This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2016/dec/22/italys-monte-dei-paschi-bailout-rescue-bid-business-live

The article has changed 14 times. There is an RSS feed of changes available.

Version 10 Version 11
Italy's Monte dei Paschi on brink of bailout as rescue bid fails – business live Italy's Monte dei Paschi on brink of bailout as rescue bid fails – business live
(35 minutes later)
5.32pm GMT
17:32
5.13pm GMT
17:13
Will Italian cabinet meet tonight?
So, what happens next with Monte dei Paschi?
We’re basically waiting for the bank’s board to conclude their meeting, and submit their request for state aid (having failed to raise the necessary €5bn from private investors to strengthen their balance sheet).
Then the ball is in new prime minister Paolo Gentiloni’s court; will his cabinet meet this evening, or push the decision back to Friday?
Reuters reckons it could go either way. Here’s their latest report:
Italy’s government will meet late Thursday or early Friday before European markets open to discuss an emergency decree to bail out troubled bank Monte dei Paschi di Siena, sources familiar with the matter told Reuters.
The salvage of Monte dei Paschi would be part of a €20bn safety net that Prime Minister Paolo Gentiloni plans to set up beneath the banking industry.
Gentiloni said on Thursday the cabinet would meet on Friday to discuss measures to help Italy’s under-developed southern regions. He did not mention the banking decree, leaving open the door on a late-night meeting on Thursday.
Updated
at 5.16pm GMT
4.46pm GMT4.46pm GMT
16:4616:46
European stock markets have closed for the night, after a fairly dull day dominated by worries over Monte dei Paschi.European stock markets have closed for the night, after a fairly dull day dominated by worries over Monte dei Paschi.
London’s FTSE 100 gained 22 points, or 0.3%, to 7063, led by precious metals producers and defensive stocks including ITV, Whitbread and Tui Travel. Mining stocks, and banks, led the fallers.London’s FTSE 100 gained 22 points, or 0.3%, to 7063, led by precious metals producers and defensive stocks including ITV, Whitbread and Tui Travel. Mining stocks, and banks, led the fallers.
Across Europe, Italy’s FTSE MIB weakened by 0.5% as investors braced for the country’s biggest banking bailout in many years, while the German DAX lost 0.2% and the French CAC closed flat.Across Europe, Italy’s FTSE MIB weakened by 0.5% as investors braced for the country’s biggest banking bailout in many years, while the German DAX lost 0.2% and the French CAC closed flat.
Meanwhile on Wall Street, the Dow Jones has slipped a little deeper into the red, and a little further from the 20,000 point milestone.Meanwhile on Wall Street, the Dow Jones has slipped a little deeper into the red, and a little further from the 20,000 point milestone.
We are less than two points away from Dow 19.9K!We are less than two points away from Dow 19.9K!
UpdatedUpdated
at 4.50pm GMTat 4.50pm GMT
3.05pm GMT3.05pm GMT
15:0515:05
Robert O’Daly of The Economist Intelligence Unit agrees that Monte dei Paschi is heading for a state rescue, now that its attempt to raise €5bn from private investors has faltered.Robert O’Daly of The Economist Intelligence Unit agrees that Monte dei Paschi is heading for a state rescue, now that its attempt to raise €5bn from private investors has faltered.
He also predicts that populist parties could get an electoral boost, if more banks require government help.He also predicts that populist parties could get an electoral boost, if more banks require government help.
O’Daly writes:O’Daly writes:
2.40pm GMT2.40pm GMT
14:4014:40
2.38pm GMT2.38pm GMT
14:3814:38
Over in New York, the US stock market has opened with barely a grunt.Over in New York, the US stock market has opened with barely a grunt.
The Dow Jones industrial average has dipped by 8 points in muted trading, to 19,933.The Dow Jones industrial average has dipped by 8 points in muted trading, to 19,933.
That takes it away from its record highs, and further way from the much-obsessed about 20,000 mark.That takes it away from its record highs, and further way from the much-obsessed about 20,000 mark.
