MILAN: The Bank of Italy sounded out Italy's biggest retail bank Intesa Sanpaolo on whether it was ready to merge with bailed-out lender Monte dei Paschi but met with a "no", La Repubblica reported on Friday citing people close to the matter.
Monte dei Paschi shares have lost almost 40 percent since results of Europe-wide bank stress tests on Sunday revealed it had a 2.1 billion euro ($2.6 billion) capital gap to fill.
The newspaper said the central bank had asked Intesa Sanpaolo CEO Carlo Messina for an opinion on the idea of a merger with Italy's No. 3 lender.
Messina saw Monte Paschi as a problem for the country as a whole that could not be resolved by a private bank with foreign investors holding 31 percent of its shares, La Repubblica said.
Intesa Sanpaolo declined to comment on the report, while the Bank of Italy and Monte Paschi were not immediately available.
Monte Paschi has two weeks to send a plan to the European Central Bank to explain how it plans to plug the capital shortfall. Press reports have said it is increasingly likely the bank will have to resort to a share issue.
Financial daily Il Sole 24 Ore said the board of Monte Paschi could meet on Wednesday. The Siena-based bank, the world's oldest still in business, has hired UBS and Citigroup to assess strategic options.
On Thursday ratings agency Moody's said Monte dei Paschi would find it difficult to cover the capital gap within the timeframe requested by the ECB without further government support.
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