Monte Dei Paschi receives ECB’s conditional approval for bad loan plan

Italian state-owned bank Monte Dei Paschi di Siena (BMPS.MI) said on Thursday it had received a conditional green light from the European Central Bank for its bad loan clean-up plan.

Monte dei Paschi said a draft decision received from the ECB subjected the bad loan spin-off to the bank replenishing its capital buffers to meet relevant requirements.

Italy’s Treasury, which owns 68% of the bank following a 2017 bailout, will need to commit to subscribing to 70% of the capital instruments issued by the bank while private investors must buy the remaining 30%.

Monte Dei Paschi said the ECB had requested it issues Tier 2 capital instruments worth 250 million euros at market conditions.

The troubled bank approved in June a plan to offload around 8.1 billion euros in bad and unlikely-to-pay loans to state-owned bad loan manager AMCO, in a move that could make it more attractive for a possible re-privatisation.