Italy flays ECB for lack of clarity of Monte Paschi imbroglio

30 Dec 2016


Italy's finance minister Pier Carlo Padoan on Thursday criticised the European Central Bank (ECB) for not being clear enough in its request for Banca Monte dei Paschi di Siena SpA to boost its capital by almost twice the amount the lender failed to raise on the market.

''It would have been useful to receive additional information from the ECB supervisory board on the criteria used for such a valuation, since it has consequences for the other banks,'' Padoan said in an interview with financial daily Il Sole 24 Ore.

''In addition to a letter of five lines and three numbers, some explanation would have been useful; opaque moves without an explanation lead people to think that there's something wrong behind it,'' the minister said.

Padoan's comments were confirmed by his press office. An ECB spokeswoman declined to comment on the minister's remarks, when contacted by Bloomberg News.

The €8.8-billion ($9.2 billion) capital increase requested by the ECB was based on the results of a 2016 stress test, Monte Paschi said in a statement on Monday, citing two letters from the central bank.

The troubled lender also said it's seeking additional information on the calculations. While the ECB saw worsening liquidity for the bank between 30 November and 21 December, the ECB still considers it to be solvent.

Italian Prime Minister Paolo Gentiloni's cabinet agreed last week to plow as much as €20 billion into Monte Paschi and other banks after the lender failed in its plan to raise about €5 billion from the market.

Padoan's criticism comes a day after Germany's finance ministry called on the ECB and the European Commission to ensure that Italy complies with European rules when aiding its bank.

Precautionary recapitalisation of banks through the government can be part of a solution ''only in exceptional circumstances'' and ''under tight conditions'', the Berlin-based ministry said by email in response to questions. ''Even then, owners and subordinate creditors should first be called upon.''

In the interview with Sole, Padoan said that the retail holders of a Paschi 2008 bond would be covered under a compensation mechanism that is part of the decree passed by the government. As a Paschi shareholder, the Rome-based Treasury ''will have a look'' at possible management changes while supporting its chief executive officer Marco Morelli, the minister also said.

Monte Paschi's shares remain suspended from trading in Milan until full details of the bank's capital-strengthening are available.

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