MPS will recover after State intervention says Padoan

Temporary recapitalisation, will return to market

MPS will recover after State intervention says Padoan

Rome, January 12 - The government's 20-billion-euro 'save-savings' decree enables the State to intervene "promptly" so that troubled Tuscan lender Monte dei Paschi di Siena (MPS) will undergo a "definitive recovery", Economy Minister Pier Carlo Padoan said Thursday. He said "the precautional recapitalisation is temporary and the definitively recovered bank will return to the market". The government is set to put billions of euros - initially estimated by the government at five billion, later estimated by the European Commission at 8.8 - into MPS to help it recover after a liquidity crisis and under the punishing weight of non-performing loans (NPLs). A new MPS board will be named after the precautional recapitalisation, Padoan said in a wide-ranging report to parliament. The primary goal of the new management team will be to implement a restructuring plan, he told parliament on the government's 20-billion-euro 'save-savings' decree which is to be implemented after negotiations with the European Central Bank and the European Commission. Padoan added: "The MPS management, which has shown willingness to tender its resignation, enjoys the government's confidence". MPS is undergoing a State-sponsored turnaround after coming last in European stress tests because of its heavy load of non-performing loans (NPls). Padoan warned against "discrediting" the banking system. He said the "essential factor" for its proper working was trust, which was "easy to destroy but hard to build up again". Padoan said it was "wrong and dangerous" to undermine confidence. Undermining trust could "jeopardise the entire system", Padoan warned. Padoan went on to say "the government hopes that justice will swiftly run its course and all those who have damaged the national community, local communities, savers and investors will be sanctioned". Padoan said, on managers who sold risky bonds to those unaware of the risks, that "the magistrature should identify responsibilities and adequately sanction those found guilty". Managers in four rescued banks - Banca Etruria, Banca Marche, CariFe and CariChieti - have been accused of selling junior binds to people who were not properly informed of the risks entailed. One Banca Etruria bondholder killed himself after losing his life savings. Retail bondholders in the four rescued banks will be automatically reimbursed "about an estimated 190 million" when all procedures have been completed, Padoan said. The government is set to compensate many holders of junior bonds who were jipped because they were not informed of the risks attached to those financial instruments.

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