Consob temporarily halts short-selling in Banca Monte dei Paschi di Siena

Stock in struggling Italian lender Monte dei Paschi di Siena bounced back after the country´s financial market regulator, Consob, temporarily banned short-selling in the bank´s shares.

Prior to the decision, the bank´s share price had plummeted by nearly 80% year-to-date.

Acting as a backdrop, in remarks to Bloomberg TV, Societe Generale chairman Lorenzo Bini-Smaghi said Italy’s banking crisis might spread to the rest of Europe and that rules capping state aid to lenders should be reconsidered.

For their part, analysts at Morgan Stanley said on Wednesday that both Banco Popolare and Banco Monte dei Paschi di Siena might see their core equity Tier 1 ratios drop below 5.5% of assets (the pass mark in the 2014 exam of their capital buffers) in the European Banking Authority´s next set of stress tests of Italian lenders.

The results of the tests were scheduled to be published on 29 July.

However, BMPS was most at risk, the broker said. Based in their estimates that Italian bank might be asked to top up its capital buffers by between €2.0bn and €6.0bn.

"We believe the EBA stress tests to be published July 29 will result in the authorities needing to address therecapitalization of Italian banks. Having spoken to policymakers, regulators, lawyers, wereview the main options available. Our conclusion is that in theabsence of new legislation being passed, the stress tests open up an avenueto inject public money, given it would avoid the 8% of liabilities being bailed in,although it would still require burden sharing of EBA stress test to put the spotlight on Italy.

"Italy sees the biggest GDP contraction of the major European countries in theEBA's adverse scenario, which combined with already high NPLs makes it most vulnerable, in our view."

As of 15:23 BST shares in the lender were rising by 7.09% to €0.28.