European Competition Commissioner
Margrethe Vestager on Thursday reached an in-principle deal with
Economy Minister Pier Carlo Padoan on a restructuring plan for
struggling Monte dei Paschi di Siena (MPS) bank, to permit a
precautionary recapitalisation of the Tuscan lender in line with
EU rules, the European Commission said.
Also in line with EU rules, some of the costs of
restructuring MPS will be borne by shareholders and junior
bondholders, the EC said.
Retail bondholders may request compensation in case of
misselling, it said, while deposit holder are protected.
Monte dei Paschi di Siena will have its entire portfolio of
non-performing loans at market conditions, reducing risks to
finances, the Commission said.
At the same time, MPS will take a series of measures to
substantially boost its efficiency including a ceiling on
managers' salaries, equal to 10 times the average salary of MPS
staff, the EC said.
The in-principle deal reached on MPS between the EU and the
Italian Treasury depends on the European Central Bank's (ECB)
confirmation that MPS is a solvent bank which respects capital
requisites, as well as Italy's obtaining a formal confirmation
from private investors that they will take on its portfolio of
non-performing loans, the Commission said.
Now the EC and the Italian authorities must define the
details of MPS's final restructuring plan, including Italy's
commitments on implementing the plan. ON this basis, Brussels
will adopt a formal decision in line with EU rules on State aid,
the EC said.
The EC said the preliminary and provisional deal was reached
thanks to "constructive talks with Italy".
Sources in Brussels said that "the financial projections and
cost control were the two main talking points" but "all the
chapters" in the negotiations "have been closed".
As for selling the non-performing loans, the sources said
there is already a "high level of tranquility" on the prospect
of private investors buying the NPL portfolio, but that in any
case the EU prefers to wait for the formalisation of that
purchase.
The sources added that a merger with troubled Veneto banks
Popolare di Vicenza and Veneto Banca would be "impossible".
"A bank going through restructuring cannot buy other banks or
engage in mergers," the sources said.
The provisional deal "will give further confidence to the
solutions for banking problems which have very often been
exaggerated, and which with today's results will be further
taken into consideration and put in perspective," Padoan said.
Another "positive consequence" of the in-principal accord, he
said, is that "it will put on the credit market a strong, stable
and sustainable bank which will give a hand to Italian
development over the coming years".
The accord has "resolved all the issues" of the troubled
Tuscan lender, Padoan said.
"Over time it will require an adjustment on the costs side
but it will be able to count on a very strong capital base
because at this point MPS is a bank cleaned of its NPLCs, with a
capital well over requirements", he said, adding that the
Italian State will "remain in the capital for the duration of
the restructuring plan but the goal is to remain the least time
possible, even less than five years".
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