http://www.zerohedge.com/news/2013-01-26/italian-scandal-widens-italys-third-largest-bank-set-get-third-bailout-3-years-dragh
Submitted by Tyler Durden on 01/26/2013 12:09 -0500
and.......
Yesterday we learned the oldest bank plunged as it lurched into derivative hell..... and all sorts of sordid dirty deals......
http://fredw-catharsisours.blogspot.com/2013/01/oldest-bank-in-world-plunges-chairman.html
Today the festering wound known as Monte Paschi (BMPS) has burped not unlike the Louisiana sinkhole and the debris coming to the surface may contain the reputations of both Super Mario Monti and ECB Mario Draghi....
Inquiring minds may be interested in the tangled web of places where Giuseppe Mussari had tentacles.
Could he and did he hide all of this from the Bank of Italy, then headed up by current ECB president Mario Draghi?
How Big Are the Derivative Losses?
While pondering what Dragi knew or didn't, let's turn our focus on actual losses. Reuters reports Monte Paschi Shares Plunge on Derivative Loss Fears
Sweeping Efforts Underway
Note the curious statement by Giorgio Napolitano, Italy’s head of state (a largely ceremonial post): “If the situation is serious we are right to be concerned but I have full confidence in the operations of the Bank of Italy.”
IF the situation is serious? Is there a question here?
I think not. And I wonder what Mario Draghi actually knew. Efforts are probably underway to determine if Draghi actually said anything about this in writing.
Meanwhile, there is a good chance Italy's third largest bank may be nationalized, and an even larger chance this will affect national elections coming up in February.
However, Please don't worry. Apparently it's not serious.
Italian Scandal Widens As Italy's Third Largest Bank Set To Get Third Bailout In 3 Years; Draghi, Monti Implicated
While little has been said in the mainstream western press about the ongoing fiasco surrounding Siena's Banca Monte dei Pasci, Italy's third largest bank and the world's oldest which may get its third bailout in three years, for fears that it may break the thin veneer of "recovery" in the European financial system, the situation on the ground in Italy is getting more serious by the minute and could have implications on both next month's general election, reaching as high up as the ECB's head Mario Draghi.
Several hours ago, on Saturday morning, the four-member board of the Bank of Italy - this time without its prior president Mario Draghi - met 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.
As we reported previously, it has emerged over the past week that due to previously undisclosed derivative contracts first exposed by Bloomberg, the Siena bank has hid as much as $1 billion in losses. However as was explained in "Will The Super Goldman Mario Brothers Succeed In Covering Up The Latest Italian Bailout Scandal", this discovery has far greater implications for both the bank's future viability, as well as the implied credibility of both the Bank of Italy, and especially the man who headed it for five years before becoming head of the ECB (where he now demands the same supervisory authority over all European banks that he had in Italy, only to supposedly let countless derivative fiascos slip through his fingers).
As Zero Hedge first connected the dots, it is not so much a question of why BMPS engaged in a variety of derivative deals, of which only three have emerged so far, but likely has many more on the books, but how or rather why, the then-Draghi led Bank of Italy allowed this to happen not once, not twice, but at least three times.
What the ultimate purpose of these deals was is still unclear and will likely become apparent eventually, however it will likely require the former Chairman of the bank, Giuseppe Mussari, who served as Chair from 2006 until April 2012, and who officially quit his post as Italy's top banking lobbyist after today's revelations, to testify. One person whom he may testify against is none other than current ECB head Mario Draghi, who just happened to be the head of the Bank of Italy from 2006 to 2011, or the entire period when Monte Paschi was engaging in what increasingly appears to have been fraudulent activity.
The next day, Retuers released "Draghi under fire over Monte Paschi derivatives scandal" continuing where we left off:
European Central Bank President Mario Draghi is facing criticism over a scandal involving loss-making derivatives trades made by troubled Italian lender Monte dei Paschi di Siena while he was Italy's central bank governor.Former Economy Minister Giulio Tremonti said in a tweet that it was "stupefying" that in his role as supervisor of Italy's banking system Draghi had failed to discover or prevent the trades, which took place between 2006 and 2009.An ECB spokeswoman declined to comment on the matter, saying that it was "the responsibility of national authorities."Current Economy Minister Vittorio Grilli avoided mentioning Draghi directly but stressed that it was not the government but the central bank that was responsible for bank supervision."It wasn't us that did the controlling," he told reporters. "On the checks, all I will say is that it is the responsibility of the Bank of Italy."
