Deutsche Bank ‘Opaque’ Dealings With Paschi Probed by Bafin

Deutsche Bank AG (DBK)’s “opaque” dealings with Banca Monte dei Paschi di Siena SpA (BMPS), which used a transaction designed by Germany’s biggest bank that masked losses from accounts, are being reviewed by the German regulator.

Consob, Italy’s securities-market watchdog, initiated contacts with international authorities including German regulator Bafin in July and the latter is still reviewing the Paschi case, the Rome-based agency said in an e-mailed statement today.

The transaction, dubbed Santorini, came to light a year ago when Bloomberg News disclosed the contract, setting off a scandal that affected the outcome of national elections and prompted regulators to investigate. Santorini masked a 430 million-euro ($585 million) loss from an older contract with Deutsche Bank.

Officials for Bafin declined to comment on the case. Officials for Monte Paschi and Deutsche Bank couldn’t immediately be reached for comment.

The Italian bank and Deutsche Bank agreed to end the contract in December, 17 years early. Paschi paid Frankfurt-based Deutsche Bank 525 million euros. The world’s oldest lender lost money on the deals because it made a money-losing bet on the country’s government bonds.

Deutsche Bank in October said it’s cooperating with regulatory agencies and Siena prosecutors. Deutsche Bank kept the Monte Paschi deal and others off its balance sheet, Bloomberg News reported in July, in a practice that German regulators are reviewing, two people familiar with the deals said in August.

To contact the reporter on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

To contact the editor responsible for this story: Simone Meier at smeier@bloomberg.net

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