ROME Feb 16 Italy's parliament approved on
Thursday a government plan to create a 20 billion euro ($21.25
billion) fund to support the country's troubled banks, including
Monte dei Paschi di Siena.
The government unveiled the project in December and the
parliamentary approval means that funds can now be released to a
sector weighed down by 350 billion euros of bad loans -- a third
of the euro zone's total.
The first bank likely to benefit will be Monte dei Paschi,
the world's oldest bank, which last year failed to win investor
backing for a desperately needed capital increase.
The government readied the fund in December on the
understanding that the struggling lender had a capital shortfall
of 5 billion euros, but the European Central Bank has since
estimated the gap at 8.8 billion euros.
Despite this jump, ministers have repeatedly asserted that
their 20 billion euro fund will be large enough to sort out
problems across the country's banking sector.
The CEO of Popolare di Vicenza told Il Sole 24 Ore newspaper
on Thursday that besides Monte dei Paschi, the state was also
expected to step in to help both his own lender and the
neighbouring Veneto Banca.
The two Veneto-based regional banks, rescued by bailout fund
Atlante last year after an attempt to raise money on the market
failed, are planning to merge.
"The size of the (state) intervention is not known yet and
will depend on talks with the ECB and talks between the Treasury
and Atlante," CEO Fabrizio Viola told the financial daily.
($1 = 0.9412 euros)
(Reporting by Crispian Balmer)