ROME (Reuters) – Italy’s Banca Carige <CRGI.MI> has filed an official request to tap a state guarantee scheme for an upcoming bond issue, Finance Minister Giovanni Tria said on Thursday, adding Rome favoured a private sector solution for the troubled lender.
Carige could raise up to 3 billion euros (£2.6 billion) in several bond issues if it gets the guarantee, which would mark a major about-face by the ruling coalition which has criticised previous governments for intervening to help troubled banks.
The European Commission, which oversees state aid rules in the European Union, has been notified of the request for a state guarantee, Tria added during a parliamentary hearing.
“We’re confident of receiving a response soon” he said.
Genoa-based Carige could launch a state-backed bond as soon as next week, daily newspaper Milano Finanza reported earlier on Thursday. The issue’s size could top one billion euros with a three-year maturity and a yield of around 2.5 percent, the report added.
Italy’s populist government has set up a 1.3 billion euro fund to support Carige after the European Central Bank (ECB) put the bank under temporary administration, following a failed attempt to raise capital from investors.
The money in the fund set up by the government could also be used for a so-called precautionary recapitalisation – an injection of capital into a troubled bank that can be permitted under EU rules if the lender is solvent.
That is what happened with Monte dei Paschi <BMPS.MI>, which was bailed-out by the government in 2016.
Tria, however, described that scenario as an “absolutely last resort option”.
“If the conditions for such an intervention were to materialise, it would be necessary to start a dialogue with European authorities,” the finance minister said.
(Reporting by Giuseppe Fonte; Writing by Giulio Piovaccari; Editing by Mark Potter)