The European Central Bank said the troubled Italian lender Monte dei Paschi di Siena needs about EUR 8.8 billion, or $9.2 billion, bailout.
It was previously estimated that the world's oldest surviving bank required EUR 5 billion to deal with a capital shortfall. The lender failed to raise the amount within the time provided by the ECB.
The latest figure is based on the results of stress tests carried out this year, according to Monte dei Paschi. The ECB has also pointed out that the bank's liquidity worsened between November 30 and December 21.
The Italian government approved a EUR 20 billion package on December 23 to support the country's embattled banking sector.
"Public intervention is always the last resort for a bank, and is subject to strict rules," ECB Supervisory Board member Ignazio Angeloni said in an interview to the Italian daily La Stampa on Tuesday.
He also said that not everything that is necessary to recapitalize the Italian banks has to come from the state. Long-standing shareholders and subordinated bondholders can contribute, he added.
The Monte dei Paschi said in a statement on Monday it is set to under go 'precautionary recapitalization, which according to the ECB is "the injection of own funds into a solvent bank by the state when this is necessary to remedy a serious disturbance in the economy of a Member State and preserve financial stability."
The measure is "exceptional" as it is conditional on final approval under the European Union State aid framework and does not trigger the resolution of the bank, the central bank said explains on its website.
Precautionary recapitalization is applicable only for solvent banks and is limited to the capital injections needed to address a capital shortfall under the adverse scenario of a stress test, the ECB said.
Under the process, the bank applies to the government authorities for a precautionary recapitalization and the state asks the banking supervisor ECB to confirm the solvency of the bank.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Economic News
What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.
