MILAN, April 12 (Reuters) - Shareholders at Italy's Banca Popolare di Milano on Saturday rejected a governance reform aimed at giving institutional investors a greater say in the cooperative bank and making its shares more attractive.
The decision comes only a few weeks before the launch of a 500 million euro ($694 million) rights issue to beef up the bank's balance sheet as the European Central Bank reviews its asset quality.
The governance reform and the capital increase are conditions set by the Bank of Italy for the removal of "add-ons", an additional risk-weighting of assets that forces the Milanese bank to set aside more capital.
The governance change failed to achieve the two-thirds majority needed for approval at an annual meeting. It had envisaged giving institutional investors the right to appoint six of the 15 members of the supervisory board, with the aim of limiting the power of employee shareholders and union representatives.
The Bank of Italy has repeatedly encouraged Popolare Milano and other Italian cooperative lenders to increase investor control over management to make themselves more attractive to institutional investors.
An attempt to transform the bank into a joint-stock company had already failed, prompting top investor Andrea Bonomi to sell his entire 8.6 percent stake on the market.
Last week, the French bank Credit Mutuel said it had sold its 6.9 percent stake in Popolare Milano, having first taken a stake in the bank in in 2004. ($1 = 0.7201 Euros) (Reporting by Andrea Mandala, writing by Danilo Masoni; Editing by Kevin Liffey)