Being the oldest, still active, bank in the world, Banca Monte dei Paschi di Siena is one of the largest banks in Italy. During the last decade, the bank got into serious trouble, after first the acquisition of Antonveneta, second, the global financial crisis, third their administration that covered hidden losses and last but not least the Italian bailout(s).
The bank has a questionable reputation of receiving bail out funds twice. Although EU law doesn’t allow more bail outs, it is expected that Monte dei Paschi has to apply for Government support for a third time in succession. It is uncertain as to how the financial markets and EU respond to this plan.
The 2016 EBA Stresstest, which investigates the stability of 51 European banks in 15 of the EU member states, showed that Monte dei Paschi could collapse when it faces three years of heavy crosswind. In the worst case scenario, according to insiders not strict enough, the core capital ratio of the bank comes out to -2,2%. The bank would at that stage have no ‘buffer’.
Even though the bank accepted a capital injection of investors, it still needs to come up with 5 billion Euro in additional capital. A fraction compared with the estimate of 47 billion Euro in bad loans that will never be repaid the bank has in their books.