Draghi saw no evil, smelled no evil, and certainly heard no evil:
On Wednesday the central bank tried to deflect any criticism, saying the nature of the trades had been "kept hidden" and were only recently divulged by new management appointed last year to turn the bank around.Draghi, who has won wide plaudits as ECB president, left the Bank of Italy in late 2011 after a five-year stint as governor.During this time he was also president of the Financial Stability Board, an international body charged with improving financial supervision and regulation.The deals under scrutiny are the so-called "Alexandria" trade with Japanese bank Nomura, the "Santorini" trade with Deutsche Bank and a derivative called "Nota Italia", with an unspecified bank.
One of the roots of its problems - the 2007 acquisition of smaller rival Antonveneta for a whopping 9 billion euros in cash just months before the beginning of the financial crisis - was also done under Draghi's watch...."One has to wonder what the Bank of Italy was doing given all the visits they've paid to Monte dei Paschi in recent months," said a source close to the situation."If what they came here to look at was only the information publicly available in the bank's financial statements, they could have done that from Rome."
If only Mario Draghi could threaten to print countless lira, as he has effectively done as head of the ECB, to contain, for now, the European banking implosion, all would be well, however he can't, and for now at least the problem is contained to Italy.
Of course, the Bank of Italy could punt, and effectively push the problem to the ECB's plate, but the second that happens the fragile alliance between surreality and outright idiocy that has gripped European pundits and "analysts", who claim Europe is fixed, when in reality nobody knows what the banks have on their balance sheets, or how many more trillions in liquidity they collectively need before their capitalization is fixed (that is a trick statement, of course, because excess liquidity will never, ever help with capitalization issues, as much as the ECB can pretend otherwise).
The problem for the ECB in coming to an indirect cash bailout of BMPS would be its own historical record from as recently as a month ago, when the second bailout of Monte Paschi was being finalized. From Reuters:
The terms of a state bailout scheme for Banca Monte dei Paschi di Siena, Italy's third biggest lender, could pose more challenges to the bank's performance, the European Central Bank said. The ECB, which will supervise euro zone's lenders from March 2014, also said on Thursday it was told by the Italian government too late into the process about the details of the rescue.
Monte dei Paschi was forced to request state aid after failing to meet tougher capital requirements set by the European Banking Authority.the ECB said issuing more bonds to pay for the coupon would add to the bank's debt burden in an already difficult economic environment."This could pose further challenges to the bank's performance in the near term and impair its capacity to redeem (the bonds) in a timely manner," the ECB said in an opinion posted on its website. It said it would be preferable for the bank to issue new shares to the treasury to help pay interest - an option that is possible under the scheme but is not favored by the treasury or by the bank.
So the Italian head of the ECB was told by the Italian government headed by Monti, both former workers of Goldman Sachs about the terms of the second Monte Paschi bailout, "too late"? And upon hearing of said bailout, it was the ECB's determination that a more feasible bailout structure would be to issue equity - equity from an entity that one short month later would need another bailout and possibly nationalization (hint: equity value = zero)?
One couldn't make this up!
But if it was only a question of implicating Draghi, we are confident that the BMPS scandal would promptly go away after the Frankfurt-based central bank slipped a few billion €s under the table to the current head of the BOI - Ignazio Visco - delaying the eruption of the problem for another year. However, what is unique this time is that the BMPS fallout has far broader political implications due to BMPS' historical links to the centre-left, and the fact that Bersani's Democratic Party runs the local government in Siena where Monte Paschi is based, and controls the banking foundation that is the lender's biggest shareholder.
As a reminder Bersani is the frontrunner to replace Mario Monti as Italian PM. Which means the immediate involvement of the entire media empire apparatus of who else but...
Yup - Silvio, who is also running in next month's election, is now on the case, and where Silvio comes in the public is sure to follow.
As Bloomberg reports:
Berlusconi and his allies have slammed Monti over the bailout by linking the aid to an unpopular real estate levy on first homes, known as the IMU, which raised from Italian taxpayers an amount similar to the emergency loans designated for Monte Paschi.“We paid the IMU to Monti so that he could save the bank” of the Democratic Party, read yesterday’s front-page headline in newspaper Il Giornale, owned by Berlusconi’s brother Paolo. “What has been said about interventions and comparisons between the amount used for aid and the revenue from taxes is a complete fantasy,” Monti said.Monti said today in an Italian radio interview that the election campaign shouldn’t affect the bailout timing because it’s being carried out under European rules. Still, he acknowledged that the Monte Paschi case “has a lot to do with the ugly beast of mixing banks and politics.”
