Photographer: Alessia Pierdomenico/Bloomberg

Monte Paschi CEO Says He’s Part of Probe Into False Accounting

  • Bank says operations were carried out by previous management
  • Viola says he, former Chairman Profumo being investigated

Banca Monte dei Paschi di Siena SpA Chief Executive Officer Fabrizio Viola confirmed reports that he and former Chairman Alessandro Profumo are under investigation as part of a wider probe into alleged false accounting.

Viola said in an e-mailed statement Friday that he and the bank acted correctly and he was confident things would “be cleared up rapidly.” He also said that current and past management of the bank shouldn’t be confused and that “at this delicate time, the bank’s credibility can be negatively influenced” by such confusion.

Prosecutors have been investigating how Monte Paschi’s former managers allegedly misrepresented the lender’s finances in the years before it sought a government bailout. The bank used transactions to mask losses and was later forced to restate its accounts. The probe involving Viola and Profumo focuses on derivatives transactions known as Alexandria and Santorini, a person familiar with the investigation said, asking not to be identified because the matter is private.

The “operations in question were carried out by the previous executives of the bank and by the ex-managers,” the Siena-based lender said in a separate statement late Thursday. Monte Paschi has acted “with complete propriety” in the matter and executives have “always collaborated” with authorities, it said. A spokesman for Profumo declined to comment when contacted by Bloomberg.

Alessandro Profumo and Fabrizio Viola

Photographer: Alessia Pierdomenico/Bloomberg

The office of the chief prosecutor in Siena and the office of the Milan prosecutor now dealing with the case both declined to comment when contacted by Bloomberg. Monte Paschi said in the statement that the Siena prosecutor’s office first started an investigation before sending the file to its Milan counterpart. Reuters reported the investigation earlier.

Under Italian law, prosecutors “are obliged to open an investigation when they receive a complaint,” a spokesman for the bank said without elaborating. The probe into Viola stems from a shareholder complaint, Monte Paschi said.

Monte Paschi had to restate its accounts to comply with a request from Italy’s market watchdog that the bank amend how it booked a transaction with Nomura Holdings Inc. dubbed Alexandria. The lender used a transaction with Deutsche Bank AG, dubbed Santorini, to mask losses.

The Italian bank’s shares dropped 2.6 percent in Milan trading to the lowest on record. Monte Paschi has lost about 80 percent of its market value this year, while the 39-member Bloomberg Europe Banks and Financial Services Index has declined about 28 percent.

Italy’s government has been seeking ways to shore up the financial system, hurt by 360 billion euros ($407 billion) in soured loans and stalling economic growth. At Monte Paschi, Viola is seeking to raise 5 billion euros and cut the share of bad loans to shore up its balance sheet. European stress tests last month showed the bank as the worst performer among the region’s lenders in a scenario of severe economic crisis.

The CEO is scheduled to present a new business plan next month.

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