Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Italian judge rejects request to drop case against former Monte Paschi executives

Published 07/29/2019, 11:16 AM
Updated 07/29/2019, 11:21 AM
© Reuters.  Italian judge rejects request to drop case against former Monte Paschi executives

© Reuters. Italian judge rejects request to drop case against former Monte Paschi executives

By Emilio Parodi and Silvia Aloisi

MILAN (Reuters) - An Italian judge has rejected a request by prosecutors to shelve a false accounting case against former executives at bank Monte dei Paschi di Siena (MI:BMPS), which had to be bailed out by the state.

The case revolves around allegations that the three former executives failed to properly book bad loan provisions between 2012 and 2015 and stems from a complaint presented by the bank's small shareholders.

Monte dei Paschi, the world's oldest bank, had to request state aid at the end of 2016 after an attempt to raise capital on the market failed. The Italian state retains a stake of around 68% in the bank.

Small shareholders argue that documents used by the bank as it sought to convince investors to buy into two successive capital increases in 2014 and 2015 did not provide an accurate picture of the lender's real financial situation.

In his ruling, dated July 25 and seen by Reuters on Monday, judge Guido Salvini told Milan prosecutors to investigate the allegations further and gave them nine months to do so. The prosecutors were not initially convinced that the case was strong enough to pursue.

The case raises questions about Monte dei Paschi's health before it was bailed out by the government and whether the rescue, approved by European authorities and costing the taxpayer 5.4 billion euros ($6 billion), respected EU rules on dealing with banking crises.

The executives under investigation are Monte dei Paschi's former Chairman Alessandro Profumo, its former Chief Executive Fabrizio Viola and the former head of the bank's team of internal auditors, Paolo Salvadori.

Lawyers for Profumo and Viola declined to comment on the case. A lawyer for Salvadori did not respond to a request for comment.

In its ruling, the judge refers to a confidential report by the European Central Bank dated June 2, 2017 following an audit of the bank by its inspectors the previous year.

The report, seen by Reuters, found that a lot of loans deemed to be performing had in fact turned sour and that the bank had failed to set aside sufficient funds to cover for loan losses.

It said that based on an estimate submitted by the bank on Dec. 13, 2016, the lender's CET 1 ratio - a key measure of financial strength - would have been just 0.58% at the end of 2015 after taking into account the results of the inspection, compared with a minimum regulatory requirement of 4.5%.

A month after the ECB inspectors' report, the European Commission authorized the government in Rome to rescue Monte dei Paschi with taxpayer money, saying it had been reassured by the ECB that the bank was solvent and respected minimum capital requirements.

An ECB spokeswoman declined to comment.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.