December 29, 2016 / 6:12 PM / 3 years ago

EU clears extension of Italian bank liquidity support

A man walks on a logo of the Monte Dei Paschi Di Siena bank in Rome, Italy September 24, 2013. REUTERS/Alessandro Bianchi/Files

BRUSSELS (Reuters) - The European Commission said on Thursday it had authorized a six-month extension of Italy’s scheme to provide liquidity support for banks in need as well as an extension of support for troubled lender Monte dei Paschi di Siena (BMPS.MI).

A number of such schemes are in place in other EU member states, such as Cyprus, Greece, Poland and Portugal, to ensure banks have no difficulties in funding their operations and to guarantee access to deposits.

Under EU state aid rules, banks with a capital shortfall cannot benefit from general liquidity support schemes, meaning the Commission takes decisions on a case-by-case basis.

“Italy has asked the Commission to authorize such support for Monte dei Paschi di Siena for use in case of need. The Commission has separately approved this today in line with EU state aid rules,” the Commission said.

It added that the measures, approved until the end of June, were separate from any public injections of capital.

Monte dei Paschi has requested aid from a new 20-billion-euro state fund to help lenders in distress, although the European Central Bank told the Italian lender this week its capital shortfall had risen to 8.8 billion euros ($9.2 billion)from the 5 billion indicated previously.

The Commission said it would now work with Italian and supervisory authorities to assess whether Italy’s planned intervention was in line with EU rules.

Reporting by Philip Blenkinsop; Editing by Adrian Croft

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