Banco BPM has formally invited Banca Monte dei Paschi di Siena (MPS) to enter merger discussions that would create Italy's second-largest bank with combined assets of approximately €58 billion.

The proposed merger would reshape Italy's banking landscape by combining two significant regional players. Banco BPM, which has a market presence across northern and central Italy, would join forces with MPS, the world's oldest operating bank founded in 1472 and based in Tuscany.

If successful, the combined entity would become Italy's second-largest bank by assets, trailing only Intesa Sanpaolo. The merger would create a banking powerhouse with extensive retail and commercial banking operations across multiple Italian regions.

Monte dei Paschi has undergone significant restructuring in recent years, including multiple bailouts and asset sales as it worked to address legacy issues and strengthen its financial position. The Italian government currently holds a stake in MPS following previous rescue operations.

The merger talks come as European banks face pressure to consolidate to achieve greater scale and efficiency in a challenging operating environment marked by regulatory requirements and economic uncertainty. Italian banks in particular have been seeking strategic partnerships to strengthen their competitive positions.

Both banks will need to conduct due diligence and obtain regulatory approvals before any potential merger can proceed. The proposal represents one of the most significant potential banking consolidations in Italy in recent years.