Italy Sees Market Solutions for Banks' Capital Shortfall

By Liam Moloney and Giovanni Legorano

ROME--Italy's Economy Minister Pier Carlo Padoan said Thursday he expects local lenders to find market solutions for their need to lift capital after a European Central Bank health check found two of them with a shortfall that still needs to be plugged.

The ECB review found two Italian banks to have a capital shortfall, said Mr. Padoan at a conference in Naples. "We are trustful that there will be market solutions to fill this capital shortfall gap."

The two banks are Banca Monte dei Paschi di Siena SpA and Banca Carige SpA.

The options that Monte Paschi has to plug a 2.1 billion euro ($2.65 billion) capital shortfall are widely open and include issuing convertible bonds into shares that count as capital, selling fresh equity, as well as disposing of assets, or even merging or being taken over by a larger bank.

The Siena-based lender is also considering delaying the repayment of a residual part of a state loan to 2017.

Monte Paschi has until Nov. 10 to present to the ECB a detailed plan explaining how it plans to cover for the capital gap. The ECB aims to complete the approval process by the end of the year.

Monte dei Paschi declined to comment

Banca Carige has said it will sell new shares for at least EUR500 million and also said it has agreed to dispose of two insurance businesses to Apollo Management Holdings LP for EUR310 million .

Guglielmo Valia of MF-DJ in Naples contributed to this story.

Write to Liam Moloney at [e-mail] and Giovanni Legorano at [e-mail]