Big-name London hedge funds Odey Asset Management and Egerton Capital are among those upping their bets against Monte dei Paschi di Siena in recent days, after revelations the troubled Italian bank faces heavy losses, Reuters reported. Italy's third-biggest bank is under investigation for an opaque series of derivatives and structured finance contracts between 2007 and 2009 that could cost it 720 million euros.

George Osborne has told Royal Bank of Scotland that it must meet its fine to US authorities over the Libor scandal – estimated to be in the region of £300m – from past, present and future bonuses, the Financial Times reported. RBS, which is 82 per cent taxpayer-owned, will discover the extent of its fines next week in a settlement with US regulators and the Financial Services Authority. Estimates of the total fines to US and UK authorities range from £400m-£500m.

The International Monetary Fund in its latest report on the Greek bailout took an interesting look at how far euro-zone economic output would fall if Greece ditched the common currency. The fund’s answer: Maybe a lot, maybe not so much – though even the “not so much” scenario looks pretty bad, The Wall Street Journal Real Time Brussels blog reported. The immediate problem for the euro zone is that a resurrection of the drachma would leave many of Greece’s public and private-sector debts to foreign creditors denominated in euros.

Some global banks are using models that let them hold only one-eighth of the capital held by their competitors against the same assets, according to a new study that will boost claims that banks are manipulating the key measure of bank safety, the Financial Times reported. The study by the Basel Committee on Banking Supervision comes at a time when investors, regulators and some bankers have called into question the way banks calculate their risk-weighted assets (RWA), which in turn determine how much capital they have to hold.

It has been a difficult turnaround for Deutsche Bank. The big German financial firm said on Thursday that it lost 2.2 billion euros ($3 billion) in the fourth quarter, as it was hit by legal costs and expenses related to its restructuring, The New York Times DealBook blog reported. “The results underline the task ahead for Jürgen Fitschen and Anshu Jain, the co-chief executives who took over the bank less than seven months ago and have declared their intention to deal more severely with the legacy of the financial crisis,” Jack Ewing writes in DealBook.

DIY chain B&Q Ireland Ltd has been placed into interim examinership following a hearing at the High Court Thursday, the Irish Times reported. This gives the company protection against its creditors for up to 100 days while the DIY chain attempts to restructure the business and formulate a survival plan to put the business back on a viable financial footing. Under a proposed restructuring, stores in Athlone and Waterford – which employ 92 staff between them - would close. B&Q will also attempt to substantially improve its rental agreements with landlords.

Banca Monte dei Paschi di Siena SpA, the Italian lender facing a government probe into money-losing structured deals, had its credit rating cut by Standard & Poor’s on concern the investigation may lead to bigger losses. The losses “may be higher than initially anticipated” and demonstrate “a risk of management weaknesses,” S&P said today in a statement. The Siena-based lender had its long-term grade cut to BB from BB+ and remains on watch negative, which means the company may be downgraded again.

Spanish Prime Minister Mariano Rajoy said he would send parliament a plan to stimulate the economy and put young people back to work, his government's first big initiative to ease the pain of a long-running economic crisis that deepened in the final quarter of last year, The Wall Street Journal reported. Spain's fourth-quarter gross domestic product fell 0.7% from the third quarter and 1.8% from the year-earlier period, the National Statistics Institute said in a preliminary reading on Wednesday. Output for the whole of 2012 fell 1.4% from 2011, it said.

Banks' "legacy assets" sound innocent enough but in the context of Europe's debt crisis, and particularly for Ireland and Spain, the question of how to deal with existing bad debts is a time bomb that has not been defused, Reuters reported in an analysis. In the months since the term entered the EU's lexicon, efforts have been made to parse it or play it down.

Romanian state-owned chemical producer Oltchim will enter insolvency, after the Ramnicu Valcea court approved its request today (January 30). The decision can be further appealed for seven days, Romania-Insider.com reported. The company will be assigned a judiciary administrator to establish the next steps and help it re-organize. “For the time being we are waiting for administrator to talk. The factory is functional, and there’s not a question of protests. We will sit down and talk to the judiciary administrator about what needs to be done.