Business World

Sunday 11 December 2016

ECB tells Italian bank to slash troubled loans

Stefano Bernabei and Silvia Aloisi

Published 05/07/2016 | 02:30

The headquarters of the Monte dei Paschi di Siena bank in Siena
The headquarters of the Monte dei Paschi di Siena bank in Siena

The European Central Bank (ECB) has asked Italy's Banca Monte dei Paschi di Siena to slash its bad debts by 40pc over three years, heaping more pressure on Rome and Brussels to stabilise the Italian banking system.

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Monte dei Paschi is the weakest link among big lenders in the Eurozone's fourth-largest bank sector and may have to raise capital quickly to meet the ECB's target, given that last month's Brexit vote has hurt investor appetite for bad debts.

The Italian government, mindful that the country's banks rely heavily on retail investors, wants a green light from the EU to help lenders such as Monte dei Paschi raise capital. Otherwise, ordinary Italians face massive losses as banks are forced to sell assets or shares at heavy discounts.

Monte dei Paschi di Siena said in a statement yesterday the ECB had told it to cut net non-performing loans by 40pc to €14.6bn in 2018 from €24.2bn in 2015.

The ECB's targets for 2016 and 2017 are €21.8bn and €18.4bn respectively. That will mean major loan sales.

Shares in the Tuscan lender extended their losses after the statement, falling more than 9pc to an all-time low, marking a slide of 70pc so far this year.

The bank, which has the highest ratio of bad debts in Italy. (Reuters)

Irish Independent

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