.S. dollars) Endit