The European Central Bank has told Monte dei Paschi it needs to plug a capital shortfall of 8.8 billion euros ($9.2 billion), higher than a previous 5 billion euro gap estimated by the bank, the lender said on Monday, confirming what sources told Reuters.
Last Friday the Italian government approved a decree to bail out Monte dei Paschi after Italy's No. 3 lender failed to win investor backing for a desperately needed 5 billion euro capital increase.
The bank said on Monday it had officially asked the ECB last Friday for go ahead for a "precautionary recapitalization".
A precautionary recapitalization is a type of state intervention in a struggling bank that is still solvent. It means only a modest bail-in of investors though the government can buy shares or bonds only on market terms endorsed by EU state aid officials in Brussels.
In its reply, the ECB said it had calculated the capital it believed the bank needed on the basis of a shortfall emerging from European stress test of large lenders earlier this year.