EU approves state bailout for Monte dei Paschi di Siena

The European Union has approved a state bailout of Italy’s fourth-largest lender, Monte dei Paschi di Siena (BMPS.MI), taking the total amount of Italian taxpayer funds deployed to rescue banks over the past week to more than 20 billion euros ($23 billion).

Outside Greece, Europe has not seen such big state bailouts since the aftermath of the global financial crisis, raising political concerns about the continued use of public funds to mop up losses at badly run banks despite the introduction of new EU rules designed to prevent this.

In a statement on the EU confirmed aid regulators said Rome could inject 5.4 billion euros ($6 billion) into Monte dei Paschi after the bank agreed to a drastic overhaul, including the transfer of bad loans to a special vehicle and a salary cap for senior managers.

The bank’s overall capital shortfall is 8.1 billion euros, an Italian Treasury official said, down from the 8.8 billion euros previously calculated by the European Central Bank.

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