The Italian government isstudying ways to purchase bad loans from Banca Monte dei Paschi di Siena SpA using money fromprivate and state-backed entities as a way to in the troubled lender withoutneeding preapproval from the European Commission, the Financial Times reported.
The latest option beingconsidered involves increasing bank rescue fund Atlante's size by approximately €2 billion of additionalcapital, partly from state pension funds and Cassa depositi e prestiti SpA. Atlante would then havethe capacity to securitize at least €10 billion of Monte dei Paschi's bad loansfor sale, "people involved in the talks" told the paper.
The rescue fund could set theprice for the NPLs at 34 cents rather than the 20 cents that is thought to becurrent market price, according to one senior person involved in the talks. Thebook value is reportedly 40 cents.
The option also foresees thelender seeking to raise about €3.5 billion in fresh capital, according to theJuly 20 report. The EC is expected to closely watch the Italian government'snext moves to ensure Monte dei Paschi does not receive any type of statesupport.
The European Court of Justiceruled July 19 thatrequiring investors to absorb losses before a bank can receive state aid is"not contrary to EU law," although it added that member states arenot required to impose losses on investors.