The headquarters of the Monte Dei Paschi di Siena bank in Siena, Tuscany, Italy
Photograph by Giuseppe Cacace/AFP via Getty Images
From CentralBanking.com:
Central bank to investigate Monte dei Paschi di Siena trades in collaboration with judicial authorities, as the Italian bank seeks €500 million in 'Monti bonds' to cover potential lossesHere's Patty Smyth with commentary:
The Italian central bank has stepped in to investigate a growing scandal at Italy's oldest bank [1472 -ed] Monte dei Paschi di Siena (MPS), which has already cost the head of the country's banking association his job.
The Bank of Italy said on January 23 that the true nature of some of MPS's transactions had been "kept hidden from the supervisory authority". MPS revealed the same day that it is investigating three deals – called ‘Alexandria', ‘Santorini' and ‘Nota Italia' – and has requested €500 million in so-called 'Monti bonds' to ensure "adequate prudential coverage" for any losses incurred.
Outgoing Italian prime minister, Mario Monti, had earlier put forward a plan for the government to buy debt issued by the loss-making Italian bank instead of offering direct aid.
The Italian central bank said the transactions are now being examined by both the supervisory and judicial authorities, in close collaboration, and that the investigations are "covered by professional and judicial secrecy". MPS has admitted that all three of the transactions had taken place without having been submitted to the bank's board of directors for approval.
The Alexandria and Santorini trades, MPS said in a statement, were investments made by the bank "in long-term multi-annual Italian government bonds (BTPs), funded by repo agreements whose coupons were asset-swapped for the purpose of hedging interest rate risk"....MORE
