MILAN (Reuters) - Italian financial regulators on Friday asked companies to carefully observe accounting rules concerning complex derivative trades known as “term structured repo” deals.
The recommendation by Bank of Italy, market watchdog Consob and insurance regulator IVASS follows heavy losses suffered by bank Monte dei Paschi di Siena (BMPS.MI) from similar derivative deals.
In a statement, the three regulators said they had issued a document calling on company executives to “carefully evaluate” such structured finance operations in order to properly observe international accounting rules.
It said companies needed to fully reflect on balance sheets and profit and loss statements the potential impact of the risky trades.
Monte dei Paschi, Italy’s third-biggest lender, booked losses of around 730 million euros ($948 million) from several structured finance deals.
A Bank of Italy source said the document did not refer specifically to Monte dei Paschi or any other bank or company, and observation of the document’s recommendations would not entail further losses for Monte Paschi.
Reporting By Danilo Masoni and Gavin Jones; editing by Andrew Roche