 has had its debt-to-equity conversion offer approved by market regulator Consob.){kind=link}
Troubled Italian bank Monte dei Paschi di Siena (BIT:BMPS) has had its debt-to-equity conversion offer approved by market regulator Consob, which will launch on Monday.
The bond swap is a key measure designed to raise capital for the bank, the oldest in the world, after it emerged as the weakest lender in Europe after stress tests on the sector in July. Other Italian banks including Veneto Banca and Carige and Banca Etruria are also at risk, with many pinning their future on the outcome of Sunday’s constitutional referendum.
If the country votes against the reform, Prime Minister Matteo Renzi has pledged to resign, seeing the advent of a technocratic government and instability that may damage the plan to save Monte dei Paschi and other troubled banks. Lorenzo Codogno, a former chief economist at the Italian Treasury and founder of LC Macro Advisors, told the Financial Time that the “biggest concern” over the result of the referendum was the impact on “the banking sector and implications for financial stability”.
“The capital increases of Italian banks due to be announced right after the referendum may become even trickier than currently perceived in the case of a “No” vote”,” Mr Codogno continued.
The debt-to-equity conversion offer will be launched at 1300GMT on Monday and run until 1500 GMT on Friday. The offer was agreed by the Tuscan bank on Thursday and will target 10 subordinated bonds with a nominal outstanding amount of 4.3 billion euros.
Italy’s banks have been weighed down by 360 billion euros of bad loans, many of which are owned by the average Italian household investor. The spread on on Italian government bonds versus German Bunds rose above 190 points on Friday, ahead of turbulence linked to the referendum result. Monte dei Paschi shares fell 12 percent before being suspended from trading.