Banca Monte dei Paschi says could run out of liquidity after four months

The embattled Italian bank Monte dei Paschi di Siena warned Wednesday that it would run out of cash at a faster pace than previously forecast if a recapitalization process does not take place.

Monte dei Paschi had previously said that its 10.6 billion euro ($11.5 billion) liquidity position could last for 11 months. However, it said Wednesday that this would happen in four months' time.

The oldest bank in the world has been struggling for a long time, but its situation has deteriorated mainly since political instability took over Italy at the start of December. Its shares were suspended from trading after falling more than 12 percent on Wednesday morning.

With unexpected changes in the Italian government, investors became more reluctant to contribute to a planned 5 billion euro ($5.2 billion) recapitalization process.

On Tuesday, the bank raised 500 million euros in a voluntary debt-to-equity offer, according to Reuters, but that's far from the aimed 5 billion euro target.

Recent media reports stated that the Italian government could be preparing a state intervention. However, the process could be tricky as the government needs to ensure that such intervention obeys to European state aid rules.

Furthermore, a state intervention could also spur further anti-euro sentiment among Italian voters at a critical time in Italian politics. There are concerns that the current issues affecting Monte dei Paschi could destabilize the wider Italian banking system.

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