New Italian Government Puts Oldest Italian Bank Back On Life Support

The country’s new hybrid right wing-populist leadership thinks Monte dei Paschi has had it too easy.
Getty Images

Getty Images

At the ripe old age of 537, the Banca Monte dei Paschi di Siena fell ill. It had led a good life, from its salad days as the official pawnbroker for the Republic of Siena to its hey day as banker to the Medici. It was, after all, the oldest bank in the world, and all good things must come to an end. And for a while, it certainlylooked like things were coming to an end. And then, un miracolo: An Italian taxpayer-backed, German-taxpayer loathed recovery. It seemed as though MPS might live well into its second half-millennium.

But the angry Italian taxpayer giveth (unwillingly), and the angry Italian taxpayer taketh away (again).

Italy’s anti-establishment Five Star Movement and far-right Northern League said they would “redefine the missions and objective” of the bank, in their contract for government published last week….

The price for its current €750m issue has tumbled to less than 91 cents on the euro — equating to a yield of 7.8 per cent — having been sold at a yield of 5.375 per cent in January. These poor market conditions raises the prospect that the bank will face a sharply higher cost from selling additional tier 2 paper later this year.

Italian bond fears turn to Monte Paschi debt [FT]