Shares In Italy's Biggest Bank Suspended

Shares in Italy's biggest bank were suspended after a bid to raise money from investors flopped in its early stages.

UniCredit offered new shares at a steep 69% discount to Tuesday's closing price as part of its plan to raise 7.5bn euros (£6.3bn) in new capital.

But the heavy discount immediately failed to attract private investors, with just a 24% take up.

The bank's share price plummeted by 9.9%, devaluing it to such an extent that trading in the stock on Milan's FTSE exchange was suspended.

The fall signalled a massive lack of confidence in the Italian bank and its attempts to shore up its financial strength.

Banking industry expert Ralph Silva told Sky News the rights issue had been a "complete and utter failure".

He predicted it would have a profound effect on the wider financial services industry as many other European lenders were planning to launch similar plans to raise cash.

Mr Silva said: "For large banks the option of going to private investors appears to be not an option.

"Going to governments and selling assets are the only ways forward."

But despite the developments he said the retail bank was too important to Italian consumers to be allowed to go to the wall.

"UniCredit could fail but it can't fail," Mr Silva warned.

Meanwhile, banks' deposits with the European Central Bank (ECB) have hit an all-time high.

Some 453.18bn euros (£378bn) was deposited at the ECB on Tuesday, breaking a previous record set last week of 452.03bn euros (£377bn).

The data suggests banks remain reluctant to lend to each other amid ongoing market tension.

Analysts said lenders were instead opting to hoard their excess funds at the ECB after borrowing under its new lending terms.

The ECB agreed last month to loan a record 489.2bn euros (£408bn) to 532 banks in a three-year refinancing operation in a bid to avert a possible credit crunch.