Italy has received an extension from the European Commission (EC) to complete the revised restructuring targets and to sell a stake in the troubled bank Monte dei Paschi di Siena (MPS).

The approval comes as the Italian government, which acquired a 64% stake in the bank in 2017 following a €5.4bn bailout, plans to pump more money into the lender as part of its €2.5bn fundraising. 

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The EC said that the extension of the deadline to complete the restructuring of MPS and to divest the government’s stake in the bank is acceptable.

“The set of revised commitments adequately counterbalances the revision of the deadline,” the EC’s statement read. 

The revised commitments by Italy include a reduction in headcount and operational costs along with additional disposals, divestments, and branch closures. 

The Italian government reached out to the EC for an extension after talks to sell MPS to larger peer UniCredit did not materialise. 

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The deadline has been pushed back “by years” to give MPS the time to revive its business, Reuters reported citing a person privy to the discussion.

In late June this year, MPS unveiled the new five-year plan, which proposes the closure of 11% of the branch network and trimming the workforce by 4,200, which will be voluntary.  

Sources aware of the matter told the news agency that the bank could reach an agreement with unions by the end of the week over the voluntary redundancies.

In terms of assets, MPS is the fifth largest bank in the country, with a market share of 6.4%. It mainly caters to retail and small and medium-sized enterprise customers. 

At the end of 2021, MPS had €138bn on its balance sheet, 21,244 staff and 1,368 branches in Italy.