Jamie Dimon, chief executive of the largest US bank by assets, and Daniel Pinto, the London-based head of JPMorgan's investment and finance department, are behind the plan to bail out the Banca Monte Paschi di Siena unveiled on Friday, according to the sources, who asked to remain anonymous.
Their first idea, the sources said, was the outright purchase of the heavily indebted BMPS, which the European Central Bank last week cited as the financial institution most susceptible to bankruptcy according to EU bank stress tests.
Contacted by AFP, JPMorgan declined to comment.
JPMorgan has deep pockets - last year the firm had $24.44 billion net profit. In contrast, BMPS is in a stock plunge: The Italian bank was valued at a little more than $800 million on the market Wednesday.
The problem is that the current environment is hostile to megabanks, one of the sources indicated, adding that JPMorgan hesitated to pursue a bid fearing US authorities would take an unfavourable view of a US bank rescuing a European firm.
US regulators want to force large financial institutions considered a potential systemic threat to the financial system to reduce their size. In the aftermath of the 2008 financial crisis, they have imposed significant increases in capital requirements of banks deemed "too big to fail" and tightened their oversight.
JPMorgan also feared a backlash to the acquisition in Italy and in Europe where big banks are not favourably viewed in the press, the other source explained.
The US bank now believes the best solution would be an injection of funds, the support of the government and improved governance, the two sources stated.
According to its calculations, €5-€6 billion ($5.6-$6.7 billion) would be sufficient to stabilize BMPS.
Dimon discussed this with Italian Prime Minister Matteo Renzi while he was in Italy in early July for the 100th anniversary of JPMorgan's presence in the country, the sources said. He also discussed it with the BMPS management team.
JPMorgan's rescue plan for BMPS is twofold.
The first part entails the resolution of bad debts estimated at €27.7 billion at the end of March, which would be put in a specific financial instrument.
The second part is a capital injection of €5 billion, to which Goldman Sachs and Citigroup have already agreed, according to one source.
Banco Santander, Credit Suisse, Deutsche Bank and Bank of America Merrill Lynch also were expected to participate, according to the Financial Times.
The rescue is aimed at restoring confidence in and stabilizing BMPS through the end of the year, preparing it for a merger with a stronger banking group, the other source close to the situation explained to AFP.