Monte dei Paschi di Siena, World’s Oldest Bank Near End

SIENA, Italy — Last month Banca Monte dei Paschi di Siena, world’s oldest bank, won another distinction: Europe’s weakest lender.

The bank performed worse than the others. test of your financial health By European regulators, it’s the final bleak chapter in an epic of long-running unfortunate deals, financial cunning, criminal crimes, and even a mysterious death.

Stress testing by regulators, showing that a severe recession would destroy the bank’s capital, has forced the Italian government to face an unpleasant reality: the five-and-a-half centuries of Monte dei Paschi are coming to an end. UniCredit, one of Italy’s largest banks, said it was in talks to buy Monte dei Paschi last month, with Rome’s encouragement, on the condition that the government retain all bad loans.

Founded in 1472, Monte dei Paschi will likely live on as a brand in bank branches in central Italy, and customers probably won’t notice much difference, at least at first. But the bank will cease to be an independent entity and a living reminder that during the Renaissance, Italian merchants basically invented modern banking. The bank’s operations will be managed from UniCredit’s headquarters in Milan, rather than Monte dei Paschi’s castle-like home office in Siena’s old quarter. The title of the oldest bank would likely pass to Berenberg Bank, which was founded in Hamburg in 1590.

The bank’s problems are an unwanted distraction for users. Italian Prime Minister Mario Draghi and the former head of the European Central Bank as he tries to push reforms and end Italy’s status as the permanent economic backwardness of the eurozone.

Lorenzo Codogno, former chief economist of the Italian treasury and now an independent adviser, said the divestment of Monte dei Paschi, which was de facto nationalized following a government bailout, “will free up resources, time and political capital for more important matters”. “There is strong political pressure to find a solution as soon as possible.”

But for Siena and its environs, the problems of Monte dei Paschi are both a psychological and an economic blow. Few banks are as imbued with the wealth and identity of their communities as Monte dei Paschi was in its heyday. remains Siena’s largest private employer and establishment It provided bank profits in a wide variety of civic activities, including kindergartens, ambulance services, and even costumes worn by rival clans at previous ceremonies. PalioThe bareback horse race is normally held twice each summer in Siena’s central plaza.

“Monte dei Paschi is part of the flesh and blood of the city,” said Maurizio Bianchini, a local journalist, Palio historian and Monte dei Paschi’s former head of communications. “From a human point of view, it’s as if the bank were a branch of every Sienese family.”

The survival of Monte dei Paschi has been questioned for years. His troubles began in 2008 after he paid more than he could pay to acquire a competitor and become Italy’s third-largest bank after Intesa Sanpaolo and UniCredit.

In 2013, when police investigated allegations that bank executives were hiding escalating losses from regulators and shareholders, David RossiMonte dei Paschi’s communications chief was found dead in an alley under his office window, apparently by suicide. Mr Rossi’s family members were convinced he was killed because he knew too much, but police never found conclusive evidence that it was a foul.

In 2019, more than a dozen executives of Monte dei Paschi, Deutsche Bank and Nomura were found guilty of illegally using complex derivatives to cover up the Italian bank’s problems. They objected.

Most banks with Monte dei Paschi’s issues would have been sold out long ago, but for the people of Siena, the proposed deal with UniCredit would have been like auctioning off some of their identities. The city will also suffer economically. The sale to UniCredit is likely to result in as many as 5,000 layoffs, a third of the total, according to Italian news reports. UniCredit declined to comment on what the layoffs might be.

“The city is infuriated,” said an 80-year-old man, who declined to be named, chatting with friends on the steps of the Monte dei Paschi branch in central Siena. Relinquishing control of Milan to UniCredit “would be like losing your daughter,” he said.

Bank stress tests A report by the European Central Bank in July revealed how vulnerable Monte dei Paschi remains despite multiple recapitalization and turnaround plans. According to the stress test, in the event of a serious recession that will last until 2023, the bank’s capital will decrease to almost zero. The bank will need ‘well over’ 2.5 billion euros or $2.9 billion in fresh capital, Daniele FrancoThe Italian economy minister told Parliament this month.

UniCredit announced on July 29 that it was in private talks to acquire Monte dei Paschi, a day before regulators released the stress tests. Andrea Orcel, UniCredit’s CEO, told reporters and analysts on July 30 that the bank should thoroughly review Monte dei Paschi’s books before making a decision on whether to stick with the deal.

But he said Monte dei Paschi will strengthen UniCredit’s business in central Italy. “The timing is right,” said Mr Orcel.

Still, many people in Siena refuse to accept that the half-millennium-year independence of Monte dei Paschi may soon come to an end. The potential sale to UniCredit has become an issue in October’s city and parliamentary elections and could fall into the hands of the League, a right-wing populist party that currently supports Siena mayor Luigi De Mossi.

Mr De Mossi recently told reporters that the bank does not have a “supermarket” where UniCredit can only choose the assets it wants and leave it to the government to take care of the rest. The future of the bank is “a social and political issue that concerns not only Siena, not only Italy, but also Europe,” he said.

But other leaders say it’s time for Siena to move on. “The ECB stress tests are a kind of final check on the fact that the bank can no longer stand alone,” said Enrico Letta, the former Italian prime minister, who returned to politics after a period in academia. A candidate for Parliament representing the provinces of Siena and Arezzo.

Mr Letta argues that while banking will still remain a major employer, the city should invest in its other traditional strength, health care. British drugmaker GlaxoSmithKline has a large research center in Siena developing vaccines for diseases common in poorer countries, such as typhoid fever.

“Siena wanted to be the capital of finance,” said Mr Letta. “Siena could be the capital of the life sciences.”

Mr Letta called for the creation of a European region for life sciences in the city and said part of Italy’s share of European Union pandemic recovery funds should be used to support research coordinated by Toscana Life Sciences, a non-profit organization in Siena. helps health care initiatives stand up. One of the organization’s research labs is developing an advanced monoclonal antibody therapy for the coronavirus that, if successful, would be less expensive than similar treatments and could be administered by doctors without hospitalizing a patient.

“We must give Siena a new mission,” said Mr Letta.

Some Siena residents agree. Like Italy itself, Monte dei Paschi has shown that a glorious history is no guarantee of success in the modern world.

“This was Siena’s prosperity,” said 70-year-old retired graphic designer Marco Bruttini, as he sat on a bench next to the bank’s headquarters this morning.

“But even without this merger,” said Mr Bruttini, “then it’s long gone.”

Gaia Pianigiani reported from Siena and Jack Ewing from Frankfurt.