The Commission has concluded that the public support granted for the restructuring of the Italian bank Banca Monti dei Paschi di Siena SpA is in line with EU state aid rules.
MPS received a state recapitalisation of €3.9 billion and state guarantees of €13 billion granted to MPS under the Italian guarantee scheme for banks (case SA.34032). In view of MPS' commitments to raise at least €2.5 billion capital from the market and to redeem the full share of state bonds within five years, the Commission approved the measures for reasons of financial stability. The Commission is satisfied that MPS' restructuring plan ensures the long-term viability of the bank, provides for an appropriate contribution by MPS to the costs of restructuring and mitigates competition distortions created by the aid.
Commission Vice President Joaquín Almunia in charge of competition policy, commented: "The restructuring plan of MPS will allow the bank to return to viability by addressing the problems that led to its difficulties. Our decision should ensure that the State capital will be repaid to the benefit of the Italian taxpayers".
In December 2012, the Commission temporarily approved a €3.9 billion capital injection through hybrid instruments (the so-called "Monti Bonds") that Italy planned to grant to MPS, to enable it to comply with European Banking Authority (EBA) requirements, subject to the notification of a restructuring plan (see IP/12/1383). Italy notified the required restructuring plan in June 2013 and updated it in November.
The Commission found that MPS' five-year restructuring plan ensures that the bank will become viable in the long term without the need for additional state support. The Commission verified that the plan rests on prudent assumptions, in particular the assumptions relating to the spread on Italian government bonds. On that basis the bank plans to achieve a competitive return on equity at the end of the restructuring period, in particular based on improved efficiency and a reduction of operating costs. At the same time the risk profile of the bank will be reduced through an improved corporate governance structure, a reduction of the sovereign exposure and limitations to trading activities. The remuneration of the management will also be capped.
Further, the restructuring plan provides for a sufficient contribution by MPS to the costs of restructuring, in order to reduce the burden for the taxpayer. Through the reduction of the balance sheet by 25 per cent the plan also mitigates the distortions of competition created by the aid.
A key element of the restructuring plan is a capital increase of at least €2.5 billion that MPS plans to realise on the market. This would allow the bank to repay a large amount of state capital.
Press release
© European Commission
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