The chief executive and former chairman of Monte dei Paschi di Siena are under investigation for alleged market manipulation and false accounting, casting a cloud over Italy’s embattled lender nearly three weeks after it agreed to a dramatic €5bn rescue package.
News that Fabrizio Viola, the chief executive, and Alessandro Profumo, the former chairman, are the subject of a judicial probe by prosecutors in Milan was first reported by Reuters and confirmed by an MPS spokesman on Thursday.
The investigation centres around the allegedly improper accounting treatment of Alexandria and Santorini, two derivatives trades booked by Monte dei Paschi di Siena between 2011 and 2014. This was the subject of a shareholder complaint that was rejected by other investors in April — and MPS suggested it was routine for prosecutors to probe the allegation.
“Faced with such a complaint the judiciary is bound to launch an inquiry . . . it’s a requirement that the prosecutors’ office cannot back away from,” MPS said.
Judicial investigations into corporate chief executives are common in Italy — and do not necessarily result in formal charges. In this case, the inquiry into Mr Viola and Mr Profumo began in Siena but has since been transferred to Milan. MPS suggested that Milanese prosecutors appeared satisfied with the co-operation of Mr Viola and Mr Profumo.
“The prosecutors’ office in Milan has highlighted how proactive the new management of the bank has been in contributing to shed light on the responsibility of those who gave life to these transactions,” MPS said. The prosecutors’ offices in Milan and Siena did not respond to requests for comment.
Nevertheless, the investigation marks another chapter in MPS’s travails. Amid a dramatic decline in its share price this year, the oldest bank in the world has been under intense pressure to raise new capital in order to ensure its survival, particularly since it was the worst performer in Europe-wide bank stress test results published in late July.
MPS has for now narrowly avoided a recapitalisation by Italian taxpayers, which would have thrust it fully into the political spotlight, agreeing instead to a private rescue plan that will allow it to rid its balance sheet of its large portfolio of bad loans. But the success of the plan still hinges on a €5bn capital-raising exercise led by JPMorgan, which is due to be completed by the end of the year, so any loss of confidence in the company’s management could hurt its chances.
The judicial probe into Mr Viola and Mr Profumo will represent a setback for the two highly respected Italian bankers who were brought in to steady MPS in 2012 after the disastrous merger with Antonveneta and restore its credibility after the troubled tenure of Giuseppe Mussari, the discredited former chairman who was embroiled in judicial battles over his own handling of complex derivatives. Mr Profumo left MPS last year.
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