The irony of course, is that the first bailout that Monte Paschi received was when Berlusconi was still PM:
Monte Paschi, the world’s oldest bank, received a first bailout from Berlusconi’s government in 2009, and has now added 500 million euros to its aid request to cover potential losses linked to the structured-finance deals, bringing the total cost of the rescue to 3.9 billion euros
However, to distract from his involvement, Silvio will be more than happy to throw none other than Draghi under the bus for having been the BOI's head at the time, and after all - it was Draghi's decision to bail out BMPS, not the Prime Minister's.
Ah, the plot thickens:
“We want to know the truth, we’re tired of being taken advantage of,” said shareholder Gianni Acciughi, 60, who took early retirement from Monte Paschi in 2009. “How is possible that nobody knew anything about this? If that’s the case, then legal action has to be taken immediately against those responsible.”
Members of the Northern League party, a partner in Berlusconi’s previous government, demonstrated at today’s investor meeting. They distributed leaflets criticizing Mussari’s management and his ties to the Democratic Party.
And for those who still believe this is a non-issue, Beppe Grillo, the leader of the 5 Star Movement running in the campaign, and a very popular grass roots candidate among voters disenchanted by both parties, "said the bank’s case will turn into a scandal worse than the collapse of food company Parmalat SpA in 2003."
Needless to say the scramble by everyone to cover their backsides ahead of what is sure to be an epic media, publicity and political scandal has started:
[Bank of Italy head] Visco attended the World Economic Forum in Davos on Friday where he gave a spate of interviews to try 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 told CNBC television, adding that his institution had nothing to hide and would cooperate with prosecutors probing the Tuscan lender.Visco told reporters on Friday that "there is no question that the bank is stable."
Actually, there is:
Outgoing Prime Minister Mario Monti said late on Friday he considered it a "remote hypothesis" that the bank would end up needing to be nationalized.
So... there is "a question"?
It only gets better:
In Davos, Visco sidestepped questions about whether Draghi knew about the derivatives trades, which were conducted between 2006 and 2009 and involved Japanese bank Nomura and Deutsche Bank.Internal auditors at Monte Paschi already detected anomalies at the bank's finance department responsible for derivative operations three years ago, daily Il Sole 24 Ore reported on Saturday, quoting parts of the audit dated November 26, 2009.However, the outcome of the audit was "partially favorable" for the Siena-based bank, contrasting with "partially unfavorable" rating given by Bank of Italy inspectors led by Vincenzo Cantarella at the end of an inspection from May-August 2010.Press reports on Saturday suggest the scandal around Monte Paschi is widening.
Yes it is.
And it is "widening" just at a time when former Bundesbank head Weber said in Davos that everyone in Europe has succeeded in sticking their heads in the sand:
“Central banks can buy time, but they cannot fix issues long-term,” former Bundesbank President Axel Weber, now chairman of UBS AG, said in the Swiss ski resort yesterday. “There’s a perception that they are the only game in town.”
This coming from the former head of the one European central bank which several days ago requested that all of its Paris gold, and much of its New York based gold, be repatriated.
And when the next leg of the financial crisis flares up, which it will as nothing at all has been fixed, unless one considers stuffing all outstanding issues under the rug "fixing", nobody will have been able to foresee any of it. As always.
And it will be, naturally, "someone else's fault."
and.......
Yesterday we learned the oldest bank plunged as it lurched into derivative hell..... and all sorts of sordid dirty deals......
http://fredw-catharsisours.blogspot.com/2013/01/oldest-bank-in-world-plunges-chairman.html
Today the festering wound known as Monte Paschi (BMPS) has burped not unlike the Louisiana sinkhole and the debris coming to the surface may contain the reputations of both Super Mario Monti and ECB Mario Draghi....
Proponents of such unconstitutional measures desire to forge a world government of sorts under the control of the United Nations. Various methods are used to expedite this plan, including the infamous 'Agenda 21' that has raised the alarm among some citizens.
The key to the success of the implementation of such plans is enforcement. How would the federal government insure compliance among the states and their citizens?
http://globaleconomicanalysis.blogspot.com/2013/01/much-more-beneath-surface-of-italian.html.
Friday, January 25, 2013 12:57 PM
Much More Beneath the Surface of the Italian Bank Scandal; How Big Are the Derivative Losses?
Yesterday I commented on how Italy's 3rd largest bank hid derivative losses,how it might affect the upcoming Italian elections, and why ECB president Mario Draghi should be under fire as well.
For details, please see Italian PM Under Fire; Italy's 3rd Largest Bank Hid Derivative Losses: ECB Says "Matter for the Italian Authorities" (To Sweep Under the Rug).
