* Bank to hold key board meeting on Jan. 14 after cash call
* Top executives have threatened to quit after clash with
* Bank's woes highlight role of charitable foundations in
By Silvia Aloisi
MILAN, Jan 12 Much is at stake when the board of
bailed-out bank Monte dei Paschi di Siena meets next
Tuesday, including possible management resignations, after a
charitable foundation forced it to postpone a vital $4 billion
rights issue planned for this month.
The clash between management and its biggest shareholder,
the Fondazione Monte dei Paschi, highlights flaws in the
ownership structure of many Italian lenders just as they prepare
for the euro zone's industry-wide health checks.
The International Monetary Fund has already called Monte dei
Paschi, the country's third-biggest lender behind Intesa
Sanpaolo and UniCredit, a "systemic bank" and
said the success of its restructuring is critical for Italian
banks as a whole.
"The foundation's behaviour is further evidence of the
problems linked to the inadequate ownership structure of our
banking system," Luigi Guiso, an economics professor at the
European University Institute in Florence, said in an article
written for independent think-tank lavoce.info.
"Not only does it risk burning the foundation's few
remaining assets but also, and this would be a lot more serious,
it risks triggering a crisis at Monte dei Paschi and sowing
seeds of instability for the whole banking system."
Foundations like Monte dei Paschi's are major shareholders
in all of Italy's main banks, with a combined stake of around 25
percent in Intesa Sanpaolo and 12 percent in Unicredit.
Altogether there are 88 banking foundations in Italy which
in the good times used dividends from the lenders to fund social
and cultural projects.
But as dividends have dried up and coffers depleted some now
find themselves unable to take part in a string of cash calls
already planned by the banks and this year's industry-wide
health tests to be conducted by the European Central Bank are
only expected to lead to more share issues.
Besides Monte dei Paschi, Genoa-based Banca Carige
has been trying for months to sell its insurance
assets to plug at least some of an 800 million-euro capital
shortfall by March, and avoid a big share offering.
Carige's top investor is also a cash-strapped foundation,
with a 47 percent stake. Smaller Banca Marche, controlled by
three foundations with a combined 56 percent stake and placed
under special administration by the Bank of Italy last year, is
also seeking 500 million euros to fix its balance sheet.
In Monte dei Paschi's case, the foundation ran up big debts
to keep a sizeable stake when the bank tapped the market for
cash in 2008 and 2011 to restore its finances, badly stretched
by the costly purchase of smaller rival Antonveneta.
That deal was the brainchild of Monte dei Paschi's former
chief Giuseppe Mussari, previously head of the foundation.
Now the bank has been forced to postpone its latest rights
issue until mid-2014 after the foundation used its 33.5 percent
holding to vote down the management proposal for an immediate
The foundation is putting its need to repay large debts
before the bank's wider interest, critics say.
The foundation says a share issue as early as January would
essentially force it to shut down as it would dilute the value
of its existing stake, which it needs to sell down to pay off
debts of some 340 million euros. Also bankers say if the current
share price falls below 0.128 euros the creditors could seize
the entire stake.
The rights issue is a key plank of a restructuring plan
imposed by the European Commission which requires repayment of
last year's 4.1 billion-euro state bailout or its conversion to
equity - effectively nationalisation.
Trade unions and even some politicians in Siena, where the
bank is known as "Daddy Monte" and is the largest private
employer, are not wholly averse to such an outcome.
The foundation, which has close ties to politicians in
Siena, says it does not want the bank to fall under state
control but needs more time to find a buyer for part or all of
its existing stake in the bank.
But the bank's Chairman Alessandro Profumo and Chief
Executive Fabrizio Viola have said postponing the fundraising
will cost the bank dearly and make it harder as it is likely to
coincide with cash calls by other Italian banks.
Both have threatened to resign at the board meeting on Jan.
14 which is also set to discuss the possibility of challenging
the foundation's stance in court.
Meanwhile the foundation has denied suggestions that it is
discussing a deal with other banking foundations led by Cariplo
- a major shareholder in Intesa Sanpaolo.
Under this plan, which industry sources say is backed by the
Italian treasury, the Monte dei Paschi foundation would sell the
bulk of its holding to other foundations or swap it for stakes
in other banks that are easier to sell on the market.
(Additional reporting by Gianluca Semeraro; Editing by Greg