Italian banking shares strengthened on Tuesday on expectation that the European Central Bank will extend its quantitative easing programme when its governing council meets on Thursday in Frankfurt, the Irish Times reported. Amid reports that Italy’s third-largest bank, Monte dei Paschi di Siena, may be preparing for a state bailout, the European Central Bank is expected to signal that it will extend its asset-purchase programme beyond March 2017.

Cleaning up Italy’s banks is an opportunity ripe for the wasting, the International New York Times DealBook blog reported. The failed referendum on Sunday need not cause a crisis if UniCredit completes its rights issue and fellow lender Banca Monte dei Paschi di Siena can be quickly stabilized. Political turmoil and weak growth, though, could push up bad loan levels, and the political will to fix them may be lacking.

Bankers were scrambling on Monday to secure a €5 billion recapitalisation of Monte dei Paschi di Siena (MPS), the world’s oldest lender, after prime minister Matteo Renzi’s decisive loss in Italy’s referendum on constitutional reform added more uncertainty over the deal, the Irish Times reported. Italy’s troubled banking system and a complex rescue and restructuring of MPS has lurched into investor focus after Mr Renzi confirmed he would step down after a worse than expected defeat in Sunday’s vote.

Banca Popolare di Bari is poised to sell the riskier bonds in its landmark bad loan securitisation without the help of Italy's rescue fund, having turned to a US hedge fund instead, according to people familiar with the situation, Reuters reported. The Italian lender has lined up Davidson Kempner Capital Management for both the mezzanine and junior notes in the Popolare di Bari NPLs 2016 securitisation, three people with knowledge of the matter said. The 14m mezzanine chunk is rated B(High)/B2, while the 10m junior slice is unrated.

Banca Monte dei Paschi di Siena may have got the green light for an ambitious recapitalisation, but the bank is yet to convince investors to buy into the complex plan needed to keep the troubled lender afloat, Reuters reported. Shareholders in Italy's third largest lender last week approved a 5bn recapitalisation aimed at keeping the bank from being wound down. BMPS is set to launch on Monday a debt-to-equity conversion offer that seeks to reduce the size of a proposed share sale.

Up to eight of Italy’s troubled banks risk failing if prime minister Matteo Renzi loses a constitutional referendum next weekend and ensuing market turbulence deters investors from recapitalising them, officials and senior bankers say, the Irish Times reported. Mr Renzi, who says he will quit if he loses the referendum, had championed a market solution to solve the problems of Italy’s €4 trillion banking system and avoid a vote-losing “resolution” of Italian banks under new EU rules.

Hedge funds investors holding some of Banca Monte dei Paschi di Siena's riskiest bonds said they would take part in the bank's proposed tender but the trade is still riddled with execution risk with Tier 2 holders' participation in the balance, Reuters reported. The Italian lender announced late on Monday that it was looking to target up to 5.3bn of subordinated debt in a debt-for-equity swap aimed at getting the bank back on its feet .

Ailing Italian lender Monte dei Paschi di Sienaon Monday announced the terms of a planned debt-to-equity conversion, a key plank of a rescue scheme aimed at averting the bank being wound down, Reuters reported. The bank said the voluntary debt swap offer would target 4.289 billion euros (3.68 billion pounds) of subordinated bonds. It was also considering converting a hybrid financial instrument known as Fresh 2008 worth 1 billion euros.

Shares in Monte dei Paschi di Siena fell 6 per cent in early trading on Wednesday, triggering an automatic trading suspension, after the withdrawal of an alternative rescue plan for Italy’s third largest lender, the Irish Times reported on a Reuters story. Veteran Italian banker and former industry minister Corrado Passera withdrew his plan for Monte dei Paschi on Tuesday, accusing the bank of obstruction and ignoring the interests of its own shareholders.

Banca Monte dei Paschi di Siena unveiled an ambitious turnaround plan last week, but its recast recapitalisation still hinges on a 28bn bad loan securitisation that remains marred by deep uncertainty, Reuters reported. Italy's third largest lender confirmed that its financial overhaul now includes a potential liability management exercise that will look to assign both retail and institutional subordinated bondholders new equity following scant investor interest for the 5bn cash call proposed in July.