Belgium, (Brussels Morning Newspaper) The European Commission approved Italy’s revised aid plan for Banca Monte dei Paschi di Siena (MPS).
The body pointed out in a statement on Tuesday that the revised plan replaces original commitments which were the basis for approving precautionary recapitalisation of the bank.
It reminded that Italy submitted its plan to recapitalise MPS in July 2017 and added that, under original commitments, the “bank had to implement specific measures to restore its long-term viability, minimise distortions of competition and ensure an adequate own contribution to cover losses and restructuring costs.”
Italy first amended the plan in September 2019, with the Commission noting that the country implemented some commitments in timely manner.
The body pointed out that MPS reduced its operating costs and ratio of non-performing loans, respected behavioural constraints and improved its risk management policies.
In July this year, Italy called for more time to fulfil commitments – sell its stake in the bank and continue the restructuring process.
“To minimise possible distortions of competition caused by the extended deadline, Italy proposed a series of additional commitments, such as certain additional disposals and divestments, additional branch closures and the continued obligation to respect certain limitations on the way it conducts business,” the EC noted.
Balanced new proposal
The Commission added that it assessed Italy’s request, pointing out that the call for extending the deadline is acceptable and the new commitments counterbalance the extension.
It stressed that Italy’s aid to MPS is in line with EU rules as the new proposal maintains balance of the original plan.
The EC noted that MPS holds a market share of 6.4% and is the fifth largest bank in Italy with regard to total assets. MPS is largely active in segments of small and medium-sized enterprises (SMEs) and retail, but maintains presence in insurance and wealth management businesses.
The body reminded that it approved Italy’s plan to restructure the bank worth 5.4 billion euro in 2017, stressing that the plan focuses on restoring viability while limiting negative effects on competition.
The EC concluded that, according to EU rules, member states can only inject public funds in a bank that is profitable in the long term, which is why MPS has to be restructured.