Deutsche Bank, Nomura Begin Trial in Monte Paschi Collusion Case

  • Two firms accused of conspiring to mask Monte Paschi’s losses
  • Trial comes as Italian lender struggles to avoid new bailout

Deutsche Bank AG and Nomura Holdings Inc. went on trial in Milan, accused of colluding with Banca Monte dei Paschi di Siena SpA to cover up losses that almost toppled the Italian lender years before its current battle for survival.

Thursday’s proceedings began in a courtroom packed with dozens of lawyers, journalists and representatives of the accused. As well as the companies, 13 former and current bank managers are on trial, including Michele Faissola, who oversaw Deutsche Bank’s global rates unit at the time, and Ivor Dunbar, former co-head of global capital markets.

The case has come to epitomize the ills of two of Europe’s most troubled lenders. The German bank has lost more than a fifth of its market value this year as investors question whether it has enough money to meet mounting legal bills. Monte Paschi, creaking under billions of euros of soured loans, is facing a state rescue as it struggles to raise fresh funds.

Deutsche Bank and Nomura are accused of using complex derivative trades to hide losses at the Italian lender, leading to a misrepresentation of its finances between 2008 and 2012. After the deals came to light in a 2013 Bloomberg News report, Monte Paschi restated its accounts and tapped shareholders twice to replenish capital.

Monte Paschi as a company isn’t among the defendants because it secured court approval for a plea bargain to resolve the investigation in October. The settlement requires the bank to forfeit 10 million euros ($10.5 million) and pay a fine of 600,000 euros.

The trial, expected to last months, comes as the world’s oldest bank pushes ahead with a plan to raise 5 billion euros of fresh funds to cover losses on bad loans that mounted during the country’s recession. If that fails, Italy’s government is preparing another rescue package for the lender, which has already received billions of euros in bailout funds.

— With assistance by Donal Griffin

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