Bank of Mounting Pressure

13 April 2015 By Neil Unmack Follow @unmack1

The European Central Bank wants MPS to find a merger partner, the Italian lender says. That’s a more serious issue for MPS than an awkward breach of counterparty limits. There aren’t many likely acquirers – and the regulatory pressure makes it even harder to secure a good price.

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Banca Monte dei Paschi di Siena said the European Central Bank had recommended it merge with a rival. This follows February’s Supervisory Review and Evaluation Process, in which the bank received an “unfavourable” score.

The bank said the ECB had cited its “trend of non-performing loan origination” as well as its “difficulty in reaching an adequate level of profitability and in generating capital,” according to a statement in English on April 13, originally published in Italian on April 10.

The bank also said it had exceeded its regulatory limit for large exposures, because of exposure to Nomura. The exposure to the Japanese bank totalled 34.68 percent of regulatory capital as of Dec. 31 2014, compared with a regulatory maximum of 25 percent, the MPS statement said.

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