The Russia-Ukraine war could impact MPS’ cash needs. Credit: . Ray in Manila/Flickr (Creative Commons)

Italian authorities expect to keep the capital requirements of embattled bank Monte Dei Paschi (MPS) at around $2.6bn (€2.5bn) Reuters reported citing sources.

The news comes as Italy holds talks with European Union authorities to negotiate a new plan for the government-backed lender. 

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As per MPS’ previous plan, the bank had demanded a €2.5bn capital injection. 

Currently, MPS CEO Luigi Lovaglio, who joined the bank in February this year, is conducting a review of the plan. 

The bank has also warned that the fallout from the Russia-Ukraine war could impact its cash requirements. 

However, MPS hopes to broadly keep the capital requirement figure unchanged, the sources said. 

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A final decision on the plan, which is to be presented to investors on 23 June 2022, is yet to be made.

In the coming weeks, the MPS chief and board members are expected to finalise the plan, which will be formally submitted to EU regulators for approval. 

EU authorities are in touch with Italian regulators and are keeping a close eye on the development at MPS, a spokesperson for the European Commission said.

“Member states have to comply with state aid commitments and it is for them to propose ways to fulfil such commitments. It is therefore up to Italy to decide and propose ways on how to exit the MPS ownership taking into consideration the 2017 state aid commitments,” the spokesperson said.

The Italian government acquired a 64% stake in the ailing bank after bailing it out in 2017.

Earlier this month, the news agency reported that MPS is set to receive an additional capital injection.