Why Italy Is Still Struggling to Rescue Monte Paschi

Italy’s Banca Monte dei Paschi di Siena SpA is the world’s oldest bank. It’s also one of the most problematic after receiving more than 9 billion euros ($10.6 billion) in bailouts since the global financial crisis from the Italian government, which now has until the end of 2021 to exit its 64% stake. A possible sale to UniCredit SpA is raising more questions about the ballooning taxpayer cost of keeping the bank alive.

The lender has been considered too-big-to-fail by successive Italian governments. That’s because the economic and social costs of a liquidation are viewed as unacceptably high, with more than 4.5 million clients, 21,000 employees and 150 billion euros of total assets. The bank, which traces its roots to the 15th century, is now the country’s fourth-largest, and has grown through acquisitions that backfired. Monte Paschi ran short of capital back in 2009, at the peak of the worst financial crisis in 70 years, and ever since has been a headache for governments, regulators and investors trying to fix it. The saga has played out from the bank’s medieval headquarters in the Palazzo Salimbeni in Siena to the neo-classical finance ministry in Rome and the steel-and-glass conference rooms of the European Central Bank in Frankfurt.