Italy Just Bailed Out The World's Oldest Surviving Bank

Tyler Durden's picture

Some people know Banca Monte dei Paschi di Siena as one of the biggest banks in Italy (lately best known for being either halted down, about 90% of the time, or up, the remainder) with 3,000 branches, 33,000 employees and 4.5 million customers. Others know it for being the world's oldest surviving bank, founded in 1472 by the magistrate of the then city-state of Siena. Most will henceforth know it as the first Italian bank bailed out in 2012 using the old 2009 ponzi scheme known as "Tremonti bonds", whereby the bank sells bonds to a guaranteed buyer - the Italian government - receiving critical cash to continue operating in exchange for, well, promises, and sharing its balance sheet with the much more "viable" sovereign, whose bonds were trading above 6% at last check. The initial bailout bid: €1 billion in Tremonti bonds with speculation the number will be realistically up to €4 billion. The final number: much, much higher, but it likely won't be known for at least days. Which incidentally is an event which was largely expected. Recall on June 13 we wrote: "Forget Three Months: Italy May Have Two Weeks Tops, As "It Already Is Where Spain Is Heading." It is now 13 days later and the bailouts have begun.

The chart of BMPS.IM says it all. Luckily the final outcome will be resolved in under 20 cents.

And from Bloomberg.

Italy has approved a decree to help banks to boost capital through the sale of bonds to the government, as Banca Monte dei Paschi di Siena SpA prepares to raise at least 1 billion euros ($1.3 billion) using the securities, a government official said.


Ministers passed the measure at a Cabinet meeting in Rome today, said the official, who asked not to be identified because the matter isn’t public yet. The legislation probably will be similar to the decree approved in 2009 that allowed lenders to issue so-called Tremonti bonds, which were named after then- Treasury Minister Giulio Tremonti, a person familiar with the matter said earlier.


Monte Paschi, which is among Italian lenders that must raise capital as part of Europe’s plan to end the sovereign-debt crisis, has a capital shortfall of 3.3 billion euros, according to the European Banking Authority. The bank must also repay 1.9 billion euros of state aid provided in 2009.


Monte Paschi was one of four lenders which got state aid under the previous law. Banco Popolare SC received 1.45 billion euros, Banca Popolare di Milano Scarl obtained 500 million euros and Banca Piccolo Credito Valtellinese Scarl got 200 million euros.


“The government measure is clearly being done to help Monte Paschi,” said Angelo Drusiani, who manages about 3 billion euros at Banca Albertini Syz & C. in Milan. “I don’t think other banks need to apply for these securities to raise capital,” he said.


Monte Paschi fell 3.7 percent to 19.39 cents before being halted for volatility in Milan, giving the bank a market value of 2.4 billion euros. The stock has dropped 23 percent this year, compared with a 3 percent decline of the Bloomberg Europe Banks and Financial Services Index.


Monte Paschi’s board meets today to approve a plan that includes capital measures to comply with the European Banking Authority’s targets. The Siena, Italy-based bank may sell at least 1 billion euros of bonds to the government as part of its plan, said a person yesterday. The bank may also restructure the old issue, said the person.


The lender has already covered more than 2 billion euros of its capital shortfall through the conversion of hybrid bonds and the implementation of new internal risk models, Chief Executive Officer Fabrizio Viola said last month.


Monte Paschi’s first-quarter profit dropped 61 percent to 54.5 million euros after setting aside more money for bad loans, it said May 15. Loan-loss provisions in the quarter rose 58 percent to 434 million euros.

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Ghordius's picture

ah, the oldest bank, going back to the "mountains of debt" that the early italian bankers created... historic

krispkritter's picture

I know right? I want an ECB ATM card where the ATM's spit out gold bars right into your hands. Back the armored Humvee up to it and put some junk in the trunk...a boy can dream can't he?

Thomas's picture

Gotta wonder how many bailouts occurred in 540 years.

CPL's picture

And there goes silver and gold.


Yay!  Italy bailed out some worthless heap of bricks with fiat capital, pardon borrowed fiat capital.

Rahm's picture

World's oldest profession needs a bailout!

Ghordius's picture

are we supposed to explain to someone with a nick of "Rahm" what the oldest profession is about? extortion and racketeering, of course! ;-)

disabledvet's picture

"fascist piIgs" is more like it. The "tradition" stole the gold from a bank that survived this long because it always had that gold. CONFIDENCE...not CONfidence. Phucking mafia. The Church will sentence them all to death now.

SheepRevolution's picture

Sort of funny to see that the oldest bank in the country who according to many invented fractional-reserve-banking, now might face its doom due to..... fractional-reserve-banking. Your own medicine doesn't taste to good ey?

Ghordius's picture

nope. this old lady has a track record of five solid centuries of being bailed out, the other side of fractional-reserve-banking

disabledvet's picture

YOU LIE EURO BITCH! That bank survived because the GOLD STAYED IN BANK and didn't "end up with the worthless euro." TIME TO DIE EURO BITCH!

