Belfast Telegraph

Italy bails out Monte dei Paschi bank after it fails to raise 5bn euros

The Italian government is bailing out Monte dei Paschi di Siena after Italy's third-largest bank failed to raise the 5 billion euros (£4.2 billion) needed to stay afloat.

The government passed the bailout decree early on Friday. Parliament has approved a 20 billion euro (£17 billion) fund to guarantee the stability of Italian banks, with MPS the most vulnerable.

Shares in Monte dei Paschi were suspended on Friday on the Milan stock exchange.

MPS said late on Thursday that it had not secured a key anchor investor to pump money in, and that efforts to swap debt for equity had netted only 2.45 billion euros (£2 billion).

The government passed the decree saying it was 100% guaranteeing the bank's retail customers.

Under the decree, the government will temporarily support MPS by offering it capital under a formula agreed with the European Commission called "precautionary recapitalisation", under which the state offers assurances that the bank is solvent and that the government will get its money back.

The bank's troubles come amid broader concerns over Italy's banking system, which is weighed down by 360 billion euros (£306 billion) in bad loans.

MPS is by far the most vulnerable after it was listed as the worst-performer in this summer's European Union stress tests of banks.

Consumer advocate organisation Codacons estimated the Italian bailout fund could cost each Italian family 833 euros (£710).