(Bloomberg) -- Banca Monte dei Paschi di Siena SpA's subordinated bonds fell amid reports that Italy is considering injecting fresh capital ahead of stress test results.
Italy's third-largest bank's 379 million euros of subordinated bonds due September 2020 fell 8 cents on the euro to 77 cents, the lowest since February, according to data compiled by Bloomberg.
Investors are concerned that losses may be imposed on junior bonds as part of the plan. Italy, which has provided aid to Monte Paschi twice since the financial crisis, is in talks with European authorities to get approval to provide state aid if regulatory stress tests reveal a shortfall, a person with knowledge of the plan said on Tuesday.
“Based on current EU rules on state aid, technically any injection of public money into banks in distress would trigger a resolution procedure - the so-called bail in,” said Mario Todino, a lawyer at Jones Day in Brussels.
European Central Bank and European Banking Authority stress test results are due on July 29.
To contact the reporter on this story: Tom Beardsworth in London at tbeardsworth@bloomberg.net. To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net, Abigail Moses
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