The Italian government has received the green light from European Union authorities to provide liquidity measures for its ailing lender Monte dei Paschi di Siena (MPS).
The European Commission approved Rome’s request for the use of liquidity support for MPS, a commission spokeswoman said Thursday.
Banks with a capital shortfall are not allowed to benefit from liquidity schemes, according to EU rules, forcing Italy to file the request for MPS.
The spokeswoman stressed that approval of the measures doesn’t affect any recapitalization plans for the bank.
MPS has been dragged down over the past years by bad loans on its books and the overpriced takeover of an industry rival.
The Italian bank said Monday the European Central Bank has requested that MPS prop up its capital base by 8.8 billion euros (9.2 billion dollars), more than the previously announced 5 billion euros.
Even for the smaller sum, MPS failed to find private investors, paving the way for a state rescue and de-facto nationalization.
Recapitalization plans for MPS are still being discussed with Italy and European supervisory authorities, the commission spokeswoman said.
The government in Rome has already agreed to create a fund containing 20 billion euros for the country’s embattled financial sector.