By Giuseppe Fonte and Valentina Za

ROME (Reuters) – Italy expects to reach an informal agreement soon with European Union authorities on new restructuring targets for Monte dei Paschi di Siena (MPS) and to be given more time to return the public bank to private hands, two sources said. .

The breakdown of talks with UniCredit over its potential purchase of MPS last year has forced Rome to seek an extension to the original deadline of late 2021 to sell the bank.

Italy owns 64% of the world’s oldest lender after a bailout in 2017.

Hit by negative interest rates and an economic slowdown, MPS failed to meet restructuring commitments that the Italian Treasury had accepted in order to authorize the 2017 bailout with the EU.

The Treasury has negotiated a new deadline to reduce its stake in MPS and new restructuring targets. Based on its previous agreements with the EU, failure to meet commitments means Rome must agree to tougher targets.

Asking not to be named due to the sensitivity of the issue, the two people briefed on talks between Rome and Brussels said the Treasury was close to reaching a deal.

One of the sources said Rome was confident it would reach an informal agreement before new MPS chief executive Luigi Lovaglio presented a business plan for the bank on June 23.

Next week, MPS will also outline steps to raise new capital, with the Treasury set to cover 64% of its final cash requirements.

Under a previous plan that Lovaglio has revised since taking office in February, MPS had offered to raise 2.5 billion euros ($2.6 billion).

Sources told Reuters last month that the bank and Treasury were scrambling to keep the cash call figure broadly unchanged despite the revised plan. The European authorities will have the last word on the injection of liquidity.

Rome also wants to extend the reprivatization deadline by more than two years to give MPS time to improve its profitability and attract a buyer, one of the sources said.

A Commission spokesperson said the EU executive was in contact with the Italian authorities and closely following developments at MPS, having authorized the 2017 bailout “on the basis of an effective and efficient restructuring plan. on the basis of certain commitments made by Italy in relation to the bank”.

“As always, member states must comply with state aid commitments and it is up to them to come up with ways to meet those commitments,” the spokesperson said.

“It is therefore up to Italy to decide and propose ways to exit ownership of MPS taking into account the state aid commitments of 2017.”

(Reporting by Giuseppe Fonte in Rome and Valentina Za in Milan; Editing by Mark Potter)

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