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Italian bank Monte Paschi fails to get $5.2B investment

Associated Press logo Associated Press 22/12/2016 By COLLEEN BARRY, AP Business Writer

MILAN — Italian bank Monte dei Paschi di Siena edged closer to a state bailout late Thursday after announcing that its capital raising efforts failed to net the 5 billion euros ($5.2 billion) needed to stay afloat.

Italy's third-largest lender said that it hadn't secured a key anchor investor to pump money in and that its efforts to swap debt for equity had netted only 2.45 billion euros.

Parliament has approved 20 billion euros to shore up Italy's troubled banks, with Monte Paschi by far the most vulnerable after it was listed as the worst-performer in this summer's European Union stress test.

The bank's troubles come amid broader concerns over Italy's banking system, which is weighed down by some 360 billion euros in bad loans. Monte Pashci's share price was up modestly on hopes of a bailout.

"After misjudgment and unnecessary delay, a rescue scheme addressing the long saga of Italian banks is in the making," said Lorenzo Codogno, an analyst for the consultancy LC Macro Advisors Limited. "Italian banks will continue their gradual healing process for months, if not years, but what is going to happen in the next few days is to be considered a turning point."

Any state intervention would imply a hit to bondholders under the EU's burden-sharing requirement, but analysts said it is possible Italy's government could inject funds without triggering a so-called bail-in if the shortfall was contained. Such an arrangement would be subject to an agreement with the EU's executive Commission.

The consumer advocate organization Codacons estimated the Italian bailout fund could cost each Italian family 833 euros.

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