Monte dei Paschi to send ECB plan to plug capital shortfall by January 31

MILAN (Reuters) – Italian state-owned bank Monte dei Paschi di Siena (MPS) said on Thursday it would tell the European Central Bank by the end of January how it plans to tackle its capital shortfall.

FILE PHOTO: The entrance of Monte dei Paschi bank in Siena, Italy, October 27, 2017. Picture taken October 27, 2017. REUTERS/Stefano Rellandini/File Photo

The Tuscan bank, which Italy rescued in 2017, has said its capital reserves will fall below minimum thresholds in the first quarter due to a bad loan clean-up it has just completed and provisions booked against pending legal disputes.

The bank’s board will meet on Dec. 17 to look at how much capital it needs depending on the various strategic alternatives included in a new business plan that will be presented that day, MPS said.

Italy’s Treasury, which must cut the 64% stake it holds in MPS under the terms the bank’s bailout, has been working to plug the capital gap as part of efforts to merge MPS with a stronger rival.

The project faces opposition from the co-ruling 5-Star Movement which backs instead the stand-alone plan MPS CEO Guido Bastianini has been working on.

Bastianini took over in May from Marco Morelli, who before leaving urged Rome to find a long-term solution for MPS, saying banks of that size had little future.

The Treasury has been discussing a possible deal with UniCredit and a person familiar with the talks told Reuters on Wednesday Rome wanted to have a solution in place by the end of January.

However, negotiations may be delayed now that UniCredit CEO Jean Pierre Mustier has resigned after clashing with the bank’s board over strategy.

People involved in the discussions said Treasury’s talks could still continue, but one source said the current UniCredit board may be reluctant to take strategic decisions just before its mandate ends in April.

Mustier, who will leave in April or as soon as a replacement is found, would only consider a deal that did not impact UniCredit’s capital buffers, sources have said.

Reporting by Valentina Za. Editing by Jane Merriman

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