Futures flat. No Dow 20K today? The Grinch is stealing the Santa Claus Trump rally? Or maybe it's the Krampus?Futures flat. No Dow 20K today? The Grinch is stealing the Santa Claus Trump rally? Or maybe it's the Krampus?
1.51pm GMT1.51pm GMT
13:5113:51
Back to Monte dei Paschi.... and the Financial Times also reckons that the bank’s board will meet later today to discuss their next move,.Back to Monte dei Paschi.... and the Financial Times also reckons that the bank’s board will meet later today to discuss their next move,.
With MPS’s capital raising push now over, the FT says:With MPS’s capital raising push now over, the FT says:
According to people close to the matter, the Italian cabinet will meet to approve the bailout of MPS late on Thursday or early on Friday, after the MPS board has requested help.According to people close to the matter, the Italian cabinet will meet to approve the bailout of MPS late on Thursday or early on Friday, after the MPS board has requested help.
The MPS board was not expected to make any statement until after the end of trading on Thursday, those people said.The MPS board was not expected to make any statement until after the end of trading on Thursday, those people said.
The FT also reports that Rome’s government will try to protect small bondholders, if there is a bailout:The FT also reports that Rome’s government will try to protect small bondholders, if there is a bailout:
Due to EU rules designed to limit the hit to taxpayers, the government rescue will impose losses on MPS shareholders and junior bondholders, making them share some of the financial burden.Due to EU rules designed to limit the hit to taxpayers, the government rescue will impose losses on MPS shareholders and junior bondholders, making them share some of the financial burden.
Italian officials said that they would move to compensate some of the 40,000 MPS retail bondholders who might take a hit, though institutional investors would not be spared.Italian officials said that they would move to compensate some of the 40,000 MPS retail bondholders who might take a hit, though institutional investors would not be spared.
“The scheme is ready”, said one senior Italian official. “The burden-sharing principle will be respected but we will try to limit the damage to savers as much as possible.“The scheme is ready”, said one senior Italian official. “The burden-sharing principle will be respected but we will try to limit the damage to savers as much as possible.
1.37pm GMT1.37pm GMT
13:3713:37
US growth revised up to new two-year highUS growth revised up to new two-year high
Breaking news from America: the world’s largest economy grew even faster than previously thought in the third quarter of 2016.Breaking news from America: the world’s largest economy grew even faster than previously thought in the third quarter of 2016.
US GDP expanded by an annual rate of 3.5% in the July-to-September period, up from a previous estimate of 3.2%.US GDP expanded by an annual rate of 3.5% in the July-to-September period, up from a previous estimate of 3.2%.
That’s the equivalent of a quarterly growth rate of around 0.85% -- much faster than Britain’s 0.5% growth in the same period.That’s the equivalent of a quarterly growth rate of around 0.85% -- much faster than Britain’s 0.5% growth in the same period.
This shows that America’s economy is growing at the fastest pace in two years, driven by a 3% rise in consumer spending, a 10% jump in exports, and a rise in companies restocking their inventories:This shows that America’s economy is growing at the fastest pace in two years, driven by a 3% rise in consumer spending, a 10% jump in exports, and a rise in companies restocking their inventories:
Contributions to Percent Change in U.S. GDP: pic.twitter.com/2xflun1VbvContributions to Percent Change in U.S. GDP: pic.twitter.com/2xflun1Vbv
There’s a flurry of other economic data flashing across my terminal too, including the news thatThere’s a flurry of other economic data flashing across my terminal too, including the news that
UpdatedUpdated
at 2.21pm GMTat 2.21pm GMT
1.20pm GMT1.20pm GMT
13:2013:20
Monte dei Paschi board to meet as cash call endsMonte dei Paschi board to meet as cash call ends
The clocks in Siena have chimed two o’clock, which means that Monte dei Paschi’s attempt to raise €5bn from private investors has officially ended.The clocks in Siena have chimed two o’clock, which means that Monte dei Paschi’s attempt to raise €5bn from private investors has officially ended.
