The Italy Treasury is reportedly intensifying talks on the takeover of Italian lender Banca Monte dei Paschi di Siena (BMPS) with UniCredit.
The Treasury has stepped up its efforts to cater to UniCredit’s demands for acquiring the troubled state-owned lender, Bloomberg reported.
The Italian finance ministry is set to inject €2.5bn ($3bn) into BMPS and protect UniCredit from legal risks and integration costs.
The integration costs could include thousands of job losses.
It is also adding a tax benefit in its draft budget law such that UniCredit’s capital is not impacted, the report added.
The government is taking off €10bn of pending legal risks from BMPS’ books, to make the sale workable for UniCredit.
Bank of America has been appointed as Italy’s adviser on the potential BMPS sale.
The latest development comes after BMPS was looking to secure a €1.5bn ($1.8bn) capital injection to cover its legal risks and bad loans, earlier this month.
Rome bailed out BMPS by acquiring a 68% stake for €5.4bn ($6.34bn) 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 (EU) competition authorities, this stake must be sold by the end of 2021 with re-privatisation by mid-2022.
The Treasury approached Banco BPM and UniCredit as potential buyers for BMPS.
Initially, UniCredit was not interested in the deal.
On the other hand, The Five Star Movement, which shares power with finance minister Gualtieri’s Democrats, is against the sale of BMPS, which is 68% state-owned, according to Bloomberg.