ECB denies Banca Monte dei Paschi di Siena's petition for more time

The European Central Bank rejected a petition from Italian lender Banca Monte dei Paschi di Siena for more time to raise cash and thus strengthen its capital position, Reuters reported citing a source.

Later reports appeared to confirm the news, which weighed on the lender's shares.

On 7 December, the lender had asked the ECB for an extension of the deadline to raise roughly €4bn in fresh funds.

A further €1bn had already been obtained through an earlier equity for debt swap; however, the ultimate success of that exchange was contingent on the capital raising exercise proceeding smoothly.

Authorities in Rome were thus expected to proceed with providing a partial state bail-out for the lender, with a view to avoiding losses for the bulk of Banca Monte dei Paschi di Siena's retail bondholders.

"We’ve seen some profit taking in financials today ahead of the weekend as the ongoing political uncertainty continues in Italy. The decision by the European Central Bank to reject Italy’s demand for more time to secure private funding for a bailout of Monte dei Paschi is likely to keep markets apprehensive at the prospect of how any new Italian government might look in the context of dealing with the country’s banking sector, bringing closer the prospect of a possible politically toxic bail-in of retail bondholders," commented Michael Hewson, chief market analyst at CMC Markets UK.

As of 1402 GMT shares in the lender were down 7.34% to €20.20.