Italy’s treasury is planning to find a buyer by end of this year to acquire troubled lender Banca Monte dei Paschi di Siena (BMPS), Reuters reported.
By doing so, the treasury can help the bank shed its remaining problem loans.
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The treasury had previously urged Prime Minister Giuseppe Conte’s office to approve a decree detailing the privatization plans for BMPS.
To attract buyers, the Treasury will help the troubled lender shed as much as €8.1bn in bad loans, through this plan.
The plan will allow the bank to cut its bad loans – which currently represents 40% of its total lending – to below 4%, the report added.
However, the European Central Bank (ECB) said it will approve the decree if the bank meets its capital needs.
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By GlobalDataTo satisfy ECB’s demands, BMPS issued two-tier bonds worth €300m last week.
The bank has to issue Additional Tier 1 (AT1) bonds worth up to €750m to reinforce its capital reserves. However, it cannot afford to do so.
To avoid AT1 issuance, the treasury wants to find a buyer that will acquire the bank and help shed the bad loans.
The Italy government is currently looking at Banco BPM as the right fit for acquiring BMPS, the Reuters report added.
Banco BPM said that it remains ready for further industry consolidation following the UBI Banca’s hostile takeover by Intesa Sanpaolo.
The Italian government first bailed out BMPS by acquiring a 68% stake for €5.4bn back in 2017 when the bank was moving into bad debts following years of mismanagement.
According to the bailout terms agreed with the European Union competition authorities, this stake must be sold by the end of 2021.
At current market prices, the stake is worth only €1.1bn.
