Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Exclusive-Italy shelves insurance plan for MPS legal risks, eyes spin-off - sources

Stock MarketsJul 26, 2021 11:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: The logo of Monte dei Paschi di Siena bank is seen at a bank entrance in Rome, Italy August 16, 2018. REUTERS/Max Rossi/File Photo

By Giuseppe Fonte and Valentina Za

ROME (Reuters) - Italy's Treasury is exploring a plan to hive off most of the legal risks weighing on Monte dei Paschi after shelving an alternative insurance scheme that was too costly, three sources close to the matter said.

Legal risks of around 10 billion euros have long posed one of the main hurdles to Italy's efforts to cut the 64% stake the state owns in Monte dei Paschi (MPS) after a 2017 bailout.

The absence of a firm solution to the legal problems threatens to further prolong the Treasury's struggle to return MPS to private hands.

The government of Prime Minister Mario Draghi is under pressure to find a solution for MPS, which needs more capital only four years after its 5.4 billion euro state bailout.

After months of tense negotiations, MPS last week signed a draft accord with its former top investor, local banking foundation Fondazione Monte dei Paschi, to settle their outstanding legal disputes.

The landmark deal will reduce claims by 3.8 billion euros. The Treasury is working to further lower remaining legal risks below 5 billion euros, sources have said.

But even after cutting the claims, the three sources said a scheme the Treasury has been working on for months to allow MPS to insure its legal risks and make it easier to find a buyer is too costly for the Tuscan bank's weakened finances.

Under the scheme, state-owned exports insurance agency SACE and other private players would have provided protection for the risks against the payment of fees.

The scheme, however, also failed to solve another key problem: the joint liability MPS and its acquirer would remain subject to under Italian law vis-à-vis potential plaintiffs.

The Treasury has now revived an earlier plan that entailed spinning off MPS' legal risks and keeping them in state hands, a move that needs clearance from European Union competition authorities, the sources said.

Deliberations are still preliminary and a decision on how to proceed can only be taken in agreement with MPS' buyer, one of the sources said, adding that if Rome opted for the spin-off scheme it would be a long and complex process.

MPS declined to comment.

The Treasury has been trying to convince UniCredit to take on its ailing rival but Italy's number 2 bank is focused on an internal revamp under new CEO Andrea Orcel.

Banking stress test results on Friday are expected to highlight MPS' vulnerability, though a person familiar with the matter said capital needs should not exceed the 2.5 billion euros MPS has already said it plans to raise by mid-2022.

The government faces calls to delay the sale by the co-ruling 5-Star Movement and the right-wing League party, lawmakers say.

Union representatives staged a protest in Rome on Monday calling for safeguards for MPS workers.

On Tuesday, Deputy Economy Minister Laura Castelli will speak about the Treasury's re-privatisation plans before a parliamentary committee conducting an inquiry into the banking system under the leadership of 5-Star MP Carla Ruocco.

The Treasury is working with Bank of America (NYSE:BAC) and Orrick to re-privatise MPS. Mediobanca (OTC:MDIBY) and Credit Suisse (SIX:CSGN) are advising MPS.

Exclusive-Italy shelves insurance plan for MPS legal risks, eyes spin-off - sources

Related Articles

Capital Southwest Adds Capital to Your Portfolio
Capital Southwest Adds Capital to Your Portfolio By TipRanks - Sep 28, 2021

I am bullish on Capital Southwest Corp. (NASDAQ:CSWC) stock. Capital Southwest is a middle-market lending and credit-focused business development corporation (BDC). The U. S....

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email