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Ex-Monte Paschi chiefs deny hiding Nomura derivatives trade
January 29, 2014 / 5:38 PM / 4 years ago

Ex-Monte Paschi chiefs deny hiding Nomura derivatives trade

SIENA (Reuters) - Former top managers at Banca Monte dei Paschi di Siena (BMPS.MI) denied on Wednesday that they hid the true nature of a 2009 derivatives trade with Nomura (8604.T) that prosecutors say was used to conceal losses at Italy’s third-biggest bank.

People are reflected in the window of a Monte Dei Paschi Di Siena bank in Rome January 29, 2013. . REUTERS/Max Rossi

The bank’s former Chairman Giuseppe Mussari and former CEO Antonio Vigni are on trial in Siena charged with misleading regulators about the so-called Alexandria transaction with Japanese broker Nomura, one of a series of risky derivatives trades investigated by prosecutors.

Both are accused of hiding a key document known as a mandate agreement, which prosecutors and regulators say made clear that the trade was linked to the acquisition of 3 billion euros ($4.09 billion) of long-term Italian government bonds by Monte dei Paschi.

The link between the two trades meant they should have received different accounting treatment, which would have shown heavy losses. Alexandria and two other derivatives trades ultimately forced Monte Paschi to restate its accounts and book a loss of 730 million euros on its 2012 results.

The new management at the bank, which received a 4.1 billion euro state bailout last year after it was hit hard by the euro zone debt crisis, says it only discovered the existence of the mandate agreement when the document was found in a safe in Vigni’s former office in October 2012, more than three years after it was signed.

However, Vigni told the court on Wednesday that “everybody at the bank knew” the Alexandria trade and the bond purchase were linked.

“The mandate agreement is a letter of intent that does not link anything ... One did not need to see the two contracts (to understand they were linked). Everybody knew about the link,” Vigni said.

Mussari, also in court on Wednesday, said that he had never had an interest in hiding the document.

The bank is separately seeking 700 million euros in damages from Vigni, Mussari and Nomura over the trade. Nomura has denied any wrongdoing and has started its own legal action against Monte dei Paschi in London.

Reporting by Silvia Ognibene; Writing by Silvia Aloisi; Editing by David Goodman

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