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| 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) | |
| 11.05am GMT | |
| 11:05 | |
| 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). | |
| 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. | |
| 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): | |
| 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. | |
| Updated | |
| at 11.12am GMT | |
| 10.50am GMT | 10.50am GMT |
| 10:50 | 10:50 |
| The Financial Times flag up that some Monte dei Paschi savers have been taking money out of the bank in recent months, as its funding crisis accelerated. More here (£). | The Financial Times flag up that some Monte dei Paschi savers have been taking money out of the bank in recent months, as its funding crisis accelerated. More here (£). |
| Monte dei Paschi has had a rollercoaster year. Here are three of its grimmest charts https://t.co/a6bmZHhPNY pic.twitter.com/mXRzgpUhSd | Monte dei Paschi has had a rollercoaster year. Here are three of its grimmest charts https://t.co/a6bmZHhPNY pic.twitter.com/mXRzgpUhSd |
| 10.28am GMT | 10.28am GMT |
| 10:28 | 10:28 |
| MPs to investigate monetary policy: what the experts say | MPs to investigate monetary policy: what the experts say |
| Toby Nangle, top multi-asset manager at Columbia Threadneedle, isn’t convinced that the Treasury Committee’s new inquiry into the Bank of England will crack the mysteries of monetary policy. | Toby Nangle, top multi-asset manager at Columbia Threadneedle, isn’t convinced that the Treasury Committee’s new inquiry into the Bank of England will crack the mysteries of monetary policy. |
| After all, the BoE does devote plenty of time to assessing whether its measures are working. | After all, the BoE does devote plenty of time to assessing whether its measures are working. |
| So MPs (or their staffers) may find themselves wading through long, competing theories about how interest rates and quantitative easing works. | So MPs (or their staffers) may find themselves wading through long, competing theories about how interest rates and quantitative easing works. |
| Toby tweets: | Toby tweets: |
| Submissions on qns to which the Bank has dedicated a large chunk of its output in recent yrs will be interesting to observe. | Submissions on qns to which the Bank has dedicated a large chunk of its output in recent yrs will be interesting to observe. |
| Eg, 'How have income & substitution effects interacted wrt real rates post-08?' Good qn, but am not sure there is a framework to answer it. | Eg, 'How have income & substitution effects interacted wrt real rates post-08?' Good qn, but am not sure there is a framework to answer it. |
| Call for written submissions looks like 17 ways of asking 'how do u think monetary policy works & how shld it work?' https://t.co/nENVvn6syH | Call for written submissions looks like 17 ways of asking 'how do u think monetary policy works & how shld it work?' https://t.co/nENVvn6syH |
| But...economist Shaun Richards is encouraged that MPs have launched an inquiry into the BoE’s work: | But...economist Shaun Richards is encouraged that MPs have launched an inquiry into the BoE’s work: |
| My advice is for them to take a look at house prices in the UK and the Funding for Lending Scheme #BoE https://t.co/y4O5ucvzfb | My advice is for them to take a look at house prices in the UK and the Funding for Lending Scheme #BoE https://t.co/y4O5ucvzfb |
| 9.36am GMT | 9.36am GMT |
| 09:36 | 09:36 |
| MPs launch inquiry into UK monetary policy | MPs launch inquiry into UK monetary policy |
| Newsflash from London: A group of influential MPs have just launched an inquiry into the effectiveness of Britain’s monetary policy since the financial crisis struck. | Newsflash from London: A group of influential MPs have just launched an inquiry into the effectiveness of Britain’s monetary policy since the financial crisis struck. |
| The Treasury committee will investigate whether the Bank of England was right to slash interest rates to record lows, and buy up hundreds of billions of government bonds with new money. | The Treasury committee will investigate whether the Bank of England was right to slash interest rates to record lows, and buy up hundreds of billions of government bonds with new money. |
| They will examine whether this policy has actually worked, what impact it has had on savers, house prices and struggling companies, and whether policymakers are now out of ammunition to fight the next crisis. | They will examine whether this policy has actually worked, what impact it has had on savers, house prices and struggling companies, and whether policymakers are now out of ammunition to fight the next crisis. |
