Daniel Ritort

Banca Monte dei Paschi risky trading investigated

Headquarters of Banca Monte dei Paschi di Siena

Headquarters of Banca Monte dei Paschi di Siena

Shareholders of the world’s oldest bank have approved a plan needed to get a state bailout amid revelations that it concealed loss-making risky trades.

Banca Monte dei Paschi needs 3,900 million Euros in government aid to meet European banking rules.

Banca Monte dei Paschi di Siena and Italian regulators are investigating the trades. The Bank of Italy defended its role in supervising Italian banking system denying knowledge of the trades. Reports have suggested the trades could lead to another 720 million Euros of losses.

The Tuscan bank, founded in 1472, confirmed this week that three trades, named Alexandria, Santorini and Nota Italia, would be investigated in full to precisely assess the impact of the transactions and consequently adopt any measures needed, including a retrospective restatement of their accounting representation.

This has raised the prospect of further losses, and the trades are being investigated by regulators. Banca Monte plans to report on its internal investigation into the trades by mid-February.

Mario Monti, Prime Minister of Italy, has offered to recall parliament to discuss the growing scandal and Giorgio Napolitano, President of Italy, said that he had full faith in the country’s central bank.

Ignazio Visco, governor of Bank of Italy, said yesterday at the World Economic Forum in Davos, that the trades that were risky, the ones that had reduced liquidity at the bank, were actually connected with other operations which had losses they were not informed of. He argued the Bank of Italy is a supervisor but isn’t the police of the banks.

Earlier this week, the Bank of Italy released a statement saying that the true nature of certain transactions regarding the Monte dei Paschi di Siena reported in the press has emerged only recently, following the discovery of documents kept hidden to the supervisory authority and brought to light by the new management of Monte dei Paschi di Siena.

The trades involved investments to hedge the risks of buying long-term Italian government bonds. The bank said it’s noted that none of the transactions in question appears to have been submitted to the bank’s board of directors for approval.

Last November, when it asked for more aid, Banca Monte dei Paschi di Siena reported a loss of 1,700 million Euros for the first nine months of the year.

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