As is typically the case, there is more going on than mainstream media reports. I bounced my article off reader Andrea who is from Italy but now lives in France. Andrea writes ....
For details, please see Italian PM Under Fire; Italy's 3rd Largest Bank Hid Derivative Losses: ECB Says "Matter for the Italian Authorities" (To Sweep Under the Rug).
As is typically the case, there is more going on than mainstream media reports. I bounced my article off reader Andrea who is from Italy but now lives in France. Andrea writes ....
The article you reported is very well done and describes almost all the facts of the situation.
What is not reported is that Giuseppe Mussari, the recently resigned head of ABI (Italian Bank Association) was the CEO of Banca Monte dei Paschi di Siena at the time of the derivative losses. He resigned following the scandal, but this casts a very negative shadow on the overall banking system. It also makes open a discussion about the widespread belief (repeated as a mantra by the whole political class) that the Italian banks were wiser than foreign counterparts, not involved in toxic things and therefore not needing huge bailouts or supports like anywhere else in the world.
This scandal blasted like a bomb in the campaign. Monti is most likely the one who will be hurt. However, It's unclear who can take advantage. The center-left was at the government only 2 years (2006-2007), so it is quite hard to find evidence to give the blame just to them.
The Economy Ministry and Bank of Italy are blaming each other about the lack of supervision, for different reasons. The probable truth is that both lacked of supervision for their respective parts.
Most likely prosecutors will open an investigation (they are obliged by law to do so in Italy if they are informed of a possible crime) and this could lead to further discoveries.
What is not reported is that Giuseppe Mussari, the recently resigned head of ABI (Italian Bank Association) was the CEO of Banca Monte dei Paschi di Siena at the time of the derivative losses. He resigned following the scandal, but this casts a very negative shadow on the overall banking system. It also makes open a discussion about the widespread belief (repeated as a mantra by the whole political class) that the Italian banks were wiser than foreign counterparts, not involved in toxic things and therefore not needing huge bailouts or supports like anywhere else in the world.
This scandal blasted like a bomb in the campaign. Monti is most likely the one who will be hurt. However, It's unclear who can take advantage. The center-left was at the government only 2 years (2006-2007), so it is quite hard to find evidence to give the blame just to them.
The Economy Ministry and Bank of Italy are blaming each other about the lack of supervision, for different reasons. The probable truth is that both lacked of supervision for their respective parts.
Most likely prosecutors will open an investigation (they are obliged by law to do so in Italy if they are informed of a possible crime) and this could lead to further discoveries.
I think that for Monti to appear in the Parliament to speak about this in the middle of the campaign and with his image of "friend of the finance world" could be a very painful and delicate exerciseTangled Web of Giuseppe Mussari
So, to summarize, I think we are at the beginning of the story. In an Italy under a bombing of taxes, huge recession and lack of credit from the banks to the real economy, this will be hard to be swept under the rug. The message "the taxes you pay are used to help banks getting out of their toxic speculations" is very easy to deliver in such circumstances.
Best regards,
Andrea
Inquiring minds may be interested in the tangled web of places where Giuseppe Mussari had tentacles.
Could he and did he hide all of this from the Bank of Italy, then headed up by current ECB president Mario Draghi?
How Big Are the Derivative Losses?
While pondering what Dragi knew or didn't, let's turn our focus on actual losses. Reuters reports Monte Paschi Shares Plunge on Derivative Loss Fears
Shares in Banca Monte dei Paschi di Siena, Italy's third-biggest lender, fell more than 5 percent for the second day in a row on Wednesday on worries of mounting losses on some financial derivative positions which it took in 2008 and 2009.
The price had already dropped 5.7 percent on Tuesday after reports that it is expected to book a loss of at least 220 million euros ($292 million) on one particular derivatives deal related to its debt holdings done three years ago.
That deal, called Alexandria and designed by Japanese bank Nomura, is one of several troubled structured transactions the bank is reviewing to assess their impact on its accounts, Monte dei Paschi said on Tuesday.
At least one other derivative trade, a 2008 deal with Deutsche Bank, is also thought to be under scrutiny, analysts and banking sources say.
The loss on the deal with Nomura is the latest setback for Monte dei Paschi, which requested 3.9 billion euros in state aid to plug a capital hole stemming from its government bond portfolio and hedging bets gone wrong. The bank had already raised its state aid request by 500 million euros in November, citing a possible hit on its capital from past structured transactions still in its portfolio.
But some analysts are beginning to question whether that 500 million cushion will be enough to cover for any losses linked to the derivative contracts. Italian newspaper Il Fatto Quotidiano quoted an anonymous source on Tuesday as saying the loss on the Nomura trade alone could amount to 740 million euros.