| The move follows growing criticism of the Bank’s actions in the crisis, most notably from prime minister Theresa May. The BoE, though, insists that it has acted sensibly to protect the economy and preserve jobs. | The move follows growing criticism of the Bank’s actions in the crisis, most notably from prime minister Theresa May. The BoE, though, insists that it has acted sensibly to protect the economy and preserve jobs. |
| Committee chairman Andrew Tyrie explains why MPs are now taking action: | Committee chairman Andrew Tyrie explains why MPs are now taking action: |
| Interest rates are stuck near zero, the Bank of England has used increasingly unconventional forms of quantitative easing, and inflation has been below the two per cent target for three years. | Interest rates are stuck near zero, the Bank of England has used increasingly unconventional forms of quantitative easing, and inflation has been below the two per cent target for three years. |
| “The efficacy of monetary policy or otherwise, its unintended consequences, and its prospects, need careful examination. | “The efficacy of monetary policy or otherwise, its unintended consequences, and its prospects, need careful examination. |
| “The Treasury Committee will continue to act as a safeguard on the operational independence of the Bank. The Treasury indemnity, which underpins parts of the Bank’s monetary policy, could all too easily encourage the Treasury, or politicians, to put undue pressure on the Bank. The Committee will examine the risks of that, too.” | “The Treasury Committee will continue to act as a safeguard on the operational independence of the Bank. The Treasury indemnity, which underpins parts of the Bank’s monetary policy, could all too easily encourage the Treasury, or politicians, to put undue pressure on the Bank. The Committee will examine the risks of that, too.” |
| Andrew Tyrie to lead Treasury Select Committee inquiry into @bankofengland monetary policy since 2008. Mark Carney will be delighted | Andrew Tyrie to lead Treasury Select Committee inquiry into @bankofengland monetary policy since 2008. Mark Carney will be delighted |
| Here are the terms of reference for the inquiry: | Here are the terms of reference for the inquiry: |
| The effectiveness of monetary policy in meeting the inflation target: | The effectiveness of monetary policy in meeting the inflation target: |
| The unintended consequences of monetary policy | The unintended consequences of monetary policy |
| The prospects for monetary policy | The prospects for monetary policy |
| 9.24am GMT | 9.24am GMT |
| 09:24 | 09:24 |
| Scrap what we said about MPS buyers being in short supply -- its shares are now up 3% on the day. | Scrap what we said about MPS buyers being in short supply -- its shares are now up 3% on the day. |
| At this stage in proceedings, and with prices so low, we probably shouldn’t read too much into it. | At this stage in proceedings, and with prices so low, we probably shouldn’t read too much into it. |
| Are we in for a wild day for Banca Monte dei Paschi shares? They're up after falling by more than 6% in early trade. https://t.co/NI3bs3pJ1F pic.twitter.com/TGyCfKL8vW | Are we in for a wild day for Banca Monte dei Paschi shares? They're up after falling by more than 6% in early trade. https://t.co/NI3bs3pJ1F pic.twitter.com/TGyCfKL8vW |
| 8.44am GMT | 8.44am GMT |
| 08:44 | 08:44 |
| Monte dei Paschi’s shares are having one of those mornings; they’ve already been suspended once, after plunging over 6%: | Monte dei Paschi’s shares are having one of those mornings; they’ve already been suspended once, after plunging over 6%: |
| Monte dei Paschi said headed for nationalization after sale failure. Stock halted after falling 6.8% in Milan. https://t.co/cj85YeqXF4 pic.twitter.com/EaQtfAgQXd | Monte dei Paschi said headed for nationalization after sale failure. Stock halted after falling 6.8% in Milan. https://t.co/cj85YeqXF4 pic.twitter.com/EaQtfAgQXd |
| Banca Monte Paschi shares resume trading after limit down, off nearly 6%. Italian, Spanish yields tick higher on bailout reports | Banca Monte Paschi shares resume trading after limit down, off nearly 6%. Italian, Spanish yields tick higher on bailout reports |
| 8.37am GMT | 8.37am GMT |
| 08:37 | 08:37 |
| Europe’s stock markets have dipped into the red in early, subdued trading. | Europe’s stock markets have dipped into the red in early, subdued trading. |
| There’s no sign of the traditional “Santa Rally” yet; perhaps it has been lost in the fog gripping London this morning. | There’s no sign of the traditional “Santa Rally” yet; perhaps it has been lost in the fog gripping London this morning. |
| Connor Campbell of SpreadEx sums up the mood: | Connor Campbell of SpreadEx sums up the mood: |
