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 The Tuscan lender, which emerged as the weakest bank in a
Europe-wide health check of the sector last year, said the ECB
request was preliminary and subject to changes, adding it was
reviewing the proposal and would reply on Jan. 16.
Its shares were down 4.4 percent by 1205 GMT.
The ECB's 14.3 percent Common Equity Tier 1 or core capital
requirement compares with a level of 12.8 percent the bank had at
the end of September 2014.
Monte dei Paschi's statement came after Il Sole 24 Ore daily said
the ECB had decided to assign specific capital requirements to
individual banks which in the case of most Italian lenders will be
much higher than those set by Basel III rules.
Italy's bank sector fared the worst in the ECB's assessment, laying
bare the extent of the economic crisis in the euro zone's third
biggest economy. Nine Italian lenders failed the tests although only
Monte dei Paschi and Carige still have a capital shortfall to fill.
The two banks have already announced plans for a 2.5 billion euro
and a 700 million euro capital increase respectively.
The ECB sent letters to the banks it directly supervises where it
outlined concerns and potential consequences based on the results of
the assessment in October, banking sources said, but not all have
been told to raise their capital levels.
The request signals steps by the ECB to tighten its grip as the euro
zone's most powerful banking supervisor by making specific banks
hold capital above minimum requirements depending on the riskiness
of their operations.
One banking source described the letters as an individual dialogue
based on details revealed by the unprecedented thoroughness of the
assessment.
The banks have January to respond to those letters, though a second
source said the room for negotiation was limited, and are expected
to reach concrete conclusions in February.
Il Sole said the new requirements would in particular set an average
common equity Tier 1 ratio floor for the 15 Italian banks under ECB
supervision of 10.5 percent.
That compares with a general Basel III minimum capital requirement
of 7 percent.
The new capital requirements are part of the so-called regular
supervisory review of lenders, which was until last year done by
national supervisors and is now done by the ECB.
European regulators say the review's purpose is to ensure banks have
adequate strategies as well as capital and liquidity to ensure a
sound management and coverage of risks to which they are or might be
exposed.
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"The ECB needs to show all the institutions that it takes its role
as supervisor seriously," said KPMG partner Daniel Quinten, a former
regulator at the German central bank.
"I would expect the ECB to dig a little deeper into all these areas
- capital adequacy, governance and controls, liquidity, and business
models," he said.
Some analysts said tougher capital rules could further curb bank
lending, threatening efforts to kickstart the economy.
"There is a concrete risk that if banks must have higher capital
levels, they will lend less to households and businesses, and this
will have a negative impact on the economy," said Vincenzo Longo of
IG.
Il Sole said the CET 1 floor requirement for UBI Banca will be 9.6
percent, while unlisted Banca Popolare di Vicenza will have to lift
its CET 1 to 11.6 percent. It gave no exact capital requirements for
other Italian lenders.
A source close to UBI confirmed the bank had received a request to
raise its minimum core capital, without elaborating. Popolare
Vicenza said the required capital level was "well below" 11.6
percent.
Il Sole said that if the banks fail to convince the ECB to reduce
the proposed minimum requirements, they will have to apply the new
floors as of February or March. The ECB declined to comment on
individual banks.
(Additional reporting by Stephen Jewkes, Andrea Mandala, Francesca
Landini and Luca Trogni in Milan; Eva Taylor, Thomas Atkins and
Kathrin Jones in Frankfurt; Editing by David Holmes and Elaine
Hardcastle)
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