Unless something remarkable happened in the last few hours, MPS will have failed to hit its target.Unless something remarkable happened in the last few hours, MPS will have failed to hit its target.
As we flagged up this morning, MPS had only managed to raise €2bn, once the Qatar sovereign wealth fund declined to back the plan last night.As we flagged up this morning, MPS had only managed to raise €2bn, once the Qatar sovereign wealth fund declined to back the plan last night.
One insider tells us that the Monte dei Paschi board will now meet to plan their next move. They could decide to ask Italy’s government for assistance tonight, to help the bank reach its €5bn target.One insider tells us that the Monte dei Paschi board will now meet to plan their next move. They could decide to ask Italy’s government for assistance tonight, to help the bank reach its €5bn target.
Any rescue plan could also force losses on investors who hold MPS bonds; under European banking rules, these bondholders must be ‘bailed in’, before the state can help.Any rescue plan could also force losses on investors who hold MPS bonds; under European banking rules, these bondholders must be ‘bailed in’, before the state can help.
But the Italian government will be keen to avoid penalising the retail investors (individuals, families, small businesses...) who hold debt issued by the world’s oldest bank..... So they could look to find a way of compensating them (one theory is that anyone holding less than €100,000 of bonds is protected, as with retail savings accounts).But the Italian government will be keen to avoid penalising the retail investors (individuals, families, small businesses...) who hold debt issued by the world’s oldest bank..... So they could look to find a way of compensating them (one theory is that anyone holding less than €100,000 of bonds is protected, as with retail savings accounts).
UpdatedUpdated
at 1.26pm GMTat 1.26pm GMT
12.51pm GMT12.51pm GMT
12:5112:51
Monte dei Paschi isn’t the only Italian bank in a fix.Monte dei Paschi isn’t the only Italian bank in a fix.
Economists estimate that Italy’s banking sector needs more than €50bn in fresh capital, to help it tackle its bad debts.Economists estimate that Italy’s banking sector needs more than €50bn in fresh capital, to help it tackle its bad debts.
Unicredit, the country’s largest bank, got the ball rolling with a €13bn cash call last week, but many other lenders have not yet acted.Unicredit, the country’s largest bank, got the ball rolling with a €13bn cash call last week, but many other lenders have not yet acted.
This chart from Bloomberg shows how the €20bn set aside by the Italian government this week might not be enough:This chart from Bloomberg shows how the €20bn set aside by the Italian government this week might not be enough:
Mihir Kapadia, CEO and Founder of Sun Global Investments, argues that the sector needs deep-rooted reforms, as well as fresh capital.Mihir Kapadia, CEO and Founder of Sun Global Investments, argues that the sector needs deep-rooted reforms, as well as fresh capital.
He writes:He writes:
“Shares of Monte dei Paschi di Siena have fallen further as efforts to raise private capital failed at the eleventh hour. With Qatar’s sovereign wealth fund pulling out from the €5bn cash call, the bank now needs a state bailout to stay afloat. Under the current scenario of low interest rates, massive fines and negligible earnings, the reluctance of the private investors to take on such weak structures is understandable. The Italian parliament has vowed to inject more than €20bn into the bank, in order to prevent a collapse which would have far reaching consequences. If the bank fails, there are strong fears that its collapse could pull down much of the country’s bad debt ridden banking sector with it.“Shares of Monte dei Paschi di Siena have fallen further as efforts to raise private capital failed at the eleventh hour. With Qatar’s sovereign wealth fund pulling out from the €5bn cash call, the bank now needs a state bailout to stay afloat. Under the current scenario of low interest rates, massive fines and negligible earnings, the reluctance of the private investors to take on such weak structures is understandable. The Italian parliament has vowed to inject more than €20bn into the bank, in order to prevent a collapse which would have far reaching consequences. If the bank fails, there are strong fears that its collapse could pull down much of the country’s bad debt ridden banking sector with it.
