Measures to allow state aid for Banca Monte dei Paschi di Siena are ready, with the Italian lender's hopes of pulling off a privately-backed fundraising fading, three sources familiar with the matter say. David Pollard reports.
It may soon be 'arrivederci' from Matteo Renzi, but Italy's desperate not to wave bye-bye to its banks. Sources tell Reuters that even amid the fallout of last weekend's referendum, state aid is being prepared for the most vulnerable one. Monte dei Paschi needs five billion euros to keep it afloat. A private rescue plan has only had pledges for a fraction of that. (SOUNDBITE) (English): DARREN SINDEN, INDEPENDENT MARKET ANALYST, SAYING: "Sovereign wealth funds that the Italian government has been talking to are not showing any interest in putting further money into the Italian banking sector. And there really isn't an alternative source of funds ... So I'm pretty convinced that Monte dei Paschi will have to be bailed out." Renzi has been asked to delay his resignation as prime minister, at least until a budget reading later this week. But amid the uncertainty over next week and beyond, a government decree authorising a state recapitalisation is, reportedly, ready. And at the same time, Monte dei Paschi's chief executive is said to be flying to Frankfurt for talks with the ECB. (SOUNDBITE) (English): DARREN SINDEN, INDEPENDENT MARKET ANALYST, SAYING: "They might even find it easier to raise fresh capital if they become state-owned. There is an implicit guarantee there, and it would be very difficult for them to go bust, or bust again anyway, unless the whole of the Italian state did." A state cash injection could entail losses for institutional investors - it's thought retail investors who hold over two billion euros of bonds in the bank could be spared or reimbursed. For the bank itself, state intervention could be the only realistic hope for a new start.