Nine Italian banks were among the 24 from the eurozone who failed the European Asset Quality Review (AQR), it was announced on Sunday.
Four of them were among the 14 banks that still need to raise more capital, the ECB also said.
Italy’s third largest bank by assets and the world’s oldest bank Banca Monte dei Paschi di Siena (Mps) was the main stress test casualty as regulators found it needs €2.1bn in fresh capital.
On Monday morning, the company’s shares dropped by 15%, as Italian regulators said they would approve a merger or sale of the group.
Following the results, Mps hired outside investment bankers at Citigroup Inc. and UBS AG to advise it on strategic options including a possible merger, according to people familiar with the matter.
Aside from Monte dei Paschi, the other Italian banks that need to raise capital are Banca Carige SpA, Banca Popolare di Milano SCARL and Banca Popolare di Vicenza ScpA. Together, the four banks face a collective capital shortfall of €3.3bn, the Bank of Italy said in a statement.
Banca Carige’s shares were also down more than 17% on Monday morning as the AQR revealed a €814m gap. The bank said on Sunday that it plans a €500m capital increase.
“If a merger or takeover made MPS more solid, better able to give credit to the economy, we would be more than happy,” said Fabio Panetta, deputy governor of the Bank of Italy. “We’d be happy for any solution that left the bank more solid.”
The five Italian banks that failed the tests but subsequently came up with additional capital are Banco Popolare SC, Banca Popolare dell’Emilia Romagna SC, Banca Popolare di Sondrio SCpA, Veneto Banca SCpA and Credito Valtellinese SC.
Italy’s two largest banks, UniCredit SpA and Intesa Sanpaolo Spa, both passed the tests.
“The results confirm the solidity of the Italian banking system, despite repeated shocks suffered by the Italian economy in the last six years,” the Bank of Italy said in a statement.