By Valentina Za

MILAN (Reuters), – After the failure of UniCredit to sell the bank to a larger rival, the CEO at the Tuscan bank stated that the Italian government must accelerate plans to assist Monte dei Paschi in raising cash.

Italy’s Treasury stated it supports a Monte dei Paschi share issue (MPS). It owns 64%. However, it is looking for other investors in order to not break EU aid rules.

Sources say that Rome wants to get rid of MPS from all problems loans, and other legal risk, in order to make it attractive.

MPS stated on Thursday that it does not expect to experience a capital shortage next year. This pushes it back to 2023. However, it still required more capital in order to function properly.

According to Chief Executive Guido Bastianini, analysts have already seen the effect of not implementing a capital rise in 2021.

He said that “if the bank has to do this, it is best to do so sooner than later.”

MPS is suspending a Bastianini business plan, which was being prepared in the wake of MPS falling behind with restructuring promises made to the EU Commission.

Now, the Treasury and the EU are discussing an updated plan that included a capital increase of 2.0 to 2.5 percent to get approval for the cash call. Sources say it is more likely.

MPS delayed employees’ exits. Bastianini claimed that this had caused the bank to lose “a lot” due not having renegotiated its staff’s contracts with unions.

Italian banks only layoff staff through expensive early retirement plans. The MPS also needs to have more capital in order to make that happen.

MPS indicated that they now expect a deficit in their Tier1 capital starting Jan. 1, 2023 but not beyond mid-2022.

After a loss in July and September of 450.6 millions euros last year, the bank made a profit of 186.0m euros. This was due to a write-up of 131.5 million euros on two loans which were returned to being performing.

Negative rates at the European Central Bank helped drive the income of the lending business to rise 2.5% quarter over quarter. However, net fees decreased 6.3% in summer due to slower commercial banking and asset-management activity.