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Monte dei Paschi shares slump after ECB reveals funding concerns

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Monte dei Paschi shares slump after ECB reveals funding concerns

Shares in Banca Monte dei Paschi di Siena SpA slumped Jan. 14 and were suspended following its announcement that it had received a warning from the ECB.

The Italian lender said Jan. 11 that the ECB letter, which provided draft conclusions after an annual supervisory review, highlighted that the bank faced "significant challenges" in raising funds on the market, and warned it about its weak capital position and profitability.

The bank's shares fell more than 9% in Milan trading before they were suspended.

The ECB has set the state-owned bank's 2019 provisional capital requirement at 11% and recommended that the bank continue to set aside funds to cover losses, the bank said.

Monte dei Paschi is looking to place a junior bond to address the ECB's concerns, a source told Reuters Jan. 12.

The Italian lender intended to sell the junior bond — needed to top up its second-tier capital — in 2018, as part of its restructuring terms post-bail-out, but was unable to because of the market-freeze caused by investor concerns over the new government's anti-austerity policies, the report said.