The Italian government approved a capital injection of up to €900 million for struggling lender Banca Popolare di Bari SCpA, Reuters reported.
The cooperative bank, which the Bank of Italy has placed under special administration, previously said it needed between €800 million and €1 billion in fresh capital to address loan losses.
As part of the plan, state-owned Banca del Mezzogiorno - MedioCredito Centrale SpA will receive an injection of up to €900 million to allow it to finance Popolare di Bari's capital increase. Popolare di Bari will use €500 million of the cash to shore up its financial strength, while the remaining funds will be reserved for future requirements, a source close to the matter told the news agency.
The government, which aims to relaunch Popolare di Bari as a state-owned bank for investments in Italy's southern region, is reportedly seeking to have Italian deposit guarantee fund Fondo Interbancario di Tutela dei Depositi provide up to €500 million of the funds for the bank's rescue. Popolare di Bari previously asked the fund for help in plugging its capital shortfall, but the fund said it wanted to assess the lender's business plan first before deciding, according to the report.
Shortly before a Dec. 13 cabinet meeting that sought to approve an injection for Popolare di Bari, Italian Prime Minister Giuseppe Conte said the country's banks were in good health and that the government will not need to bail out any lenders, Reuters noted.