Former Monte Paschi executives acquitted in derivatives case
Acquittals of chair Alessandro Profumo, CEO Fabrizio Viola and an auditor reduce legal risks for bailed-out Monte dei Paschi and boosts its outlook
11 December 2023 - 23:35
byEmilio Parodi
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Former chair Aessandro Profumo, right, reacts after having been acquitted, in Milan, Italy, December 11 2023. Picture: EMILIO PARODI/REUTERS
Milan — An Italian appeals court on Monday acquitted three former top executives of Banca Monte dei Paschi di Siena in one strand of a long-running derivatives case, boosting the earnings prospects of the state-owned lender.
The court ruling, which overturns an earlier conviction, reduces the legal risks facing bailed-out Monte dei Paschi, in which the state still has a 39% holding after selling a 25% stake last month for €920m.
The Italian state must eventually exit Monte dei Paschi’s capital in full in order to comply with EU rules on state aid.
The acquittal of the executives frees Monte dei Paschi from obligations towards plaintiffs seeking damages in connection to derivatives deals which are widely blamed for playing a part in the bank’s troubles.
Monte dei Paschi set aside money against such legal risks, provisions which it can now release. The bank has not disclosed their overall value, but said in November it faced about €5bn in legal claims as of September 30.
Shares in the bank closed up 3%, outperforming a flat Italian banking index.
Milan’s appeals judges acquitted former Monte dei Paschi chair Alessandro Profumo and former CEO Fabrizio Viola, as well as the former head of statutory auditors Carlo Salvadori, saying there was no case to answer.
“I never lost my trust in the judicial system, I’m happy for the bank,” said Profumo, a veteran Italian executive previously at the helm of both UniCredit and Leonardo.
Losses on the derivatives deals, together with those Monte dei Paschi suffered during the eurozone debt crisis, have threatened to destabilise Italy’s financial industry and triggered the Tuscan lender’s €8bn bailout in 2017.
Profumo and Viola had each been handed a six-year jail sentence by a lower court for allegedly incorrectly booking the two derivative deals between 2012 and 2015.
Salvadori had received a three-and-a-half year sentence.
The main trial on these same deals related to their booking in the bank’s accounts between 2009 and 2011.
That case ended on October 11 when Italy’s highest court acquitted all 15 defendants, as well as Deutsche Bank and Nomura, which had arranged the transactions in 2009.
The deals were alleged to have helped Monte dei Paschi hide losses racked up after the ill-advised acquisition of a smaller rival in 2008, on the eve of the global financial crisis.
“The verdict ends a sad story that has dragged on for 10 years,” Viola said in a statement.
“The bitterness of the initial conviction ... will accompany me for the rest of my life ... I'm happy for the bank, which can benefit from this decision to complete its turnaround.”
Monte dei Paschi is targeting a 2023 profit above €1.1bn as CEO Luigi Lovaglio presses on with a restructuring that has seen about 4,000 staff take early retirement. Unions on Monday said its performance should lead to new hires, as previously agreed.
In 2018, Milan prosecutors had asked for the Viola-Profumo case to be dropped, saying they followed accounting guidelines from regulators in booking the deals, but a judge rejected the request and sent them to trial.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Former Monte Paschi executives acquitted in derivatives case
Acquittals of chair Alessandro Profumo, CEO Fabrizio Viola and an auditor reduce legal risks for bailed-out Monte dei Paschi and boosts its outlook
Milan — An Italian appeals court on Monday acquitted three former top executives of Banca Monte dei Paschi di Siena in one strand of a long-running derivatives case, boosting the earnings prospects of the state-owned lender.
The court ruling, which overturns an earlier conviction, reduces the legal risks facing bailed-out Monte dei Paschi, in which the state still has a 39% holding after selling a 25% stake last month for €920m.
The Italian state must eventually exit Monte dei Paschi’s capital in full in order to comply with EU rules on state aid.
The acquittal of the executives frees Monte dei Paschi from obligations towards plaintiffs seeking damages in connection to derivatives deals which are widely blamed for playing a part in the bank’s troubles.
Monte dei Paschi set aside money against such legal risks, provisions which it can now release. The bank has not disclosed their overall value, but said in November it faced about €5bn in legal claims as of September 30.
Shares in the bank closed up 3%, outperforming a flat Italian banking index.
Milan’s appeals judges acquitted former Monte dei Paschi chair Alessandro Profumo and former CEO Fabrizio Viola, as well as the former head of statutory auditors Carlo Salvadori, saying there was no case to answer.
“I never lost my trust in the judicial system, I’m happy for the bank,” said Profumo, a veteran Italian executive previously at the helm of both UniCredit and Leonardo.
Losses on the derivatives deals, together with those Monte dei Paschi suffered during the eurozone debt crisis, have threatened to destabilise Italy’s financial industry and triggered the Tuscan lender’s €8bn bailout in 2017.
Profumo and Viola had each been handed a six-year jail sentence by a lower court for allegedly incorrectly booking the two derivative deals between 2012 and 2015.
Salvadori had received a three-and-a-half year sentence.
The main trial on these same deals related to their booking in the bank’s accounts between 2009 and 2011.
That case ended on October 11 when Italy’s highest court acquitted all 15 defendants, as well as Deutsche Bank and Nomura, which had arranged the transactions in 2009.
The deals were alleged to have helped Monte dei Paschi hide losses racked up after the ill-advised acquisition of a smaller rival in 2008, on the eve of the global financial crisis.
“The verdict ends a sad story that has dragged on for 10 years,” Viola said in a statement.
“The bitterness of the initial conviction ... will accompany me for the rest of my life ... I'm happy for the bank, which can benefit from this decision to complete its turnaround.”
Monte dei Paschi is targeting a 2023 profit above €1.1bn as CEO Luigi Lovaglio presses on with a restructuring that has seen about 4,000 staff take early retirement. Unions on Monday said its performance should lead to new hires, as previously agreed.
In 2018, Milan prosecutors had asked for the Viola-Profumo case to be dropped, saying they followed accounting guidelines from regulators in booking the deals, but a judge rejected the request and sent them to trial.
Reuters
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