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Report: Monte dei Paschi bailout size depends on business plan

The size of Banca Monte dei Paschi di Siena SpA's government bailout depends on the lender's new business plan, Italy's finance minister Pier Carlo Padoan said in an interview with Il Sole 24 Ore published Dec. 29.

The ECB said recently that the lender's capital shortfall stands at €8.8 billion. Monte dei Paschi failed to generate enough private sector interest to raise €5.0 billion — the earlier estimate of its capital hole — forcing the Italian government to step in. Some sources estimate that the government might need to pump €6.5 billion into the bank as part of a €20 billion bailout of the Italian banking sector. Small investors in the bank will not suffer losses, the government said.

Padoan told Il Sole that the ECB's assessment of Monte dei Paschi's capital shortfall cannot be contested, but that it would have been "useful" to be given the ECB's reasoning as it could help other Italian banks determine how strong their own capital position is. He added that Monte dei Paschi could launch a capital increase in two to three months, and also said the lender's shares will not be delisted and that they will resume trading as soon as possible. Monte dei Paschi's shares trade in a very volatile fashion and are currently suspended.

Padoan told Il Sole that the makeup of Monte dei Paschi's board would be reconsidered, but that no questions would be raised over the position of the CEO, Marco Morelli.