Ghordius's picture

disabledvet, LOL, what are you looking for? a bitch slapping? I'll take your post as humour, I usually appreciate your remarks.

meanwhile, you are conflating "mountains of debt", banking, fractional reserve banking, gold as a currency or as a CB reserve asset and bank-bailouts.

thankfully, you seem to be a stacker, like me, so your bitch idiocy does not extend to what might save you, bitchez.

Note that I was writing about this stuff of which you seem to be ignorant (something that can be cured) two blasted days ago.

Here 2554721 bitchez, I wrote last Sunday:

"...where the 13th century bankers created "mountains of debt" - akin to bad banks or sinking funds that were so useful that they kept being viable banks until the 21st century, like the Italian bank Monte dei Paschi di Siena."

Those "mountains of debt" were created as bad banks (yes, bank propaganda goes back to the 15th century) on the model that the creditors (mostly rich patricians) allowed the extension of maturity to a century or more (YES, A FORM OF DEBT JUBILEE), where merged because of lack of funds (another form of bailout), in this case the Monte dei Paschi and the Monte di Siena, (I think a century later - perhaps due to bad maturity planning), and were bailed out several times also during the various gold or silver standard epochs. There is more knowledge than google can bring you on your screen, bitchez.

Now, behave, bitch, or explain to me where you think I'm lying. And stop believing all this trash that the MegaBanks are writing on the EUR, they are the gold-suppressor parties.

Ghordius's picture

is this you were alluding to? 2562283 btw, I can't help if your EUR shorts are around your ankles, I sure did not tell you to short it

Ghordius's picture

by the way, a small error: the last number of 4.5 millions is the customer base, not the employees

interestingly, the wikipedia article does not explain where the "monte", i.e. the mountain comes from. those were the first unpayable "mountains of debt" that banking in the 15th Century created and that got recycled into something similar to a "debt that will never be repayed but will generate yield as long as..."


I got interested in the Monte dei Paschi for the first time when they received from the Italian Government the job of collecting taxes in Sicily. After three months, the bank was already asking for more funds in order to collect them. Shockingly, the gov decided that tax-farming is not worth it if the tax-farmer is incompetent for this job...

krispkritter's picture

Yeah, saw the 4.5mil employees and thought 'They're bigger than the US Gov't! Send in the drones!'. My next thought was that the bailout amount better start with T's and not B's...

machineh's picture

'the wikipedia article does not explain where the "monte", i.e. the mountain comes from'

Probably this is a reference to the venerable card game, 'three-card monte.'

A metaphor, as it were ...

disabledvet's picture

i thought "those were the ounces" and "the mountains was the storage facility...

Jumbotron's picture

Ghordius said:

interestingly, the wikipedia article does not explain where the "monte", i.e. the mountain comes from.

Actually...yes it did.....

From Wikipedia:

Banca Monte dei Paschi di Siena S.p.A. (MPS) is the oldest surviving bank in the world. Founded in 1472 by the Magistrate of the city state of Siena, Italy, as a mount of piety,

Click on mount of piety above.....and you will find out that that means that the bank was originally set up as....wait for it....wait for it....

A PAWN SHOP.....but with a's a section from the Wiki article

This fifteenth-century institution originated in Italy and was developed in cities as a reform against money lending,[1] an early form of organized charity.

The public office was organized and operated by the Catholic Churchs and offered financial loans at a moderate interest to those in need.[2] The organizing principle, based on the benefit of the borrower and not the profit of the lender, was viewed as a lesser evil than money lending.[1] The organization of the Monte di Pietà depended on acquiring a monte, a collection of funds from voluntary donations by financially privileged people who had no intentions of regaining their money. The people in need would then be able to come to the Monte di Pietà and give an item of value in exchange for a monetary loan. The term of the loan would last the course of a year and would only be worth about two-thirds of the borrower’s item value. A pre-determined interest rate would be applied to the loan and these profits were used to pay the expenses of operating the Monte di Pietà.[3]

Now I hate to add this part since there seems to be a fair amount of Anti-Semetism on this site, but for the sake of completeness and history here is the rest.......

In 1462, the first recorded Monte di Pietà was founded in Perugia. Between the years 1462 and 1470, an estimated forty more of the same organization were developed.[7] The Franciscan Marco di Matteo Strozzi preached about the benefits of a Monte di Pietà in combating usury. He left a set of memoirs that outlined his goal to rid the city of Jewish money lenders and to replace them with Christian pawn shops which allowed the poor to acquire cheap credit.[8]

How far this bank has fallen since those early, lofty goals of providing a cheaper alternative to loans for poor people.....

Greed Will Out !

Ghordius's picture

+1 jumbotron, I'm on travel and so I can't quote from the sources I was reading a couple of decades ago - and I would have to find them first anyway. So I'll just let some common sense appeal to you: "a collection of funds from voluntary donations by financially privileged people who had no intentions of regaining their money".

Let it roll on your tongue: voluntary, donation, rich people, who just have no intention of regaining their money.

Does it sound like a whole class of Oligarchs making a common donation or does it sound like a class of creditors getting stiffed?

 Does it sound like Bill Gates setting up a foundation with a few collegues or does it sound like the clients of MF Global being told that they will not get their money back?

Hence "no regaining"?

