Brussels, 17/12/2012 (Agence Europe) - On 17 December, the European Commission temporarily approved a €3.9 billion recapitalisation of Italy's third largest bank Monte dei Paschi di Siena S.p.A (“MPS”) for reasons of financial stability. This will increase its common equity tier 1 capital ratio to 9% and enable it to comply with a European Banking Authority (EBA) recommendation requiring an additional temporary buffer against sovereign risk holdings. MPS will receive fresh capital in the form of hybrid capital instruments, replacing €1.9 billion of existing hybrid capital instruments that Italy provided in 2009 under its recapitalisation scheme. Unlike the Tremonti-bonds, the new instruments entail a so-called alternative coupon satisfaction mechanism, which obliges MPS to pay the annually due coupon in kind in the event of insufficient distributable profits. The Commission's approval of the support measures is conditional on the presentation within six months of a restructuring plan from the date of the decision. (FG/transl.fl)