World’s oldest and Italy’s third largest bank Monte dei Paschi di Siena, which has been continuously operational since 1472, rolls out the dice one last time to stay in business. The bank is trying a Herculean recapitalisation, its third in the last three years. The bank is weighed down by bad loans of at least 9.2 billion Euro. In order to stay operational, the bank has laid down a two step plan.
The first step involves the bank gathering 5 billion Euro. Given the bank’s recent records, it might be a tough task in itself, especially considering Italy’s downtrodden banking sector. Currently Monte dei Paschi’s market value is less than 1 billion Euro. So far 8 financial institutions, Credit Suisse, Goldman Sachs, JPMorgan, Santander, Bank of America, Deutsche Bank, Mediobanca and Citi have agreed to be part of the plan.
Once the capital is secured, the bank aims to sell off its bad loan of 9.2 billion Euro via securities. Many financial analysts do not see this plan being successful as it will be hard for Monte dei Paschi to raise 5 billion Euro in current market conditions. Even if they do, the sell of bad loan, due to its sheer volume, may not be possible. Monte dei Paschi’s fall, however, could create huge financial turmoil in the European Union. Only time will tale if the world’s oldest bank will survive or perish.