| Once again the main news surrounded Monte dei Paschi. With the world’s oldest bank rapidly running out of time to raise the €5 billion in capital it desperately needs – it’s only managed €2 billion so far, with a key Qatari investors choosing not to invest a €1 billion chunk – it looks like MPS will be forced into a government bailout. Italy approved a €20 billion increase to its debt ceiling yesterday, freeing up money for its ailing banks, starting with Monte dei Paschi. | Once again the main news surrounded Monte dei Paschi. With the world’s oldest bank rapidly running out of time to raise the €5 billion in capital it desperately needs – it’s only managed €2 billion so far, with a key Qatari investors choosing not to invest a €1 billion chunk – it looks like MPS will be forced into a government bailout. Italy approved a €20 billion increase to its debt ceiling yesterday, freeing up money for its ailing banks, starting with Monte dei Paschi. |
| This news has begun to drag on the rest of the European banking sector, with the likes of Deutsche Bank, Barclays and Lloyds all dipping their toes into the red after the bell. This in turn capped the region’s indices, with the DAX and CAC falling 0.1% and 0.2% respectively. | This news has begun to drag on the rest of the European banking sector, with the likes of Deutsche Bank, Barclays and Lloyds all dipping their toes into the red after the bell. This in turn capped the region’s indices, with the DAX and CAC falling 0.1% and 0.2% respectively. |
| 8.27am GMT | 8.27am GMT |
| 08:27 | 08:27 |
| Update: Shares in Monte Dei Paschi have finally opened, and they’re down 6.75% at €15.20. | Update: Shares in Monte Dei Paschi have finally opened, and they’re down 6.75% at €15.20. |
| They’ve already shed more than 99% of their value in the last decade, as this graph from blogger Jeroen Blokland shows: | They’ve already shed more than 99% of their value in the last decade, as this graph from blogger Jeroen Blokland shows: |
| The downfall of the world’s oldest bank in one chart! #montepaschi pic.twitter.com/UfGHsB3WFy | The downfall of the world’s oldest bank in one chart! #montepaschi pic.twitter.com/UfGHsB3WFy |
| 8.18am GMT | 8.18am GMT |
| 08:18 | 08:18 |
| Shares in Monte dei Paschi have failed to open at the start of trading in Milan. | Shares in Monte dei Paschi have failed to open at the start of trading in Milan. |
| Buyers may be in short supply today, as they risk being wiped out if the Italian state has to bail the bank out | Buyers may be in short supply today, as they risk being wiped out if the Italian state has to bail the bank out |
| Updated | Updated |
| at 8.49am GMT | at 8.49am GMT |
| 8.08am GMT | 8.08am GMT |
| 08:08 | 08:08 |
| Il Sole 24: MPS rescue could take three months | Il Sole 24: MPS rescue could take three months |
| Italian newspaper Il Sole 24 is reporting that the rescue of Monte Dei Paschi might take two or three months. | Italian newspaper Il Sole 24 is reporting that the rescue of Monte Dei Paschi might take two or three months. |
| The paper says that the details haven’t been worked out yet, but that MPS would initially be able to tap state guarantees to bolster its liquidity. | The paper says that the details haven’t been worked out yet, but that MPS would initially be able to tap state guarantees to bolster its liquidity. |
| That would help MPS avoid running out of cash, now that Qatar has declined to back its €5bn cash call. | That would help MPS avoid running out of cash, now that Qatar has declined to back its €5bn cash call. |
| A long-term recapitalisation plan would take longer; and involve MPS’s management presenting a new business plan. | A long-term recapitalisation plan would take longer; and involve MPS’s management presenting a new business plan. |
| #ITALY | MONTE DEI PASCHI RESCUE BY THE STATE TO BE CARRIED OUT IN SEPARATE STEPS, TWO OR THREE MONTHS WILL BE REQUIRED - IL SOLE 24 ORE | #ITALY | MONTE DEI PASCHI RESCUE BY THE STATE TO BE CARRIED OUT IN SEPARATE STEPS, TWO OR THREE MONTHS WILL BE REQUIRED - IL SOLE 24 ORE |
| #ITALY | MONTE DEI PASCHI CAPITAL HIKE UNDER STATE RESCUE TO REMAIN UNVARIED AT AROUND 5 BLN EUROS - IL SOLE 24 ORE - RTRS | #ITALY | MONTE DEI PASCHI CAPITAL HIKE UNDER STATE RESCUE TO REMAIN UNVARIED AT AROUND 5 BLN EUROS - IL SOLE 24 ORE - RTRS |
| Updated | Updated |
| at 10.59am GMT | at 10.59am GMT |
| 7.50am GMT | 7.50am GMT |
| 07:50 | 07:50 |
| The agenda: Monte dei Paschi bailout looms as Qatar walks away | The agenda: Monte dei Paschi bailout looms as Qatar walks away |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Monte dei Paschi di Siena has been through a lot since it was founded back in 1472, twenty years before Columbus discovered America. | Monte dei Paschi di Siena has been through a lot since it was founded back in 1472, twenty years before Columbus discovered America. |
