With regard to Italy’s Monte dei Paschi di Siena, what this means in concrete terms is that the institution’s capital base was first bolstered by € billion by converting subordinated debt instruments into equity, with the Italian government then injecting an additional € billion. However, the government will offer compensation to retail investors, thereby increasing its stake in the bank.
The ownership structure will change as a result of the aid provided: legacy shareholders will lose out as their stakes are diluted. By contrast, the Italian government will own up to 70 % of the institution.