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Bank of Italy Authorizes Paschi Aid, Passing Buck to Monti

The Bank of Italy approved 3.9 billion euros ($5.3 billion) in emergency loans for Banca Monte dei Paschi di Siena SpA, meaning Prime Minister Mario Monti may have to push ahead with the unpopular bailout before elections next month.

The decision comes amid a political firestorm over rescuing the world’s oldest bank after revelations the lender’s former management hid details of structured-finance transactions from regulators that may produce hundreds of millions of euros in losses. The Bank of Italy made its announcement late yesterday, a day after Monte Paschi shareholders approved 6.5 billion euros in capital increases needed to secure the loans.