The European Central Bank has rejected Monte dei Pachi's request for more time to raise cash

Emma Haslett
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The world's oldest lender is negotiating a €5bn rescue package (Source: Getty)

Shares in troubled Italian lender Monte dei Paschi nosedived after reports suggested the European Central Bank (ECB) had rejected its request for more time to raise rescue money.

The lender is in the process of negotiating a €5bn (£4.2bn) rescue package with the Italian government.

Yesterday it requested until mid-January to seal the deal - but a report by Reuters suggested the ECB turned down the request on the grounds the delay would do little to help.

That means it could be bailed-in, with a privately funded rescue plan, as soon as this weekend, the FT reported.

Shares in the lender, the world's oldest, fell 6.3 per cent to €20.48 in lunchtime trading.

Referendum wipeout

The bank's shares tumbled following Italy's referendum last Sunday, and Prime Minister Matteo Renzi's subsequent resignation: Renzi was seen as playing a major part in rescue negotiations.

The Italian government is already Monte dei Paschi's largest shareholder, with a four per cent stake in the business - although Reuters it could recapitalise the bank with as much as €2bn, leaving it with a 40 per cent stake.

In European Banking Authority stress tests in the summer, Monte dei Paschi was the only lender whose capital would be entirely wiped out by a sharp economic downturn.

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