"If losses above 500 million euros emerged, the group would struggle even more to fix its capital position," Comi said.This mess should hit Draghi and the ECB, but they will do everything possible to sweep it under the rug. Nonetheless, it is highly likely to impact the elections as Andrea notes.
Nomura said on Tuesday the trade had been approved by the Italian bank's board and its then chairman Giuseppe Mussari, but Monte dei Paschi said the Alexandria deal had never been submitted to its board for approval. Mussari stepped down late on Tuesday as head of Italy's banking association, denying any wrongdoing.
If the losses are big enough, Banca Monte dei Paschi di Siena faces nationalization.
Mike "Mish" Shedlock
Thursday, January 24, 2013 6:06 PM
Italian PM Under Fire; Italy's 3rd Largest Bank Hid Derivative Losses: ECB Says "Matter for the Italian Authorities" (To Sweep Under the Rug)
When Mario Draghi (now ECB President), had oversight of the Italian bank system as Bank of Italy Governor, the Italian bank Monte dei Paschi di Siena (Italy's third largest bank) hid information on the derivatives transactions between 2006 and 2009.
This information is just now out, and shares of the bank have plunged 22% in a few days. Mario Draghi ought to be under fire, but he says it's a "Matter for the Italian Authorities".
The Mish translation is "It's a Matter for the Italian Authorities, to Sweep Under the Rug".
This information is just now out, and shares of the bank have plunged 22% in a few days. Mario Draghi ought to be under fire, but he says it's a "Matter for the Italian Authorities".
The Mish translation is "It's a Matter for the Italian Authorities, to Sweep Under the Rug".
With that backdrop, let's take a look at the other Super-Mario (Mario Monti) who is Under Fire Over bank Crisis.
Mario Monti, Italy’s prime minister, was forced to offer to recall parliament on Thursday amid questions about his government’s handling of the financial crisis at Monte dei Paschi di Siena and the role of the central bank.
Shares in Italy’s third-largest bank by assets, which has requested a second state bailout in four years, have fallen more than 22 per cent in the past few days since revelations five days ago of derivatives transactions that may force the 500-year-old bank to restate hundreds of millions of euros of losses.
Supervision of the struggling institution by the Bank of Italy while Mario Draghi, European Central Bank president, was governor has come under attack as an increasingly fierce political outcry erupts in the run-up to national elections next month.
Among the most vocal criticisms of the central bank, which traditionally has oversight of the Italian banking system, was Mr Draghi’s long-time rival Giulio Tremonti, the former finance minister who is again running for office on February 25 for the centre-right.
In a sign of the severity of the situation, Giorgio Napolitano, Italy’s head of state, made a rare entry into the financial arena. “If the situation is serious we are right to be concerned but I have full confidence in the operations of the Bank of Italy,” he told reporters.
In a statement released late on Wednesday, the central bank said Monte dei Paschi had “hidden” information on the derivatives transactions struck between 2006 and 2009, a period during which Mr Draghi was governor.
The Bank of Italy said the “true nature” of some of the deals emerged only recently, “following the discovery of documents kept hidden from the supervisory authority and brought to light by the new management of MPS.”
The ECB told the Financial Times that it was a matter for the Italian authorities and declined to comment.
Italy’s centre-right party, led by Silvio Berlusconi, has seized on the issue to attack its centre-left opponents, who have had long institutional ties with MPS. “Monte dei Paschi is close to collapse,” commented Angelino Alfano, secretary of the People of Liberty. “This is an example of how the left would govern the country.”
Il Giornale, a Milan daily owned by the Berlusconi family, ran banner headlines saying the more than €4bn paid by Italians in a widely hated property tax imposed by Mr Monti was in effect going to prop up a failed bank.
Analysts remain concerned that the derivative losses, which are expected to push the bank to a €2bn annual loss for 2012, may increase the risk of the bank being partially nationalised as it will force the state to take an equity stake because the bank will not be able to repay its bail out bonds.
Sweeping Efforts Underway
Note the curious statement by Giorgio Napolitano, Italy’s head of state (a largely ceremonial post): “If the situation is serious we are right to be concerned but I have full confidence in the operations of the Bank of Italy.”
IF the situation is serious? Is there a question here?
I think not. And I wonder what Mario Draghi actually knew. Efforts are probably underway to determine if Draghi actually said anything about this in writing.
Meanwhile, there is a good chance Italy's third largest bank may be nationalized, and an even larger chance this will affect national elections coming up in February.
However, Please don't worry. Apparently it's not serious.
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