The agreement between the European Commission and the Italian government on the recapitalization of Monte dei Paschi will save the Sienese bank by avoiding systemic risks for all the Italian and European banking systems, but it will not save MPS's shareholders and subordinated bondholders. In rescuing the bank, the so-called burden sharing will be triggered, a gentler form of the bail-in, which will call upon the shareholders and subordinated bondholders to participate in the costs of restructuring the institution.
The 40 holders of subordinated bonds, a financial instrument halfway between bonds and shares, will thus be able to hope to be compensated only in cases where the bank's own impropriety is demonstrated for having induced them at the time to buy bonds that are not without high risks . But it is easy to understand that it will not be an easy practice and that as of now there are countless lawsuits to be considered.
After the agreement with Rome on the recapitalization of the Sienese bank, the European Commission explained that “Mps will compensate the retail holders of subordinated bonds who have been subjected to mis-selling by converting those securities into shares and buying those shares from these investors. MPS will pay these bonds with safer senior notes".
In short, there is some hope of repayment, but not for all bondholders.
