Troubled Italian lender Banca Carige said on Sunday the European Central Bank had given it until the end of the year to meet a minimum capital threshold unless it embarked a merger. Carige, Italy's last remaining large problem bank, is facing a management crisis after its chairman, deputy chairman and two board members resigned in disagreement over the leadership of Chief Executive Paolo Fiorentino.
Fiorentino, a veteran UniCredit executive, is overseeing a balance-sheet clean-up demanded by the ECB and in December managed to pull off a capital increase needed to keep Carige in business. But its failure this year to issue a hybrid bond that would have boosted its lower-quality capital means Carige's total capital ratio of 12.2 percent lags a 13.1 percent threshold set by the ECB.
Carige said the ECB had rejected the bank's latest capital plan and had asked for new measures by November 30 that would allow the lender to comply with mandatory capital levels by December 30. The ECB could push back that deadline, "if a merger were pursued to ensure that capital requirements are met on a sustainable basis," the bank said, quoting a letter received on Friday from the regulator.
Heavily exposed to the local economy of the northwestern Liguria region, Carige has long been seen in need of a tie-up, especially after it used asset sales to lure investors into its December share issue.
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