Banca Monte dei Paschi di Siena SpA won’t seek more aid to cover potential losses from derivatives that were undisclosed by the bank’s previous management, Chief Executive Officer Fabrizio Viola told reporters today.
The bank, which has requested a 3.9 billion-euro ($5.2 billion) bailout, isn’t holding talks with potential new investors in the Siena, Italy-based lender, Viola said at Milan’s Foreign Press Club.
“I can confirm that the amount of funds we need is 3.9 billion euros,” Viola said, adding that the bank’s board will complete the bailout request by early February and the Italian Treasury will conclude the transaction by the end of that month.
Investors in the world’s oldest bank on Jan. 25 approved a 6.5 billion-euro capital-raising plan, a required step to receive a second bailout from the Italian government, a week after Bloomberg News revealed the bank used derivatives to mask losses. Italy’s central bank has said that the lender hid documents from regulators on deals that may prompt the bank to restate profit.
The Rome-based Bank of Italy on Jan. 26 approved the government’s emergency loans, allowing Italian Prime Minister Mario Monti to push ahead with the bailout before national elections next month. Under the aid plan, Monte Paschi will sell securities dubbed “Monti bonds” to the government with a 9 percent coupon that may rise to as much as 15 percent.
Italian consumer association Codacons is seeking to block Monte Paschi’s bailout. The group filed a complaint in a Rome administrative court against the Cabinet, Economy Ministry, Italy’s central bank and market regulator Consob, seeking 3.9 billion euros in damages from the Bank of Italy for not adequately monitoring the bank’s activities, according to an e- mailed statement today.
Codacons’ request follows criticism about the central bank’s supervision raised by some politicians and another consumer group, Adusbef, which last week asked why regulatory authorities didn’t review Monte Paschi’s use of the derivatives.
“It would have been very hard for the central bank to find something wrong while reviewing accounts because some documents were hidden,” Viola said today.
Monte Paschi is reviewing three money-losing derivative deals, dubbed Santorini, Alexandria and Nota Italia, which led to losses for the bank. The lender discovered in October that former managers signed a “mandate agreement” with Nomura Holdings Inc. (8604) to cover losses on a mortgage-backed derivative called Alexandria with new, riskier derivatives.
The hidden document, proving the link between the unprofitable Alexandria derivative with a new riskier one, should have led the bank to book a loss of more than 200 million euros on the original transaction, instead of spreading it over the 30-year maturity of the new deal.
Viola said today that the bank is unable to find a similar mandate agreement for the Santorini financing.
Monte Paschi will complete the review of the losses, which haven’t been quantified yet, in the first half of February, and they will be included in the bank’s 2012 accounts, Viola said. “The 2012 results will reflect the real situation of the bank.”
Viola said he has seen no evidence of bribery related to Monte Paschi’s purchase of Banca Antonveneta SpA in 2008, commenting on press reports of illicit payments linked to the acquisition. The executive said the bank considered selling Antonveneta when it needed funds to meet a European Banking Authority capital gap and isn’t currently considering a sale.
Monte Paschi shares gained 0.7 percent to 26.15 cents in Milan, after rising earlier as much as 7.4 percent, giving Italy’s third-largest bank a market value of 3.05 billion euros.
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