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Monte dei Paschi expected to seek government support

European regulatorsexpect Banca Monte dei Paschi diSiena SpA to ask the Italian government for support amid concernsthat the lender's planned €5 billion capitalincrease will fall short, Reuters reported, citing "threeeurozone officials with knowledge of the matter."

The government couldlaunch a precautionary recapitalization to cover any capital gap left afterMonte dei Paschi concludes its capital increase, "one official withknowledge of the rescue attempt" told Reuters.

Such a recapitalizationcould allow Italy to inject public funds into Monte dei Paschi under certainconditions while avoiding a bail-in of all of the lender's bondholders, but thecountry still prefers finding private investors to solve the bank's capitalcrisis, the newswire said Sept. 22.

Asked if the use ofpublic funds could be a way to help address issues surrounding Monte deiPaschi, European Banking Authority Chairman Andrea Enria said state aid"could be part of the solution" to solve a lender's problem, Reutersnoted.

A that has seen Montedei Paschi Chairman Massimo Tononi and CEO Fabrizio Viola step down has raisedconcerns that the bank's capital increase may likely be to 2017. Adding to thoseconcerns is the upcoming referendum on proposed changes to Italy'sconstitution, likely to be held by early December.