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You can find the current article at its original source at https://www.theguardian.com/business/2016/dec/22/italy-bail-out-monte-dei-paschi-di-siena-rescue-matteo-renzi
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| Italy poised to bail out Monte dei Paschi di Siena as rescue deal fails Italy poised to bail out Monte dei Paschi di Siena as rescue deal fails | |
| (about 2 hours later) | |
| The Italian government is braced to bail out the world’s oldest bank, Monte dei Paschi di Siena (MPS), which has failed to win support from private investors for a €5bn rescue package. | The Italian government is braced to bail out the world’s oldest bank, Monte dei Paschi di Siena (MPS), which has failed to win support from private investors for a €5bn rescue package. |
| The board of Italy’s third largest bank was meeting on Thursday after it failed to secure an anchor investor – thought to be the Qatar sovereign wealth fund – to support its fundraising effort. | The board of Italy’s third largest bank was meeting on Thursday after it failed to secure an anchor investor – thought to be the Qatar sovereign wealth fund – to support its fundraising effort. |
| Shares in the bank were volatile, lifting off record lows but then falling back in confusion about the next steps. MPS is under instruction from the European Central Bank to bolster its finances after it was the weakest of 51 European banks subjected to stress tests. | Shares in the bank were volatile, lifting off record lows but then falling back in confusion about the next steps. MPS is under instruction from the European Central Bank to bolster its finances after it was the weakest of 51 European banks subjected to stress tests. |
| The failure to attract enough investors means the Italian government will have to impose losses on bondholders before it can stump up cash because of new EU rules intended to stop taxpayers having to pick up the bill for bank losses. | The failure to attract enough investors means the Italian government will have to impose losses on bondholders before it can stump up cash because of new EU rules intended to stop taxpayers having to pick up the bill for bank losses. |
| However, some €2bn of the bonds are held by private investors and there are expectations that an arrangement will be put in place to limit their losses. | However, some €2bn of the bonds are held by private investors and there are expectations that an arrangement will be put in place to limit their losses. |
| The bailout is not just a financial issue. It is also expected to have political consequences for Italy’s controlling Democratic party and Matteo Renzi, the former prime minister who stepped down from office earlier this month after he was roundly defeated in the 4 December referendum. | The bailout is not just a financial issue. It is also expected to have political consequences for Italy’s controlling Democratic party and Matteo Renzi, the former prime minister who stepped down from office earlier this month after he was roundly defeated in the 4 December referendum. |
| Paolo Gentiloni has taken over as prime minister for now, but Renzi is expected to run for election as early as next year. | Paolo Gentiloni has taken over as prime minister for now, but Renzi is expected to run for election as early as next year. |
| Wolfango Piccoli, an analyst with Teneo Intelligence, said a government rescue might not be immediately damaging politically, in large part because public attention will be diverted from the issue during the Christmas period. | Wolfango Piccoli, an analyst with Teneo Intelligence, said a government rescue might not be immediately damaging politically, in large part because public attention will be diverted from the issue during the Christmas period. |
| But the issue could become “politically toxic” later, once it becomes clear how many of the bank’s junior bondholders are eventually compensated for their losses, and how long it takes for them to be paid. | But the issue could become “politically toxic” later, once it becomes clear how many of the bank’s junior bondholders are eventually compensated for their losses, and how long it takes for them to be paid. |
| “In terms of the junior bondholders, let’s see what happens. it will eventually be decided by Brussels,” Piccoli said. Once MPS is saved, a number of other banks could also require government support, keeping the issue in the news for the foreseeable future. | “In terms of the junior bondholders, let’s see what happens. it will eventually be decided by Brussels,” Piccoli said. Once MPS is saved, a number of other banks could also require government support, keeping the issue in the news for the foreseeable future. |
| “This will drag on for some time. If we have elections in May or June, it will be used then [against Renzi’s Democratic party], and there is no way to deflect that,” he added. | “This will drag on for some time. If we have elections in May or June, it will be used then [against Renzi’s Democratic party], and there is no way to deflect that,” he added. |
| The bail-in of bondholders should reduce the amount of funds that the Italian government must contribute to MPS. On Wednesday, the parliament approved a €20bn rescue fund for the Italian banking sector, which is laden with €360bn of bad debts. | The bail-in of bondholders should reduce the amount of funds that the Italian government must contribute to MPS. On Wednesday, the parliament approved a €20bn rescue fund for the Italian banking sector, which is laden with €360bn of bad debts. |
| The €5bn fundraising from private investors was complex, involving a cash call on shareholders, asking bondholders to swap their investments for equity and also parcelling off bad debts. The €4.25bn Atlante fund – set up by Renzi and backed by larger banks to prop up banks – had been expected to hoover up the problem loans. | The €5bn fundraising from private investors was complex, involving a cash call on shareholders, asking bondholders to swap their investments for equity and also parcelling off bad debts. The €4.25bn Atlante fund – set up by Renzi and backed by larger banks to prop up banks – had been expected to hoover up the problem loans. |