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Bank of Italy scrutinizing activities at troubled MPS

Stock plunges amid derivatives scandal at world's oldest bank

23 January, 20:12
Bank of Italy scrutinizing activities at troubled MPS (ANSA) - Milan, January 23 - Officials from the Bank of Italy are carefully scrutinizing documents related to troubled Monte dei Paschi di Siena (MPS), the banking supervisor said in a statement late Wednesday.

"The true nature of certain transactions...have emerged only recently," said the Bank of Italy, which supervises banks in Italy.

Its comments came in the wake of a derivatives scandal at Italy's third-largest lender, which saw its stock plunge more than 8% on Wednesday.

At the same time, MPS executives came under intense pressure to explain to shareholders what was behind 2012 losses that could reach 220 million euros. The Bank of Italy said MPS operations now have the full attention of supervisory authorities, adding the bank was cooperating with investigators.

Just one day earlier, news broke that a three-year-old derivative deal with Japanese bank Nomura meant that MPS will book an additional loss of at least 220 million euros.

The news led to the resignation of MPS ex-chairman Giuseppe Mussari from his post as chairman of the Italian banking association ABI the same day.

Italian newspaper Il Fatto Quotidiano reported that MPS managers became aware of the three-year-old derivative trade, named "Alexandria" just last October.

The derivatives losses were revealed during an accounting overhaul launched by a new management team, reported the Financial Times.

MPS Chairman Alessandro Profumo and CEO Fabrizio Viola were brought in last year after the bank failed to meet European capital requirements. Mussari resigned from his ABI post on Tuesday after Nomura said he had personally approved the derivative trade during his tenure as MPS chairman.

Mussari firmly denies any wrongdoing.

MPS issued a statement saying the Nomura derivative deal was one of several structured transactions it was reviewing.

MPS is also examining a separate contract structured by Deutsche Bank, according to the Financial Times.

Controversy also swirled Wednesday over a request made last November, when MPS asked to increase State aid by 500 million euros to 3.9 billion euros, due to possible losses from past transactions related to its exposure to Italian State debt.

MPS stated that a review of those deals will be submitted to the MPS board in February, and that the bank would report in a timely way any impact on its accounts.