MILAN (Reuters) - The European Central Bank (ECB) has asked Monte dei Paschi di Siena (MI:BMPS) to raise its core capital level to 14.3 percent as it sets new, tougher requirements for riskier lenders in a bid to bolster their financial strength.
The Tuscan lender, which emerged as the weakest bank in a Europe-wide health check of the sector last year, said the ECB request was preliminary and subject to changes, adding it was reviewing the proposal and would reply on Jan. 16.
Its shares were down 4.4 percent by 9:55 a.m..
The ECB's 14.3 percent Common Equity Tier 1 or core capital requirement compares with a level of 11.4 percent the bank had at the end of September 2014.
The Monte dei Paschi statement came after a report in Il Sole 24 Ore said the ECB, which took over single supervision of euro zone lenders in November, had decided to assign specific capital requirements to individual banks which in nearly all cases will be much higher than those set by Basel III rules.
Il Sole, citing letters sent by the ECB to lenders, said the new requirements would in particular set an average common equity Tier 1 ratio floor for the 15 Italian banks under ECB supervision of 10.5 percent.
That compares with a general Basel III minimum capital requirement of 7 percent.
The new requirements are part of the so-called regular supervisory review of lenders, which was until last year done by national supervisors and is now done by the ECB for the banks on which it has direct oversight.
European regulators say the review's purpose is to ensure institutions have adequate strategies as well as capital and liquidity to ensure a sound management and coverage of risks to which they are or might be exposed.
Il Sole said the CET 1 requirement for UBI Banca (MI:UBI) will be 9.6 percent, while unlisted Banca Popolare di Vicenza will have to lift its CET 1 to 11.6 percent. It gave no exact capital requirements for other Italian lenders.
A source close to UBI confirmed the bank had received a request to raise its core capital, without elaborating.
Il Sole said that if, in their reply to the ECB, the banks fail to convince the central bank to reduce the proposed minimum requirements, they will have to apply the new floors as of February or March.
Even before the ECB's request, Monte dei Paschi was already planning a 2.5 billion euro share issue to cover for the shortfall which emerged after ECB stress tests.
The ECB declined to comment on individual banks. The Bank of Italy was not immediately available for comment.