Monte Paschi Court Ruling May Be Feb. 2, Consumer Lawyer Says

An Italian court may rule as soon as Feb. 2 on a complaint by a consumer group trying to block government plans to lend 3.9 billion euros ($5.3 billion) to Banca Monte dei Paschi di Siena SpA, the group’s lawyer said.

The Rome-based administrative court for the Lazio region may announce its ruling after hearing all the parties involved, including Bank of Italy and Italian Treasury officials or their legal representatives, Gino Giuliano, a lawyer for consumer association Codacons, said today by phone. The court has jurisdiction in administrative matters regarding government decisions.

Earlier this week, Codacons filed a claim to the court seeking damages from the central bank and other institutions for not adequately monitoring Monte Paschi’s activities. The Siena, Italy-based bank on Jan. 17 said it may be forced to restate earnings after Bloomberg News reported that it used derivatives to obscure losses. Accounting irregularities also led to a criminal investigation targeting previous management.

The court also asked officials for the lender and market watchdog Consob to testify, according to a copy of the court document obtained by Bloomberg News. The Bank of Italy acted vigilantly in its oversight of the lender, a former senior official of the central bank who was involved in the inspections told Bloomberg News yesterday.

‘Monti Bonds’

Monte Paschi is seeking state help to bolster its balance sheet after the bank failed to meet the capital requirements set by the European Banking Authority. The bank is also selling assets and reducing risk and costs in a three-year plan to restore liquidity. Under the government’s rescue plan, Monte Paschi will sell securities, dubbed “Monti bonds” after the prime minister’s surname, to the government with a 9 percent coupon that may rise to as much as 15 percent.

The regional administrative court, or TAR, asked the Bank of Italy to submit its board’s Jan. 26 opinion on Monte Paschi’s rescue by no later than 24 hours before the hearing, the document shows. The hearing is scheduled at 9:30 a.m. on Feb. 2.

The Bank of Italy will file the documents that are useful for a correct comprehension and assessment of the matter, said a spokeswoman for the central bank. A spokesman for the Finance Ministry declined to comment on the Rome court’s hearing. A spokeswoman for Monte Paschi didn’t have an immediate comment and Consob didn’t immediately return calls seeking comment.

On Jan. 28 Monte Paschi’s Chief Executive Officer Fabrizio Viola said 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.

In a separate case, prosecutors in Siena, where the world’s oldest bank is based, are probing Monte Paschi’s past management for alleged market manipulation, false accounting, obstructing regulators and fraud related to structured financing deals.

-- Editors: Andrew Davis, Marco Bertacche, Dan Liefgreen

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