Of course there is propaganda involved. The story went on that the creditors had their maturities extended and extended and at the end their descendents gifted them, to at least score some political capital with the people and the Church.


phungus_mungus's picture

My house burned down in a flash of thunder.
My wife ran off with a one-legged plumber.
My crops fell dead when the riverbed went dry.
My dog got squashed by a pickup truck.
My son ran away and got hooked on drugs.
My daughter's knocked up by the class of '85.

People say that life is good;
It don't seem good to me.
I'm lost without a paddle,
And I'm headed up shit creek.
People say that life is fun,
But I don't know why.
As far as I can tell,
LIFE SUCKS then you die.

The government dumps its toxic waste
Right on top of my mother's grave.
A team of experts say it won't do her no harm.
But my sheep went crazy and killed my mule.
I cut off my dick with a power tool
Fixin' the hole where the meteor hit the barn.
(And it hurt, too!)

People say that life is good,
But I just piss and moan.
I got one foot on a banana peel,
The other in the Twilight Zone.
People say that life is fun,
But I don't know why.
As far as I can tell,
LIFE SUCKS then you die.

Let me hear some "yee-hah"s out there!

I went to the store to buy some shells.
My gun went off and blew the owner to hell.
Now I'm sittin' here in jail, singin' this song.
And one guy wants to cut me with a knife.
Another guy wants me to be his wife.
Hey, I wish they'd hang me before somethin' really goes wrong!

People say that life is good,
Give thanks for what you have.
When all you have is nothin',
Nothin' makes you glad.
People say that life is fun,
But I don't know why.
As far as I can tell,
LIFE SUCKS, then you die.
I said, people say that life is fun,
But I don't know why.
As far as I can tell,
LIFE SUCKS, then you die.

EscapeKey's picture

A bankrupt country bails out a bankrupt bank. What could possibly go wrong?

TrainWreck1's picture

They need some sort of Transaction Security Agency to frisk & scan all parties involved. This would improve efficiency a gazillion-fold.

machineh's picture

Dude, I thought the TSA was running the bank. 

At least they're driving the armored trucks, so they control the cash drain ... errr, flow.

DormRoom's picture

fiat currencies presupposes trust, and being anchored in real assets.  Now, fiat currencies are IOUs backed by IOUs ad infinitum, and for the most part no longer anchored by anything 'real'.


It's the flow of false promises & IOUs that keep this turd system going.

disabledvet's picture

"provided The Bank is dead...nothing."

bdc63's picture

uhm ... am I missing something?  where the heck did the Italian government get a billion euros to loan to a bank?

GetZeeGold's picture



I think they were kinda hoping your weren't going to ask that.


bdc63's picture

maybe somebody made them an offer they couldn't refuse ...

machineh's picture

Shoes for banksters, comrades.

Made outta concrete ...

Vince Clortho's picture

The same place the US got the money to bailout the banks in 2008.

walküre's picture

Dude, the FED bailed out all sinking ships in 2008.

The oldest Jewish Italian "noble" house was bailed out by a billion the Italian government found under a mattress ...

dick cheneys ghost's picture

They got it from 'Thin Air, INC', whom makes money the old fashioned way, by Printing it.

Zero Debt's picture

If the people knew that, there would be a revolution tomorrow morning

the not so mighty maximiza's picture

I smell market rally, bailouts make those happen

battle axe's picture

And so the dance is well underway in Italy....Italy meet Greece, you guys have a lot in common....

doomandbloom's picture

is this what the Dinosaurs did during their wipeout?

bdc63's picture

it's different this time ... the dinosaurs were destroyed by an asteroid colliding with earth.  According to Jamie Dimon, our fate will be sealed when the moon crashes into the JPM headquarters in Manhattan.

apples and oranges ... not the same at all ...

icanhasbailout's picture

any bank that wants to be "oldest surviving bank" in the future is going to have to figure out how to hide its operations from governments

Its_the_economy_stupid's picture

Umm, let me get this straight. The Italian banks buy sovereign debt, then the sovereign buys bank debt. Can my wife and I swap debt like that ad infinitum?

tedstr's picture

You can stop reading at 4.5 Mil employees.  Dear God.  That say s it all.  How much debt do you have to sell to support that.  Obvioulsy a lot and much of it was obvioulsy bad.

LULZBank's picture

Pheewwwwww.. Thats a relief!

valley chick's picture

Forget the popcorn....A fine bottle of wine, good Italian dish, and kick back and savor the moment. :)

caimen garou's picture

so they robbed peter to pay paul ,oh sorry they robbed mario to pay macalouso!

walküre's picture

No, Mario Draghi robbed Peter and Paul to bailout his buddy Macalouso.

Don't ask questions.

Alejandrito's picture

the next step for Europe is quite clear or full integration or full blast

timbo_em's picture

Thank god we have an EU summit later this week that will present a once and for all solution for this crisis (just read the paper "towards a genuine economic and monetary union" by the four-headed monster) - a banking union that cannot be called a banking union and Eurobonds that cannot be called Eurobonds.

Because if the FANG countries don't want to be on the hook for €4000 bn of PIIGS sovereign debt, I'm sure they could be talked into being on the hook for three times that amount in banking debt.