Roundup: Italian bank MPS needs 8.8-bln-euro capital raise: ECB

Monte dei Paschi di Siena (MPS), Italy's third largest lender, will need to raise 8.8 billion euros (9.2 billion U.S. dollars) to fill its capital gap, the lender said Tuesday citing a request by the European Central Bank (ECB).

The new figure largely exceeds the amount of 5 billion euros (5.2 billion U.S. dollars) previously estimated by the bank as necessary to solve its financial troubles.

The ECB considered the Italian lender solvent, MPS said in a statement late on Monday. Yet, it deemed the bank's liquidity position to be critical due to a rapid deterioration between Nov. 30 and Dec. 21.

As such, "the shortfall would results -- according to ECB - in a capital requirement of 8.8 billion euros," MPS said in the statement.

The new figure was based on the result of the stress test carried out on the continent's major banks by the European Banking Authority in the first half of 2016, and published in late July. Out of 51 institutions put under test, MPS was the weakest one. It was also the only Italian bank to perform poorly in the adverse scenario.

"The bank has promptly launched talks with the competent authorities in order to understand the methodologies underlying to calculations made by ECB, and give course to the measures for a precautionary recapitalization," MPS also said.

Last week, the Italian parliament backed a government's plan that would provide a bailout of MPS, after the bank failed to raise 5 billion euros from private investors for a capital increase.

Overall, the government's scheme allowed the use of up to 20 billion euros (20.9 billion U.S. dollars) in public funds to support the most fragile institutions within the banking sector.

However, under new EU bail-in provisions that came into force in Jan. 2016, any intervention by the state cannot take place unless a "burden-share" mechanism is implemented, with private shareholders and bondholders taking losses first.

According to Italy's main business daily Il Sole 24 Ore, the cabinet's plan would see MPS non-privileged bondholders change their bonds into shares, which would in turn be purchased by the Treasury for new, privileged, MPS bonds.

The bailout plan, however, has come under criticism by some European high-ranking officials, and especially in Berlin, local media reported on Tuesday.

"The bailout should be weighed carefully," Ansa news agency cited president of the German central bank Jens Weidmann as saying.

"The European rules aim at protecting taxpayers and giving responsibility to investors. The public funds are intended as a last resort," Weidmann added, according to Ansa.

MPS is Italy's third largest by assets. It is burdened by a large amount of bad debts, many of which rooted in the long economic crisis that has recently hit the country.

Gross non-performing loans amounted to 46.9 billion euros, and net non-performing loans to 24.2 billion euros at the end of 2015, according to the bank's official data. (1 euro = 1.05 U.S. dollars) Endit