BRUSSELS (Reuters) - The European Commission has reached an initial agreement with Italian authorities over a recapitalization of troubled lender Banca Monte dei Paschi di Siena
The Commission said it had agreed in principle on the "precautionary recapitalization" of the bank in line with EU rules, provided that certain criteria are met such as making sure the bank becomes profitable.
"It would allow Italy to inject capital into MPS as a precaution, in line with EU rules, whilst limiting the burden on Italian taxpayers," Competition Commissioner Margrethe Vestager said in a statement.
Italy's fourth biggest bank had 26 billion euros ($29 billion) in gross defaulting debts at the end of last year said it was in exclusive talks with a domestic fund and a group of investors over the sale of its bad loan portfolio.
The world's oldest bank, headquartered in the Tuscan town of Siena, emerged as Europe's weakest lender in stress tests in July last year and has requested a state bailout to help to fill an 8.8 billion euro capital shortfall after failing to raise funds on the market in December.
The Commission said the agreement was dependent on the European Central Bank confirming that MPS was solvent and private investors agreeing to buy the bank's non-performing loan portfolio.