ROME (Alliance News) – Italy’s two houses of parliament on Wednesday approved a government request to increase the public debt by up to EUR20 billion (USD20.8 billion) to fund a rescue package for ailing banks, starting with Monte dei Paschi di Siena (MPS).
MPS, founded in 1472 and considered the world’s oldest lender, is struggling to complete a EUR5 billion recapitalization by the year’s end, as required by the European Central Bank after it came bottom in recent stress tests.
A resolution in favour of the government’s plan was approved in a 389-134 vote, with 8 abstentions, in the lower Chamber of Deputies. A few minutes after, the Senate also have its go-ahead in a 221-60 vote, with 3 abstentions.
The EUR20 billion sum “is sufficient” to solve the problems of an Italian banking sector that “is solid, healthy, with some well-known critical cases with specific characteristics for each,” Economy Minister Pier Carlo Padoan told the Chamber of Deputies.
MPS was due to close its four-day recapitalization bid on Thursday, and there were strong expectations that it was going to fall short of the EUR5 billion target, prompting the need for a top-up from the government.
In an updated filing on its rights issue, the Tuscan bank said it had only four month’s worth of liquidity left, down from 11 months communicated last week. By noon (1100 GMT) its share price was down by 6.4% to 17.36 euros.