29 Gennaio 2013

Monti Minister to Defend Paschi Bailout After Losses Uncovered

Monti Minister to Defend Paschi Bailout After Losses Uncovered

Finance Minister Vittorio Grilli today will defend Italy’ s planned 3.9 billion-euro ($5.3 billion) rescue of Banca Monte Paschi di Siena SpA as lawmakers question whether the lender deserves aid after hiding losses. Grilli testifies in the Chamber of Deputies in Rome on the plan to grant the aid next month, a bailout that allows Italy’ s oldest bank to meet regulator demands to shore up its capital. The debate will follow a meeting of Italy’ s financial stability committee, formed by officials from the Bank of Italy, Treasury and market regulator Consob, which will discuss the case, officials said. Revelations this month that Monte Paschi’ s former management hid details of structured finance deals that may saddle the bank with losses has undermined support for the aid. Former premier Silvio Berlusconi, who’ s heading the center-right coalition in the Feb. 24-25 national vote, has criticized Prime Minister Mario Monti over the bailout by linking the aid to an unpopular property tax. “Grilli can’ t do anything other than repeat all the reasons that led the government to give aid, a decision that has no alternatives since the bank needs to comply with the European Banking Authority’ s capital requirements,” said Luca Peviani, who oversees about 1 billion euros of assets as managing director of P&G SGR in Rome. “The aid came into question just because of the electoral campaign.” Project Santorini The bank said on Jan. 17 it will review its accounts after Bloomberg News reported the lender engaged in a transaction with Deutsche Bank AG in 2008, dubbed “Project Santorini,” that obscured losses before it sought an initial government bailout the following year. The bank said Jan. 23 it’ s reviewing three money-losing structured deals, including Santorini, uncovered by newly appointed executives. Monte Paschi won’ t seek more aid to cover potential losses from the undisclosed derivatives, Chief Executive Officer Fabrizio Viola told reporters yesterday. Monte Paschi, which hasn’ t quantified yet the size of the losses, will complete a review by mid-February. Consumer group Codacons plans to file a request with a Rome court to block the government’ s aid to Monte Paschi. Monti was greeted by protestors with signs denouncing the aid on Jan. 27 when he visited victims of the Emilia Romagna earthquake in May. Democratic Party leader Pier Luigi Bersani, the front- runner for the Feb. 24-25 vote, has also been criticized for his party’ s close ties with the lender, which is based in Siena, where the Democrats control the banking foundation that is Paschi’ s biggest shareholder and helps appoints its management. Monte Paschi shares have dropped 11 percent since the Bloomberg News report, valuing Italy’ s third-largest bank at 3.05 billion euros. To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net.
 

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