Belfast Telegraph

Monte dei Paschi di Siena shares plunge as ECB rejects Italy plea for more time

Shares in troubled Italian bank Monte dei Paschi di Siena dived on Friday following reports that the bank's request for more time to raise new capital from investors has been rejected by regulators.

Shares in the lender were down 14.1% in afternoon trading to 18.73 euros and were temporarily suspended.

The bank had been given until the end of the month to raise 5 billion euros in capital, but the bank asked the European Central Bank for a delay until January 20 due to political uncertainty unleashed by the resignation of Prime Minister Matteo Renzi earlier this week.

But it has been reported by Reuters that the ECB's Single Supervisory Mechanism has rejected the request.

Failure to obtain private capital would raise the possibility that the Italian government would have to bail out Monte dei Paschi and would deal a hefty blow to the European banking sector.

Shares in fellow Italian banks UniCredit, Banca Popolare, Mediobanca and Banco Popolare di Milano were also down on the news.

Michael Hewson, c hief market analyst at CMC Markets, said: " The decision by the European Central Bank to reject Italy's demand for more time to secure private funding for a bailout of Monte dei Paschi is likely to keep markets apprehensive at the prospect of how any new Italian government might look in the context of dealing with the country's banking sector, bringing closer the prospect of a possible politically toxic bail-in of retail bondholders."