Monte dei Paschi suspends bond, stock and derivatives trading after Italian government gives green light to bailout

Francesca Washtell
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Monte dei Paschi is the world's oldest bank (Source: Getty)

Trading in Monte dei Paschi shares, derivatives and bonds has been suspended today after it was confirmed the bank has requested state aid from the Italian government.

Paolo Gentiloni, the new Italian prime minister, announced in the early hours of this morning that the country will dip into a €20bn (£16bn) fund to help the world's oldest bank. The fund, which will be used to prop up failing bank, was approved by parliament earlier this week.

Yesterday, Monte dei Paschi admitted it had failed to raise €5bn (£4.3bn) from private investors.

Read more: Last chance saloon for private Monte dei Paschi bailout

The country's third-largest bank said it failed to secure enough investor interest and sell sufficient new shares. This means the lender will scrap its planned debt-for-equity conversion offer that would have raised €2bn.

Bonds will be returned that were previously tendered under the swap agreement.

A raft of advisers will also feel the lender's pain after putting skin in the game to get the successful financial restructuring away. Monte dei Paschi investment banks such as JPMorgan and Mediobanca would not be receiving fees for their work.

Read more: Italian banks fall as Monte dei Paschi's future hangs in the balance

This will be the bank's third bailout since 2009.

Local press has said the bailout plan could take two to three months, starting with a government guarantee of Monte dei Paschi's own borrowings to ensure it doesn't run out of cash.

It has been bleeding deposits and on Wednesday said its liquidity could run out after four months. Only days earlier it had estimated it would last for 11 months.

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