EBA rejects criticism over Monte dei Paschi's stress testing
The European Banking Authority has rejected criticism over its inclusion of Monte dei Paschi di Siena in its stress testing of European banks, saying that it had no choice but to include the bank. This comes after the Bank of Italy said that the bank's inclusion in the tests was "ill suited for a bank undergoing a major restructuring", such as the Italian bank.

EBA rejects criticism over Monte dei Paschi's inclusion in stress tests

MILAN, Nov 23 (Reuters) - The European Banking Authority (EBA) has rejected criticism over the inclusion of Monte dei Paschi di Siena in banking stress tests that singled out Italy's third-largest bank as Europe's weakest lender, saying it was not its decision.

Following the outcome of the tests, Monte dei Paschi announced an ambitious 5 billion euro ($5.3 billion)recapitalisation which has so far failed to attract investor interest, partly due to political risks as Italy nears a make-or-break referendum vote on Dec. 4.

If it can't get fresh capital by the end of the year, Monte dei Paschi risks needing state support with a destabilising effect on the wider banking sector.

The Bank of Italy, in its latest financial stability report released last week, said that the methodology used in the stress tests was "ill suited for a bank undergoing a major restructuring" such as Monte dei Paschi.

Italian daily Il Messaggero picked up on the comment, running a story under the headline "It was the EBA that knocked out MPS."

The EBA, in a letter to the newspaper's editor in chief published in Wednesday's edition of Il Messaggero, said the test methodology allowed for the exclusion of banks undergoing a restructuring process approved by the European Commission.

However, "the methodology gave competent authorities the option of including them", it said.

An EBA spokeswoman clarified the competent authorities were the European Central Bank and the Bank of Italy.