The bank had been named as the weakest lender in Europe because of billions of euros of risky loans, failing the EU stress test in July this year. Given this, the Italian government’s efforts cannot end with simple state support, but rather large-scale banking reforms and stringent policy measures are needed. Unless this is achieved a banking crisis looks almost inevitable. This is not just a threat to Italy, but for the larger Eurozone, the euro and the region’s political future.”The bank had been named as the weakest lender in Europe because of billions of euros of risky loans, failing the EU stress test in July this year. Given this, the Italian government’s efforts cannot end with simple state support, but rather large-scale banking reforms and stringent policy measures are needed. Unless this is achieved a banking crisis looks almost inevitable. This is not just a threat to Italy, but for the larger Eurozone, the euro and the region’s political future.”
12.12pm GMT12.12pm GMT
12:1212:12
Weak pound prompts Tesla to hike prices in UKWeak pound prompts Tesla to hike prices in UK
Electric carmaker Tesla has become the latest firm to raise the cost of its products in the UK, in response to the pound’s decline this year.Electric carmaker Tesla has become the latest firm to raise the cost of its products in the UK, in response to the pound’s decline this year.
The company told some UK showrooms that prices will go up at the start of next month.The company told some UK showrooms that prices will go up at the start of next month.
In an email, Tesla said:In an email, Tesla said:
We have just received some information that we need to share with you – due to currency fluctuations we will be increasing our UK prices for custom orders by 5% on 1 January 2017.”We have just received some information that we need to share with you – due to currency fluctuations we will be increasing our UK prices for custom orders by 5% on 1 January 2017.”
“Prices on showroom and pre-owned cars will remain fixed at current prices.”“Prices on showroom and pre-owned cars will remain fixed at current prices.”
More here:More here:
11.05am GMT11.05am GMT
11:0511:05
The fog has now lifted in London, but there’s little else to report from the City.The fog has now lifted in London, but there’s little else to report from the City.
After three hours of trading, Europe’s financial markets still seem becalmed, as people wait for Monte dei Paschi’s cash call to formally end after lunchtime (2pm in Italy, or 1pm GMT).After three hours of trading, Europe’s financial markets still seem becalmed, as people wait for Monte dei Paschi’s cash call to formally end after lunchtime (2pm in Italy, or 1pm GMT).
Some investors are hopeful that the saga will soon end. As LC Macro Advisors head, Lorenzo Codogno, explains (via Reuters):.Some investors are hopeful that the saga will soon end. As LC Macro Advisors head, Lorenzo Codogno, explains (via Reuters):.
“This situation has dragged on for years without a clear solution. Now a solution is in sight.“This situation has dragged on for years without a clear solution. Now a solution is in sight.
My perception is that the government backstop will be welcomed by financial markets and it will be a plus for the (Italian) economy as well.”My perception is that the government backstop will be welcomed by financial markets and it will be a plus for the (Italian) economy as well.”
But Mike van Dulken, head of research at Accendo Markets, isn’t pleased that a rescue might take three whole months (see earlier post):But Mike van Dulken, head of research at Accendo Markets, isn’t pleased that a rescue might take three whole months (see earlier post):
Risk appetite remains hampered by thinner holiday trading into Christmas as well as talk of a Monte dei Paschi bailout taking a whopping 3-months to complete, taking us well beyond a supposed 31 Dec deadline for shoring up Italy’s knackered banks.Risk appetite remains hampered by thinner holiday trading into Christmas as well as talk of a Monte dei Paschi bailout taking a whopping 3-months to complete, taking us well beyond a supposed 31 Dec deadline for shoring up Italy’s knackered banks.
An official announcement still eludes markets which understandably want clarity on the issue.An official announcement still eludes markets which understandably want clarity on the issue.
UpdatedUpdated
at 11.12am GMTat 11.12am GMT