Walk through the Piazza Salimbeni in Siena and you'll see it. The Palazzo Salimbeni. It’s not just a beautiful Gothic building; it’s the headquarters of Banca Monte dei Paschi di Siena, an institution that has been around since 1472. That's twenty years before Columbus even bumped into the Americas. For a lot of people, MPS—as it’s usually called—is just a trivia answer. The world's oldest bank. But honestly, if you’ve followed European finance over the last decade, you know the story is way messier than just a "historic landmark." It’s a story of survival, massive state bailouts, and a really difficult pivot toward the modern era.
Most people assume that because it’s old, it’s stable. Or they assume that because it needed a massive government rescue, it’s a "zombie bank." Neither is quite right.
The 1472 Factor: Why It Started
The bank didn't start because some wealthy Medici wanted to hide gold. It started as a Monte di Pietà. Basically, a mount of piety. The idea was to help the poor people of Siena avoid the crushing interest rates of local usurers. It was charitable. That DNA—the connection to the city of Siena—is exactly what made its modern struggles so painful. For centuries, the bank and the city were the same thing. The Fondazione Monte dei Paschi di Siena poured money into the city’s hospitals, its famous Palio horse race, and its schools. When the bank started bleeding, the city started bleeding.
What Really Happened With Banca Monte dei Paschi di Siena?
The trouble didn't start 500 years ago. It started in 2007. Right before the global financial crisis hit, MPS decided to buy Antonveneta from Santander. They paid about 9 billion euros in cash. It was a massive overpayment. Analysts at the time were scratching their heads. Why pay that much? That single deal, combined with some really questionable derivative trades like "Alexandria" and "Santorini" meant to hide losses, sent the bank into a tailspin.
By the time the dust settled from the 2008 crisis and the Eurozone sovereign debt crisis, MPS was sitting on a mountain of non-performing loans (NPLs). We’re talking about billions of euros in debt that people simply weren't paying back.
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In 2017, the Italian government had to step in with a "precautionary recapitalization." They spent 5.4 billion euros to save it. You've got to understand how controversial this was. EU rules generally hate state aid for banks. But letting the world’s oldest bank collapse wasn't an option for Rome. It would have triggered a systemic panic across the Italian economy. So, the Italian Treasury became the majority shareholder, owning roughly 64% of the bank.
The Turnaround No One Expected
For years, the narrative was: "When will Italy sell its stake?" The ECB wanted them out. The Italian government wanted their money back. But who wants to buy a bank with that much baggage?
Then came Luigi Lovaglio.
Lovaglio took over as CEO in 2022, and he didn't mess around. He launched a massive 2.5 billion euro capital increase. It was risky. The markets were shaky. But he pulled it off. He cut costs, laid off thousands of employees through voluntary redundancy schemes, and started cleaning the balance sheet.
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Fast forward to 2024 and 2025. The high-interest-rate environment—which sucked for mortgage holders—was actually great for Banca Monte dei Paschi di Siena. Their net interest income soared. Suddenly, the "dying" bank was reporting billions in profit. In late 2024, the Italian government finally started selling chunks of its stake, raking in billions and proving that the bank could actually stand on its own feet again.
The Legal Ghosts and the "Mps-Gate"
You can't talk about this bank without mentioning the darker side. The death of David Rossi, the bank's head of communications, in 2013 is still a massive talking point in Italy. He fell from a window at the bank’s headquarters. The official ruling was suicide, but if you talk to anyone in Siena or watch the countless investigative specials on Italian TV, you’ll find a lot of people who don't believe that.
Then there are the trials. Former executives like Giuseppe Mussari and Antonio Vigni faced years of legal battles over those derivative deals. While many convictions were eventually overturned or settled, the legal cloud hung over the bank for a decade. It made investors terrified. It’s only recently that the legal risks have subsided enough for institutional investors to feel "safe" buying in again.
Why MPS Matters Today
So, why should you care about a bank in Tuscany?
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- It’s a bellwether for Italy. If MPS is doing well, it usually means the Italian banking sector is stable.
- The Privatization Success. The way Italy exited its stake is being studied as a blueprint for other state-rescued banks in Europe.
- Consolidation. There is constant talk about a merger. Will Banco BPM buy them? Will BPER? MPS is the "pretty bride" of the Italian banking M&A scene right now.
The bank has shifted focus. They aren't trying to be a global investment powerhouse anymore. They are focusing on small and medium-sized enterprises (SMEs) and retail customers in Italy. They’re leaning into the "commercial bank" identity.
Things Most People Miss
One: The bank’s art collection is insane. We’re talking about masterpieces from the Sienese school that have been kept in the Palazzo for centuries. It’s basically a museum that happens to have an ATM in the lobby.
Two: Their digital pivot was actually decent. For an old bank, their mobile app and online services don't feel like they were built in 1472. They had to modernize to survive.
Three: The "Monte" system. The word Monte (mountain) refers to a heap of money or a fund. It’s a very specific Italian financial structure that influenced how modern banking works today. Without the experiments in Siena, the way we think about credit might be totally different.
Actionable Insights for the Modern Observer
If you're looking at Banca Monte dei Paschi di Siena from an investment or business perspective, don't just look at the history books.
- Watch the ECB Dividends: Now that MPS is profitable again, they’ve started paying dividends. This is a huge signal to the market that the "crisis era" is over.
- Monitor the Mergers: The Italian banking landscape is shrinking. Keep an eye on any "Third Hub" rumors involving MPS, BPER, or Banco BPM. A merger could change the competitive landscape of Southern Europe.
- Check the NPL Ratio: The "Non-Performing Loan" ratio is the heartbeat of this bank. If it stays low, the bank is healthy. If it starts creeping up due to an economic slowdown in Italy, that's your red flag.
- Understand the Treasury's Exit: The Italian Treasury still holds a residual stake but is looking to exit completely. The timing of these sales often creates volatility in the stock price, offering entry points for those who follow the news closely.
Banca Monte dei Paschi di Siena has survived the plague, the fall of empires, and a massive 21st-century financial meltdown. It’s no longer just a "historic relic." It’s a lean, restructured commercial bank that finally stopped living in its own shadow. Whether it stays independent or gets swallowed by a larger rival, its place in the financial world is finally looking secure again.