On Tuesday 4 July, the European Commission gave its agreement to the preventative recapitalisation of the bank Monte dei Paschi di Siena (MPS) by the Italian state, as the operation will help to ensure the bank's long-term viability, without distorting competition.
The level of aid granted is €5.4 billion, to be injected in exchange for shares in MPS acquired at preferential prices. This decision of the European Commission follows the agreement in principle on the restructuring of the bank reached between Margrethe Vestager, the Commissioner for Competition, and the Italian Minister for the Economy and Finance, Pier Carlo Padoan, on 1 June (see EUROPE 11800).
Two conditions were necessary for the institution to authorise this preventative recapitalisation. First of all, the European Central Bank (ECB) had to confirm that MPS was solvent and in compliance with the capital requirements, which it was. Private investors then had to make a formal commitment to acquire non-performing loans in MPS, a commitment which the Italian authorities have secured in the amount of €4.3 billion. Small savers will furthermore be able to ask the bank for compensation, as it sold junior bonds abusively.
As agreed on 1 June, the bank will be restructured, allowing it to ensure its viability and the Italian State to receive an adequate return on its investment. The bank will refocus its economic model onto retail clients and small and medium-sized enterprises. Furthermore, directors' salaries will be capped at ten times the average salary of MPS employees and the bank will be required to sell a portfolio of non-performing loans of €26.1 billion.
The European Commission therefore considered that the preventative recapitalisation was compatible with EU rules on State aid.
Readers may recall that in December 2016, the bank launched an unsuccessful operation to raise private capital in order to avoid bankruptcy. The Italian State then expressed its intention of recapitalising the bank, to avoid a failure that could have had a significant impact in Italy and the Eurozone. (Original version in French by Lucas Tripoteau)