The Italian bank Monte dei Paschi di Siena (MPS) is expected to fail the 2016 EU-wide stress test
conducted by the European Banking Authority (EBA), whose results are due to be presented
Friday, 29 July 2016. When taking a closer look at the bank, it becomes apparent that the bank has
so far failed or nearly failed all the EU-wide supervisory exercises that have been undertaken in
the past six years. Almost every time the bank has managed to raise just enough capital, including
public funds already contributed twice by the Italian government, to close the capital shortfalls or
meet the threshold. This allowed the bank to live on the edge, which is costly to society.
Supervisory, resolution and competition authorities should therefore discourage banks from
following in MPS’ path of doing the minimum required, by imposing extensive recapitalisation
requirements with a proper resolution
