Tier jerker

7 December 2016 By George Hay Follow @gfhay

The Italian bank has secured a fifth of the 5 billion euros it needs in new equity by turning some bonds into shares. The priorities are to protect retail depositors and attract outside investment. Institutional investors, and Brussels, will both have to give a little.

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Italy is preparing to take a 2 billion euro controlling stake in Monte dei Paschi di Siena as the bank's hopes of a private funding rescue fade following Prime Minister Matteo Renzi's decision to quit, two sources close to the matter told Reuters on Dec. 6.

The government is already the lender’s single largest shareholder with 4 percent, but is planning to buy junior bonds held by ordinary Italians, which it would then convert into equity to take the stake up to 40 percent, the sources said.

This would make it by far the biggest shareholder, meaning the Treasury would be able to control Italy's third-biggest bank and its shareholder meetings.

An Italian Treasury spokesman denied on Dec. 7 that the state was poised to ask for a loan from the European Stability Mechanism.

MPS shares rose 9 percent to 20.6 euros as of 1400 GMT on Dec. 7.

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