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May 6, 2022

Italy to infuse additional capital in embattled bank MPS

Government-backed Monte Dei Paschi di Siena (MPS) is set to receive additional funds to boost its capital base, Reuters reported citing sources.

The troubled lender would receive a part of €925m funds the Italian government plans to infuse into state-owned firms, the sources said. 

Earlier, the lender had said it needs €2.5bn to meet its capital requirements but it had warned that the Ukraine crisis could lead to an increase in the capital it needs. 

MPS CEO Luigi Lovaglio, who joined the bank earlier this year, is conducting a review of the 2022-2026 plans.

The actual size of the required capital can be ascertained after the new plan is presented. 

As per the news agency’s earlier report, Lovaglio aims to finalise his strategy for MPS in June and raise capital in October. 

The Italian government rescued the MPS in 2017 and acquired a 64% stake in it. 

In 2021, the government tried to sell MPS to an established rival UniCredit.

However, the talks failed after UniCredit demanded that it needed around €7bn to cover MPS’ capital buffer.

In March this year, Italian Economy Minister Daniele Franco revealed that the government would privatise MPS after it completes the restructuring process.

“It is reasonable to expect that only after the capital increase and the restructuring steps envisaged in the new business plan, the best conditions will be there for the privatisation,” Franco had said.

Notably, as per the terms agreed with European Union, Italy had to sell its stake in MPS by the 2021-end, but it is now seeking an extension.

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