Italy's Monte dei Paschi says will request a state bailout

MILAN (Reuters) - Italy's Monte dei Paschi di Siena BMPS.MI said on Friday it would request a capital injection from the state after failing to raise 5 billion euros ($5.2 billion) it needed from private investors to stay afloat.

The request came just minutes after the government announced the creation of a 20 billion euro fund to help ailing lenders in the wake of Monte dei Paschi’s failure to raise sufficient capital in the market.

Monte dei Paschi said in a statement it would request a so-called precautionary public recapitalisation, which, under European Union rules aimed at shielding taxpayers, entails a forced conversion of the bank’s junior bonds into shares.

However, to prevent an outcry from retail savers, the bank said it would put forward a specific proposal for high street investors who had bought into a 2 billion euro junior bond that it issued in 2008.

Reporting by Valentina Za; Editing by Crispian Balmer