| And the world’s oldest bank finds itself in the undignified position of needing a bailout this morning, after efforts to persuade private investors to provide desperately needed fresh capital floundered. | And the world’s oldest bank finds itself in the undignified position of needing a bailout this morning, after efforts to persuade private investors to provide desperately needed fresh capital floundered. |
| Monte dei Paschi di Siena admitted last night that Qatar’s sovereign wealth fund had not been persuaded to become the “anchor investor” to underpin its €5bn cash call. | Monte dei Paschi di Siena admitted last night that Qatar’s sovereign wealth fund had not been persuaded to become the “anchor investor” to underpin its €5bn cash call. |
| So a saga that has been dragging on for months could finally be resolved today, when the cash call closes at lunchtime today. | So a saga that has been dragging on for months could finally be resolved today, when the cash call closes at lunchtime today. |
| Without private sector capital, MPS is now likely to miss an end of year deadline imposed by the European Central Bank to raise fresh funds. So the Italian government is now under serious time pressure to step in and put in fresh capital itself. | Without private sector capital, MPS is now likely to miss an end of year deadline imposed by the European Central Bank to raise fresh funds. So the Italian government is now under serious time pressure to step in and put in fresh capital itself. |
| As we wrote last night, MPS is running out of time and options. | As we wrote last night, MPS is running out of time and options. |
| Shares in the bank, Italy’s third largest, gyrated wildly in Wednesday’s trading session, plunging 18% to record lows before closing 12% lower amid rumours that the fund-raising effort would fail. | Shares in the bank, Italy’s third largest, gyrated wildly in Wednesday’s trading session, plunging 18% to record lows before closing 12% lower amid rumours that the fund-raising effort would fail. |
| “The idea that Qatar could be an anchor investor has vanished and without an anchor investor there is no demand from anyone else,” one source told Reuters. | “The idea that Qatar could be an anchor investor has vanished and without an anchor investor there is no demand from anyone else,” one source told Reuters. |
| In the last few minutes, the bank reported that it had only raised €2bn in new capital through the debt-for-equity swap, far short of the €5bn target. | In the last few minutes, the bank reported that it had only raised €2bn in new capital through the debt-for-equity swap, far short of the €5bn target. |
| *ITALY GOVT MAY APPROVE DECREE TO RESCUE PASCHI TODAY: STAMPA --- debt for equity swap raised 2.07 bln, far below target of 4.3 bln | *ITALY GOVT MAY APPROVE DECREE TO RESCUE PASCHI TODAY: STAMPA --- debt for equity swap raised 2.07 bln, far below target of 4.3 bln |
| Yesterday, Italy’s government prepared for a rescue bid by approving a €20bn fund for bank recapitalisation. | Yesterday, Italy’s government prepared for a rescue bid by approving a €20bn fund for bank recapitalisation. |
| Ministers have also insisted that there will be a “minimised or non-existent” impact on savers. But shareholders, and those who hold MPS’s junior, and riskier, bonds could suffer losses. | Ministers have also insisted that there will be a “minimised or non-existent” impact on savers. But shareholders, and those who hold MPS’s junior, and riskier, bonds could suffer losses. |
| Also coming up today | Also coming up today |
| The Dow Jones industrial average will have another tilt at smashing through the 20,000 point mark, after faltering and falling back from record highs yesterday. | The Dow Jones industrial average will have another tilt at smashing through the 20,000 point mark, after faltering and falling back from record highs yesterday. |
| We get a flurry of US economic data, including new personal consumption and durable goods orders at 1.30pm GMT, plus the latest weekly jobless report. | We get a flurry of US economic data, including new personal consumption and durable goods orders at 1.30pm GMT, plus the latest weekly jobless report. |
| And rumours continue to swirl that Deutsche Bank might be close to a settlement with the Department of Justice, over misconduct before the 2008 financial crisis. | And rumours continue to swirl that Deutsche Bank might be close to a settlement with the Department of Justice, over misconduct before the 2008 financial crisis. |
| Updated | Updated |
| at 7.59am GMT | at 7.59am GMT |