BOI board to decide on Monte Paschi $ 5.3 bn loan



Reuters

Published — Sunday 27 January 2013

Last update 26 January 2013 11:54 pm

| نسخة PDF Print News | A A

ROME/MILAN: The four-member board of the Bank of Italy met yesterday to consider the position of scandal-hit bank Monte dei Paschi di Siena and decide whether to authorize its request for 3.9 billion euros ($ 5.3 billion) of state loans.
Italy's third-largest bank this week revealed loss-making derivatives trades that could cost it about 720 million euros, sinking its shares and prompting questions about how the risky deals could have been hidden from regulators.
The issue has shot to the center of the campaign for a Feb. 24-25 national election and politicians have blamed the Bank of Italy (BOI), led by current European Central Bank President Mario Draghi at the time of the deals, for failing to spot them.
At the meeting chaired by current Bank of Italy Gov. Ignazio Visco, the board will assess whether Monte Paschi meets the stability requirements necessary to receive the state loans.
The Tuscan bank, the world's oldest, was forced to seek state aid last year for the second time since 2009 after becoming one of just four European lenders that failed to meet tougher capital requirements set by regulators.
Under the proposed scheme, the bank would issue 3.9 billion euros of bonds to the Italian Treasury, with just under half of these replacing 1.9 billion euros of existing state loans.
Visco said on Friday the bank was unquestionably stable. The lender's new management, appointed last year to turn it around, said the situation was "completely under control".
The bank would pay a hefty 9 percent coupon on the bonds, which are worth more than its current market capitalization of 3 billion euros. The coupon will increase by 0.5 percentage point every two years up to a maximum of 15 percent.
At a stormy meeting at Monte Paschi's Siena headquarters on Friday, shareholders approved two capital increases for 6.5 billion euros to be carried out if needed in the next five years, which are a condition of the state bailout.
That raises the prospect of possible nationalization, because if the bank cannot repay the state bonds or the coupons attached to them, it will have to issue shares to the Treasury.
Prime Minister Mario Monti said late on Friday he considered nationalization a "remote hypothesis".
Monti, bidding for a second term in the election, defended his government's decision to rescue it with taxpayers' money. "It's a loan, with a high interest rate," he said.
At the World Economic Forum in Davos, Visco sought to deflect accusations that the BOI had not done its job properly.

"It is wrong to insinuate that there was a lack of supervision by the Bank of Italy," he said on Friday, adding the BOI would cooperate with prosecutors investigating the lender.
Draghi, also in Davos, took no questions from reporters.
Visco's task was made more difficult by a report in the Corriere della Sera daily on Friday which included excerpts of a document drafted by six BOI inspectors expressing concerns over the two main trades under scrutiny as long ago as 2010.
That report would have been sent to the BOI's head of bank supervision at the time, Anna Maria Tarantola, who has since left the bank to become president of state broadcaster RAI.
Visco sidestepped questions about whether Draghi knew about the 2008-09 derivatives trades, which involved Japanese bank Nomura and Deutsche Bank.
Internal auditors at Monte Paschi already detected anomalies at the bank's finance department responsible for derivative trades three years ago, daily Il Sole 24 Ore said yesterday.
However, the outcome of the Nov. 26, 2009 audit was "partially favourable" for the bank, contrasting with a "partially unfavorable" rating by the Bank of Italy after a May-August 2010 inspection.
Monte Paschi was already under investigation over its 9-billion-euro cash acquisition of smaller lender Antonveneta from Spain's Santander in 2007.
Santander had bought Antonveneta for 6.6 billion euros in a three-way break-up bid for Dutch bank ABN Amro, and almost immediately sold it on to Monte dei Paschi netting a hefty gain.

What's happening around Saudi Arabia

ABHA: Several Saudi businesswomen started traveling with a group of friends after recent regulations which allow women to travel without their mahram. These women said they find great fun to travel as a group with their friends and their children, wh...
RIYADH: The United Nations, Arab League and Gulf Cooperation Council welcomed the Kingdom-led coalition’s announcement of a five-day cease-fire, that took effect at midnight on Sunday, to push humanitarian relief in war-ravaged Yemen to the beleaguer...
ALKHOBAR: Jobless Saudi women constitute 70 percent of the unemployed. The Ministry of Economy and Planning said 58 percent of the jobless have preparatory school level education. According to the statistics, the annual unemployment growth rate among...
RIYADH: Saudi Arabia has found traces of a civilization that was domesticating horses about 9,000 years ago, 4,000 years earlier than previously thought. The discovery has shed new light on the origin of the Arabian horse, which has remained a great...
RIYADH: The Ministry of Labor in the Makkah region found 250 laborers working on various construction projects during restricted hours of the day. Punitive measures will be taken against the employers of these workers. According to a ministerial decr...
JEDDAH: When poverty is your guest for 15 years, gardens, parks, streets and pavements become your abode under the unavoidable scorching sun. One has to face hardships of hunger and survive on breadcrumbs. This is the situation of a 60-year-old Saudi...
JEDDAH: The negative attitudes of society in dealing with harassment and abuse cases prevent victims from reporting a great number of such cases to the authorities.Despite this, about 3,982 cases reached the country's criminal courts in 1435 and 1436...
AL-QATIF: The Omani security forces have arrested a man who, they said, accidentally fired a bullet that hit a young Saudi girl in a hotel in Musandam on Saturday. Four-year-old Zainab bint Mohammed Labad of Al-Awamiyah was playing in the hotel lobby...
Ramon Corvera, deputy chief of mission at the Argentinian Embassy in Riyadh.* Which particular aspect of Saudi Arabia you like the most? The natural beauty of the desert.* What is your favorite and oft-repeated Arabic word? Masha’Allah.* Which book i...
JEDDAH: The creativity and entrepreneurship community program of Umm Al-Qura University brought together 80 creative entrepreneurs to exchange their experiences and knowledge on Monday. Fawaz Saad, the dean of the institute for innovation and entrepr...
RIYADH: The August issue of ‘Nature’, the monthly magazine of King Abdulaziz City for Science and Technology (KACST), will focus on Middle East Respiratory Syndrome (MERS) corona, which has affected 1,055 people in the Kingdom since June 2012.The to...
LILLE, France: Saudi Arabia’s firm stand against the phenomenon of violence as well as religious, ethnic and cultural fanaticism came in for praise at an international symposium, which concluded here.The participants of the symposium on "Media Covera...
DAMMAM: The Saudi Arabian Boy Scouts Association (SABSA) is participating in the 23rd World Scout Jamboree with the slogan “A Spirit of Unity,” which starts July 28 and runs until August 8 in Kirara-hama, Japan. A total of 32,000 scouts from 144 nati...
JEDDAH: The Ministry of Labor was able to increase the number of Saudi women employees from 70,000 to 428,000 during the past four years, Abdul Munim Al-Shehri, assistant undersecretary for special programs, has said . The ministry is now working on...
JEDDAH: A court issued a 10-year prison sentence against a health employee in Al-Ahsa and fined him SR1 million for getting involved in forgery and fraud as well as embezzling public funds in contracts to import medical equipment for the Children and...

Stay Connected

Facebook