Brussels, 27/11/2013 (Agence Europe) - On 27 November, the European Commission approved the state aid granted by Italy to the Italian Monte dei Paschi di Siena (MPS) bank in the form of state recapitalisation to the tune of €3.9 billion and state guarantees of €13 billion as part of the bank's restructuring plan.
The Commission particularly took into account the bank's commitment to increasing its capital to at least €2.5 billion on the markets, which should enable it to reimburse a large part of the state aid granted (two so-called “Monti bonds” underwritten by the state for €2 billion and €1.9 billion respectively) as well as its commitment to pay back the totality of the state bonds within a five-year deadline. The Commission believes that the restructuring plan ensures the long-term viability of the bank without additional state aid. On the basis of “prudent assumptions”, MPS is seeking to obtain a competitive return on equity at the end of the five-year restructuring period thanks to an improvement in efficiency and reduce operating costs. At the same time it is seeking to improve its risk profile through an improved corporate governance structure, reduction of its sovereign debt exposure and limitations to trading activities. Bank bosses' pay will also be reduced. The Commission says the restructuring plan provides for a sufficient contribution by MPS to the costs of restructuring. Through the reduction of the balance sheet by 25 % the plan also mitigates the distortions of competition created by the aid. (FG/trans.fl)