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| Italy approves bailout for Monte dei Paschi | Italy approves bailout for Monte dei Paschi |
| (35 minutes later) | |
| Italy's cabinet has approved a state-bailout for the country's third-largest bank, Monte dei Paschi di Siena. | Italy's cabinet has approved a state-bailout for the country's third-largest bank, Monte dei Paschi di Siena. |
| Prime Minister Paolo Gentiloni said his government had authorised a €20bn ($21bn, £17.9bn) fund to support Italy's embattled banking sector. | Prime Minister Paolo Gentiloni said his government had authorised a €20bn ($21bn, £17.9bn) fund to support Italy's embattled banking sector. |
| The announcement came after Monte dei Paschi had failed to raise €5bn from private investors. | The announcement came after Monte dei Paschi had failed to raise €5bn from private investors. |
| The Italian bank said it would request a capital injection from the state to stay afloat. | |
| Under new EU rules on bank bailouts, the bailout will entail a forced conversion of the bank's junior bonds into shares. | |
| A state bailout risks losses for thousands of ordinary retail investors. Small investors are estimated to hold some €2bn of Monte dei Paschi's bonds. | |
| However, the government will need to stick to new European Union rules designed to stop tax payers bearing the brunt of supporting weak banks. | |
| The Italian parliament had already authorised the government to create a fund to prop up the bank sector. | The Italian parliament had already authorised the government to create a fund to prop up the bank sector. |
| Founded in 1472, Monte dei Paschi is said to be the oldest surviving bank in the world. | Founded in 1472, Monte dei Paschi is said to be the oldest surviving bank in the world. |
| It failed an EU stress test in July due to billions of euros of risky loans on its books, made to clients who cannot afford to repay them. | It failed an EU stress test in July due to billions of euros of risky loans on its books, made to clients who cannot afford to repay them. |
| The situation has worsened since then. | The situation has worsened since then. |
| On Wednesday, Monte dei Paschi revealed that it could run out of funds by next April, using up nearly €11bn. | On Wednesday, Monte dei Paschi revealed that it could run out of funds by next April, using up nearly €11bn. |
| Previously it had said it had the funds to stay afloat for 11 months. | Previously it had said it had the funds to stay afloat for 11 months. |
| It added that by next May, it could burn through even more - €15bn in total. | It added that by next May, it could burn through even more - €15bn in total. |