Monte Paschi ex-managers probed over bribery, fraud

Wed Jan 30, 2013 5:23pm EST
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By Silvia Aloisi

SIENA, Italy (Reuters) - Prosecutors are investigating the former management of Italy's troubled Monte dei Paschi (BMPS.MI: Quote) bank for bribery and fraud, judicial sources said on Wednesday, as pressure grew on the Bank of Italy and bourse watchdog Consob.

With parliamentary elections less than a month away, the scandal at Italy's third-largest bank has deepened with questions about the role of banking supervisors and the influence of local politicians.

Milan prosecutors said they had transferred an investigation into allegations that Monte dei Paschi executives took bribes to buy toxic derivatives from Dresdner Bank to Siena magistrates investigating the main corruption case.

At the same time, prosecutors in the southern town of Trani, who have previously taken on ratings agency Standard and Poor's, said they had opened an investigation against the Bank of Italy and Consob over accusations they failed in their regulatory duties.

The Siena-based bank is in a crisis over an opaque series of derivatives and structured finance deals that have produced losses of 720 million euros ($970 million) and raised questions about possible corruption by bank officials.

On Wednesday Moody's rating agency said it had put the bank's Ba2 rating under review for a downgrade.

The problems go back to at least 2008 when the bank was struggling to absorb its 9-billion-euro cash acquisition of rival Antonveneta just before the global financial crisis, which hit banks across the world.

Executives from Monte dei Paschi, which depends on a 3.9 billion euro ($5.29 billion) government lifeline, are accused of using the derivatives deals to massage accounts and conceal the impact of past losses on its weakened balance sheet.   Continued...