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Monte Paschi shares tumble, rights issue confirmed

Banca Monte dei Paschi di Siena
Alessia Pierdomenico | Bloomberg | Getty Images
Banca Monte dei Paschi di Siena

The board of troubled Italian lender Banca Monte dei Paschi di Siena approved a rights issue of up to 3 billion euros ($4.1 billion) on Tuesday, in a bid to stave off nationalization.

Monte dei Paschi (BMPS) said in a statement Tuesday that the cash call should be completed in the first three months of next year. Reuters reported that sources close to the matter indicated it could be launched as soon as January 2014, but first it must be approved at an extraordinary shareholder meeting scheduled for December 27 this year.

(Read more: Monte dei Paschi CEO: We're ready to bounce back)

Earlier on Tuesday, shares in the bank were were trading down over 7 percent on the Italian FTSEMIB index. They were suspended earlier in the day after they fell around 10 percent.

BMPS was brought to the brink of collapse by the combination of the euro zone financial crisis and a derivatives trading scandal that emerged earlier this year, and has taken a 4.1 billion euro state loan ($5.57 billion) to stay afloat.

European Union authorities approved the loan on the condition that the bank implemented a turnaround plan including a capital increase and thousands of job cuts, branch closures and cost-cutting measures.

(Read more: EU backs Monte Paschi capital hike plans)

Intesa meets

Elsewhere, Italian bank Intesa Sanpaolo is holding is first managers' meeting since Carlo Messina became its chief executive following the controversial departure of Enrico Cucchiani.

The meeting follows a turbulent period for the Italian retail bank; reporting third-quarter earnings on November 13, the bank posted a 47 percent drop in net profit of 218 million euros ($292 million) in the quarter, compared with 414 million euros last year.

The bank has also bolstered its capital buffers against future financial and economic shocks and the European bank stress tests, setting aside 1.5 billion euros in loan loss provisions in the third quarter, making a total of 4 billion euros over the last nine months.

Enrico Cucchiani resigned from the Italian retail bank in September after two years in the job over clashes with board members -- who own 5 percent of the bank -- over his management style and the bank's strategy.

He was replaced by the group's chief financial officer, Carlo Messina. At the time Intesa refused to comment on the reasons behind the CEO's departure.

Earlier in November, Italy's economy and finance minister told CNBC there had been no "political assassination" at the bank when Cucchiani was ousted as chief executive in September.

- By CNBC's Holly Ellyatt, folow her on Twitter @HollyEllyatt

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