Italy’s troubled banks are offering huge fees in order to arrange their rescue, with 500 year old Monte dei Paschi di Siena (MPS) set to pay millions if a private rescue deal goes ahead.

Underwriting fees in the deal orchestrated to save MPS will hit around €250 million, with investment banks who are involved having the potential to earn around €1 billion. The deal begun being brokered after the bank received the worst results in European stress tests; several other Italian banks, including the country’s largest lender UniCredit, also performed badly in the most recent audit.

The deal to save MPS will be the third time the bank has needed a cash injection, paying €130 million to a pool of banks for a €3bn cash call last year. The rescue plan, coordinated by JP Morgan and Italian bank Mediobanca, is still in the development stages but would see the MPS unload its bad loans into a special purpose vehicle (SPV).

The current banking crisis comes at a tricky time for Italy, just months before the referendum on constitutional reform taking place in October, on which the future of Prime Minister Matteo Renzi’s leadership rests.

08/08/2016