Published: Wed, December 28, 2016
Markets | By Terence Owen

Italy's Monte dei Paschi bank shortfall reaches $9.2bn

Italy's Monte dei Paschi bank shortfall reaches $9.2bn

The European Central Bank has told Monte dei Paschi it needs to plug a capital shortfall of 8.8 billion euros ($9.2 billion), higher than a previous 5 billion euro gap estimated by the bank, the lender said on Monday, confirming what sources told Reuters. The FTSE 100 was closed in London for a bank holiday.

He also questioned whether enough funds would be available to other struggling banks, given that Monte dei Paschi could use up nearly half of the agreed €20bn support fund.

The Italian government approved a decree on Friday to bail out Monte dei Paschi after the world's oldest bank failed to win investor backing for a desperately needed capital increase. Italy's benchmark share index, the FTSE MIB, was down less than 0.1%. The intervention means a modest bail-in of investors with the government able to purchase shares or bonds at market terms authorized by the European Union in Brussels.

"The bank has quickly started talks with the competent authorities to understand the methodologies underlying the ECB's calculations and introduce the measures for a precautionary recapitalisation", Monte dei Paschi said.

While the ECB saw worsening liquidity at Monte Paschi in December, it still considers the Italian bank to be solvent because it meets Tier 2 capital requirements.

New Ebola Vaccine Is 100% Effective
Dubbed the Ebola Zaire vaccine V920, expectations are that it will offer much-needed cushion against the virus. The trial used a ring vaccination protocol that had been shown to be effective in eliminating smallpox.

Russian Federation looking into every possible cause behind plane crash
The ensemble, informally known as "Russia's singing weapon", has about 200 members and has achieved a number of worldwide awards. In televised comments, President Vladimir Putin, speaking in St Petersburg, declared December 26 a national day of mourning.

US home prices continue rise -- along with mortgage rates
While not the most timely indicator on home prices, the index is considered among the most accurate. The 10-city and 20-city indices both posted a month-over-month gain of 0.6 percent.

The bank's shares remained suspended from trading Tuesday at the request of Italy's stock market regulator.

Banks have to set aside more funds for possible losses on these loans, leaving them less funds to lend to other clients, and thus acting as a drag on growth in the overall economy.

A number of smaller Italian banks are also expected draw from the €20 billion rescue fund in order to rebuild their financial positions.

On 21 December, the bank revealed that it could run out of funds by next April, using up almost €11bn.

Like this: