(MENAFN- AFP) Italy's Monte dei Paschi di Siena saw its stock tumble more than 10 percent Friday over reports the ECB had denied it more time to raise the cash it needs to avoid being wound down.
The world's oldest bank had on Wednesday asked the European Central Bank for two more weeks to find the funds, saying political instability created by Prime Minister Matteo Renzi's resignation had left investors reluctant to commit funds.
But the ECB's supervisory board was reported to have said no Friday, upping pressure on the Italian government to intervene to avoid a financial crisis in the eurozone's third-largest economy.
The board is believed to have ruled two extra weeks would be of little use in turning around the historic bank.
Both Monte dei Paschi di Siena (BMPS) and the ECB declined to comment when contacted by AFP.
The Italian bank's new CEO Marco Morelli, who took over the reins in September, had a meeting at the finance ministry on Friday to take stock, according to a source close to the ministry who declined to confirm the reports of the ECB's decision.
The bank was due to hold a board meeting at 1530 GMT.
BMPS was down 12.52 percent at 1500 GMT while Milan's FTSE MIB was down 1.15 percent at 18,216 points.
The government is said to be mulling a preventative recapitalization to protect the savings of thousands of customers.
The country's third-biggest bank is trying to pull off a five billion euro ($5.38 billion) equity injection and had requested an extension of a deadline to find the money from the end of December to mid January.
It has lost nearly 85 percent of its market capitalisation since the start of the year. It also emerged as the worst performer from European Banking Authority (EBA) stress tests in July.
- Banking crisis woes -
Renzi's resignation has added to deep worries about the failure of the Italian banking sector -- which features no fewer than 700 banks -- to make meaningful progress towards consolidation.
Non-performing loans on their books amount to a combined 360 billion euros, roughly a third of the eurozone's total bad debt.
Italy is in political limbo following Renzi's crushing referendum defeat on Sunday. President Sergio Mattarella is currently holding political consultations to try and reach an agreement on who should be made caretaker PM.
The next general election had been scheduled for early 2018 but could be brought forward by up to a year.
Though Renzi's centre-left Democratic Party (PD) is currently leading in the polls, the outgoing PM's downfall has opened the door to the possibility of the populist anti-euro Five Star movement coming to power.
Among those in the running for the top job are Finance Minister Pier Carlo Padoan -- a seasoned economist with the potential to reassure financial markets and a jittery Europe -- and Foreign Minister Paolo Gentiloni.
Renzi, 41, is also being touted as a possible contender for his own job and could cite the BMPS problem as a reason for him to stay on and ensure the political stability needed to avert a banking crisis.
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