Monte Paschi denies report ECB asked for three billion euro cap hike

Italian bank Monte dei Paschi di Siena denied on Friday a press report that the European Central Bank had asked it to carry out a capital increase worth up to 3 billion euros ($3.4 billion). Il Fatto Quotidiano newspaper said the bank could undertake the cash call by the end of this year. "Banca Monte dei Paschi di Siena denies today's report in Il Fatto Quotidiano.
The bank also notes that the disclosure of groundless reports, in such a complex context, can only cause further instability and damage to the banking system, the market and investors." An ECB spokeswoman declined to comment, saying the regulator does not comment on individual banks. The country's No 3 lender has been in crisis mode for years due to the combined effects of a disastrous acquisition on the eve of the financial crisis, losses from risky derivatives trades and a pile of bad loans accumulated during Italy's worst post-war recession.
It emerged as the weakest lender in a Europe-wide health check of banks in October 2014, has tapped investors for nearly 15 billion euros since 2008 and lost the same amount from 2011 to 2014. The bank is burdened with 46.7 billion euros of gross bad debts - more than a third of its loan book, and a higher proportion than any other Italian bank.
The lender plans to sell 3.5 billion euros of bad loans by 2018, on top of 2 billion euros already sold. But it has said it is looking at ways of getting rid of even more soured debts than targeted in its business plan. Selling bad loans at market prices, however, would erode its capital base - a problem shared by other Italian lenders. The whole sector is saddled by some 360 billion euros of problematic debts.
Sources have told Reuters that the government and the Bank of Italy are considering a scheme to help banks offload their bad loans with the involvement of state lender Cassa Depositi e Prestiti and other investors to limit the impact on their capital of such disposals. The treasury is "following closely developments in the banking sector and Monte dei Paschi of course," a treasury spokesman said, adding it was confident the Tuscan bank could reduce its pile of bad loans "using all available instruments.