Measures to allow state aid for Banca Monte dei Paschi di Siena are ready, with the Italian lender's hopes of pulling off a privately-backed fundraising fading, three sources familiar with the matter said today.
The Tuscan bank is looking to raise €5 billion this month to avoid being wound down.
Bbut investors are reluctant to commit funds after Prime Minister Matteo Renzi lost a referendum on Sunday, triggering political uncertainty.
One source said the bank was looking at the idea of a so-called precautionary recapitalisation, which would involve the government injecting cash.
Two other sources said a government decree authorising the state recapitalisation was ready, with its implementation depending on political developments in the next few days.
An injection of cash by the state would entail losses for institutional investors who hold the bank's junior debt, in line with European banking crisis rules.
Retail investors who hold €2.1 billion of the bank's subordinated bonds would be either spared or would be reimbursed, according to a source familiar with the matter.
The bank's finance chief, Francesco Mele, said last week if the privately-funded plan failed, the state would probably have to launch a precautionary recapitalisation under conditions set by the European Commission for state aid.
Sources said on Monday banks working on backing the planned €5 billion cash call had decided to wait three to four days until the political situation was clearer.
Under the terms of their involvement, they can drop the transaction due to adverse market conditions.
Renzi has said he will quit, but the country's head of state asked him yesterday to put his resignation on hold until parliament has approved the 2017 budget, which could be done as early as Friday.
The Financial Times said today that bankers had told the lender to prepare for a state bailout this weekend.
Monte dei Paschi, rated the weakest lender in European regulatory stress tests this summer, had planned to secure a firm commitment from one or more anchor investors and launch a share sale as early as tomorrow or Thursday.
A board meeting scheduled for today will now take place tomorrow, the Corriere della Sera newspaper said.
The lender said yesterday a take-up of a debt swap offer that is a crucial plank of its rescue plan totalled a maximum of €1.029 billion.
