Italian parliament approves €20bn bailout plan for banks, as Monte dei Paschi's shares tank on liquidity warnings

Hayley Kirton
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Monte dei Paschi is trying to raise €5bn in its own private capital boosting plans (Source: Getty)

Italy's parliament has today signed off a government proposal for a potential €20bn (£16.8bn) bailout for the country's banks, according to various reports.

Italy's banking sector has found itself in hot water in recent years, burdened by billions of euros in non-performing loans.

First in line for a cash boost is likely to be the country's oldest lender, Monte dei Paschi di Siena, which is in the middle of a crunch week for its own bailout plans.

Shares in Monte dei Paschi were suspended this morning after investors reacted to warnings the struggling Italian lender could quickly burn through its cash on hand.

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Updated paperwork from the bank, which was published today, revealed the approximately €11bn worth of liquidity the lender currently has to its name could be used up in just four months, much sooner than the 11 months previously estimated.

At one point, shares were trading as low as €15.17, 17.4 per cent down on their previous close price of €18.54. However, they have since recovered and are trading down one per cent at €18.35 at the time of writing.

Earlier this week, the bank announced it was extending its share offer plan in a last ditch attempt to fund a private-sector bailout to boost its capital by €5bn, with the deadline for retail investors being set for today and for institutional investors tomorrow.

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However, the possibility of the bank being propped up without help from the state has been called into question, particularly after it came to light that Italian bailout fund Atlante was having second thoughts about its €1.5bn purchase of bad loans.

Investors are also likely feeling wary about letting go of their cash following the 'no' vote in the Italian referendum at the start of the month, which eventually resulted in then Prime Minister Matteo Renzi handing in his resignation.

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