Monte Paschi Considers Seeking Higher Damages From Nomura

Banca Monte dei Paschi di Siena SpA, which is seeking 1 billion euros ($1.08 billion) in damages from Nomura Holdings Inc. for a derivatives deal arranged in 2009, is considering raising that amount after further investigations.

The bank, which has tapped Italy for two bailouts since 2009, is re-calculating damages caused by a transaction dubbed “Alexandria” after an investigation conducted by Milan prosecutors found evidence alleging “the criminal wrongdoing of some of Nomura’s senior managers for having paid out sums to executives,” the Siena-based bank said in a statement Thursday.

The transaction, struck by Paschi’s former management in 2009, is a 35-year bet on Italian government bonds. The deal, which had hidden earlier losses from the bank’s accounts, backfired. Prosecutors in Milan allege Paschi and Nomura falsified the Italian bank’s accounts and manipulated the market by masking the health of the lender’s finances with Alexandria.

Monte Paschi filed a lawsuit in 2013 seeking compensation from Nomura should a court find the Japan-based bank’s employees’ conduct in arranging the deals was criminal. A spokesman for Nomura wasn’t immediately reachable for a comment outside of normal business hours.

Nomura Risks

Paschi’s exposure to Nomura, including Alexandria, was about 35 percent of its regulatory capital base at the end of 2014, exceeding the 25 percent limit set by regulators. Closing Alexandria would cost Monte Paschi about 1 billion euros based on January prices, and would have no impact on the bank’s common equity Tier 1 ratio, Paschi said.

The European Central Bank requested that Paschi close the transaction by July 26 “unless a proven legal impediment arose in the future as a consequence of the ongoing civil proceeding or criminal investigation,” the bank said.

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