With the plan, the bank is seeking to draw a line under years of problems stemming from poor lending practices, political interference and chronic mismanagement that has left the Siena-based bank-known as the world’s oldest-one of Europe’s sickest lenders, with thin profits and almost €50 billion in bad loans.
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The bank’s board, which was already scheduled to meet on Friday to approve first-half results, was looking closely at the proposal, which came as a complete surprise to financial markets.
The European Central Bank has approved a rescue plan drawn up by Italy’s third-biggest lender, Monte dei Paschi di Siena BMPS.MI , two sources close to the matter said on Friday.
Monte dei Paschi shares were recently up more than 8.10% in morning trading.
Crucially, the bank is counting on an existing EU-sanctioned state guarantee in order to sell a tranche of 6 billion euros of the new bonds at investment grade.
At the end of that process, it will inform markets of its conclusions, the bank said. Atlante would underwrite the sale of about 1.6 billion euros worth of the bank’s riskier bad loans.
While the bank is seeking to raise funds through private means, Italy is in talks with the European Commission to back the bank’s recapitalization, minimizing losses for its creditors, people familiar with the discussions have said.
BMPS, whose stock has fallen by almost 80 percent since the start of the year, is seen as particularly vulnerable.
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Renzi faces a constitutional reform referendum in the autumn on which he has wagered his job.
