ANNOUNCEMENT 07 Dec 2012In December 2012, the government of Italy announced a change in private-sector financial support.
NUMBER OF INTERVENTIONS
Letter of the EC to Italy, Brussels, 17.12.2012; C(2012) 9660 final corr:
letter from the EC to Italy, Brussels 27.11.2013
On 7 December 2012, the Italian Government notified the European Commission about the recapitalization of Monte dei Paschi di Siena S.p.A. (MPS).
MPS is an Italian listed bank, which was privatized in 1995 by transferring the banking business to a foundation (Fondazione MPS), whose board members are appointed by the local authorities of Siena. Initially the foundation held 100% of MPS. It remains its majority stakeholder today, with a stake of 37.56%, the rest belonging to various shareholders with a stake not greater than 4%. The Gruppo MPS is composed of a large number of national and foreign companies and as of December 2011, it was the third largest Italian banking group in terms of total assets, branches and employees.
In 2009 MPS issued EUR1.9bn of hybrid capital instruments (the so called 'Tremonti Bonds') subscribed by Italy under the first Italian recapitalization scheme (approved by the Commission on 23 December 2008).
To face a Tier 1 capital shortfall, in summer 2012 the board of directors of MPS authorized the issuance of new hybrid capital instruments (under Law Decree n.95 of 6 July 2012), for an overall maximum amount of EUR3.9bn, which Italy intends to subscribe. The new instruments are a perpetual hybrid (like Tremonti Bonds), with a 9% annual coupon with a 'step-up' clause of 0.5% every two years. Coupon payments can be made by assigning to Italy new MPS shares or by issuing to Italy new instruments instead of the cash payment.
The new hybrid capital instruments of EUR3.9bn are exclusively subscribed by Italy and allow MPS to remain above the solvency ratio. Hence, the EC confirms that: 'In the current economic circumstances...it is highly doubtful that MPS would have been able to raise capital on the market. For those reasons the new measure entails an advantage to MPS. Given that MPS is and will be active in the financial sector, which is open to intense international competition, any advantage from State resources to the bank has the potential to affect intra-Union trade and to distort competition. The measure therefore constitutes State aid within the meaning of Article 107(1) TFEU.' 'p.7 letter of the EC to Italy, Brussels, 17.12.2012; C(2012) 9660 final corr.'
Update:On 17 June 2013, Italy presented a restructuring plan that foresees the reorganisation of governance and control functions and the rationalisation of organisational structures and processes (par. 50, letter from the EC to Italy, Brussels 27.11.2013)
The plan further includes:
divestiture of certain units (Consum.it and MPS Leasing & Factoring)
divestiture of two forein banking subsidiaries (France and Belgium)
The EC reconfirms potential trade distortings by stating that:
"MPS is and will be active in the financial sector, which is open to intense international competition, any advantage from State resources to a bank may affect trade between the Member States and distort competition." (par. 104)
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.