Monti Government Said Likely to Proceed With Monte Paschi Aid

Mario Monti’s caretaker government will probably proceed with plans to give Banca Monte dei Paschi di Siena SpA a 3.9 billion-euro ($5.1 billion) bailout this week after considering a delay, a person familiar with the discussions said.

According to the decree approved by Monti’s cabinet in December, the payment is set to be completed by March 1. Under the government’s rescue plan, Monte Paschi will sell securities, dubbed “Monti” bonds, to the government with a 9 percent coupon that may rise to as much as 15 percent.

Government officials are leaning toward meeting the March 1 deadline on the capital injection, said two people, who asked not to be identified because the preparations are private. Ansa earlier reported that the March 1 deadline will be met, without citing saying how it obtained the information. A Monte Paschi (BMPS) official said the bank didn’t have a comment on the matter, while a government spokeswoman declined to comment. The stock fell as much as 4 percent in Milan trading.

Italian elections this week produced a hung parliament, with comedian Beppe Grillo’s anti-austerity movement winning more than 25 percent of the popular vote, compared with the 10.5 percent of the votes received by Monti’s coalition in the lower house. Grillo opposed the current bailout plan, arguing that a parliamentary commission should investigate the bank’s dealings.

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Monte Paschi fell 2.8 percent to 20.7 cents at 4:55 p.m. in Milan. The stock is down about 29 percent since Bloomberg News reported on Jan. 17 that the bank used a derivatives deal, dubbed Santorini, to disguise losses before a previous government bailout in 2009.

Monte Paschi, engulfed by investigations of its former managers, said on Feb. 6 it will take a 730 million-euro hit to its assets after reviewing structured deals from 2008 and 2009 that hid losses on earlier derivatives. The bank is seeking state funds to boost capital after failing to meet regulators’ minimum requirements in a rescue that some lawmakers and consumer groups have opposed.

Consumer group Codacons said in a statement today it’s appealing the ruling of an administrative court, which rejected Codacons claim to block Monte Paschi’s state aid last week. The Council of State will have a hearing on the appeal in Rome March 22, Codacons said.

To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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