ROME: Veteran Italian banker and former industry minister Corrado Passera withdrew his rescue plan for Banca Monte dei Paschi di Siena (BMPS.MI) on Tuesday, accusing the bank of obstruction and ignoring the interests of its own shareholders.
Passera’s withdrawal leaves Monte dei Paschi, the country’s weakest major lender, tied to a plan drawn up and backed by investment bank JP Morgan to sell some 28 billion euros ($31 billion) in bad loans and raise 5 billion euros in new capital. “Ours was a serious proposal to turn around and relaunch the bank that would have given a key role to current shareholders,” Passera said in a letter to the bank which was released to media. “We were denied the minimum conditions for proceeding.”
Monte dei Paschi said in a statement it regretted Passera’s decision but added the claims he made were groundless and incompatible with the bank’s duty to guarantee all investors a level playing field as regards data access.
Banking analysts say the 544-year-old Tuscan bank, the world’s oldest lender, faces an uphill struggle to convince investors to back its third recapitalization in as many years, especially at a time of political uncertainty. Monte dei Paschi wants to complete the 5 billion-euro cash call by the end of December, an ambitious target given that Italians are to vote on Dec. 4 in a constitutional referendum which could unseat the government and sour market sentiment.
The attempted turnaround of Monte dei Paschi is the first big test of a state-backed campaign to steady Italy’s banking sector and clean up 360 billion euros in problem loans. Monte dei Paschi, which fared the worst in European stress tests earlier this year, needs to strengthen its balance sheet by year-end to meet a request by the European Central Bank and avoid the risk of being wound down.
