Monte Paschi working on 'substantial' capital increase: source

Banca Monte dei Paschi di Siena, the oldest surviving bank in the world, is working on a rights issue to fill at least half of a 2.1 billion euro ($2.6 billion) capital gap uncovered by a European review of banks, a source with direct knowledge of the matter said. Italy's third-largest bank has hired UBS and Citigroup to assess strategic options after it failed European Central Bank (ECB) check tests designed to test the solidity of the financial system. The options for the historic Tuscan lender, which raised 5 billion euros as recently as June to strengthen its balance sheet and help pay back state aid, are expected to include further asset sales and a merger. The source told Reuters the plan, which has to be presented to the ECB by Nov. 10, would include a "substantial" capital increase of at least 1 billion euros but did not give a precise figure because no decision had yet been taken.

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