MILAN (AP) — Italian bank Monte dei Paschi di Siena edged closer to a state bailout Thursday as its capital raising efforts are falling short of the 5 billion euros ($5.2 billion) needed to stay afloat.
The bank announced overnight that its attempt to swap debt for equity had netted just 2.45 billion euros, and that it had failed to secure an anchor investor. The bank is expected to announce by Friday if it is able to plug the gap.
Parliament has approved 20 billion euros to shore up Italy's troubled banks, with Monte Paschi, the country's third-largest lender, by far the most vulnerable after it was the worst-performer in this summer's EU stress test.
The bank's troubles come amid broader concerns over Italy's banking system, which is weighed down by some 360 billion euros in bad loans. The bank's share price was up modestly on hopes of a bailout.
"After misjudgment and unnecessary delay, a rescue scheme addressing the long saga of Italian banks is in the making," said Lorenzo Codogno, an analyst for the consultancy LC Macro Advisors Limited. "Italian banks will continue their gradual healing process for months, if not years, but what is going to happen in the next few days is to be considered a turning point."
Any state intervention would imply a hit to bondholders under the EU's burden-sharing requirement, but analysts said it is possible that the government could inject funds without triggering a so-called bail-in if the shortfall is contained. Such an arrangement would be subject to an agreement with the European Union's executive Commission.
The consumer advocate organization Codacons estimated that the Italian bailout fund could cost each Italian family 833 euros.