ITALY RETREATS FROM NATIONALIZING TROUBLED BANK

c.2013 New York Times News Service

ROME — The Italian government signaled Monday that it had no interest in nationalizing Monte dei Paschi di Siena, the country’s third-largest bank, after shareholders over the weekend overruled bank management and delayed plans to raise urgently needed cash.

An Italian Treasury spokesman Monday confirmed reports that the government was not eager to take responsibility for the troubled bank. The government is already dealing with a severe recession and internal political turmoil.

The Bank of Italy and Consob, which oversees the Italian stock market, are monitoring events closely, according to an official with knowledge of the situation who was not authorized to be quoted by name. Monte dei Paschi shares closed about 1 percent higher Monday, at 17.5 cents, but problems at the bank have the potential to provoke market turmoil in a country already suffering from a broader banking crisis and severe shortage of credit.

The decision by Monte dei Paschi shareholders Saturday to postpone the share sale of 3 billion euros (about $4.1 billion) left turnaround plans for the bank in limbo and raised the possibility that it would not be able to repay government bailout funds starting in mid-2014.

Debt to the government would then convert to Monte dei Paschi shares, in effect nationalizing the bank, which has survived numerous wars and crises since its founding in 1472, but whose future is now in doubt.

On Saturday, shareholders gathering in Siena voted to delay the share sale at least until May, in accordance with the wishes of the charitable organization that is Monte dei Paschi’s largest shareholder.

Alessandro Profumo, the chairman of Monte dei Paschi, had argued that the share sale must be held in January. Investment banks that were set to underwrite the transaction would not wait any longer than that, he said.

But the Monte dei Paschi Foundation, which once distributed bank profits to local charities and other organizations in and around the historic city of Siena, asked for more time to sell its 33.5 percent stake. Antonella Mansi, president of the Monte dei Paschi Foundation, said she thought that a consortium of banks underwriting the share sale would be willing to wait.

According to the bank’s plan approved by the treasury and the European Commission, Monte dei Paschi has to repay 3 billion euros of the state aid by the end of 2014.