Italian Finance Minister Pier Carlo Padoan criticized the European Central Bank for not being clear enough in its request for Banca Monte dei Paschi di Siena SpA to boost its capital by almost twice the amount the lender failed to raise on the market.
“It would have been useful to receive additional information from the ECB Supervisory Board on the criteria used for such a valuation, since it has consequences for the other banks,” Padoan said in an interview with financial daily Il Sole 24 Ore published on Thursday.
Pier Carlo Padoan
Photographer: Andrew Harrer/Bloomberg
“In addition to a letter of five lines and three numbers, some explanation would have been useful; opaque moves without an explanation lead people to think that there’s something wrong,” the minister said.
Padoan’s comments were confirmed by his press office. An ECB spokeswoman declined to comment on the minister’s remarks, when contacted by Bloomberg News.
Implementing measures to aid banks, including Paschi, passed by the Italian cabinet last week “will be long and complicated,” Prime Minister Paolo Gentiloni said at a year-end news conference in Rome Thursday. Talks with European Union’s supervisors will “hopefully be marked by productive and effective dialogue,” Gentiloni added, saying that, should not that be the case, there is a risk of tensions and difficulties.
The central bank’s demand to Monte Paschi doesn’t call into question the “capability and relevance” of the decree passed by the Italian cabinet, the premier also said.
The 8.8 billion-euro ($9.2 billion) capital increase requested by the ECB was based on the results of a 2016 stress test, Monte Paschi said in a statement on Monday, citing two letters from the central bank. The troubled lender also said it’s seeking additional information on the calculations. While the ECB saw worsening liquidity for the bank between Nov. 30 and Dec. 21, the ECB still considers it to be solvent.
Gentiloni’s cabinet agreed last week to plow as much as 20 billion euros into Monte Paschi and other banks after the lender failed in its plan to raise about 5 billion euros from the market.
Padoan’s criticism comes a day after Germany’s Finance Ministry called on the ECB and the European Commission to ensure that Italy complies with European rules when aiding its bank.
Precautionary recapitalization of banks through the government can be part of a solution “only in exceptional circumstances” and “under tight conditions,” the Berlin-based ministry said by e-mail in response to questions. “Even then, owners and subordinate creditors should first be called upon.”
In the interview with Sole, Padoan said that the retail holders of a Paschi 2008 bond will be covered under a compensation mechanism that is part of the decree passed by the government. As a Paschi shareholder, the Rome-based Treasury “will have a look” at possible management changes while supporting its chief executive officer, Marco Morelli, the minister also said.
Monte Paschi’s shares remain suspended from trading in Milan until full details of the bank’s capital-strengthening are available.