Rome prosecutors open probe into MPS financial scandal

Former Vatican bank head Gotti Tedeschi questioned

Rome prosecutors open probe into MPS financial scandal

Rome, January 31 - Rome prosecutors said Thursday that they have opened a probe into the financial scandal at troubled Italian bank Monte dei Paschi di Siena (MPS). The prosecutors said they are looking into possible market manipulation. MPS was thrown in crisis last week when it emerged that a shady series of derivative and structured finance deals produced losses of 720 million euros. Magistrates in Siena are also investigating the case and prosecutors in the southern city of Trani have launched a probe into whether the Bank of Italy and stock-market regulator Consob failed to conduct proper oversight. The former head of the Vatican bank, Ettore Gotti Tedeschi, was questioned on Thursday by prosecutors investigating suspect operations at MPS. The prosecutors wanted to talk to Gotti Tedeschi about MPS's nine-billion-euro acquisition of Antonveneta in 2008 from Spanish bank Santander. Gotti Tedeschi was in charge of Santander's operations in Italy before becoming president of the Vatican Bank, the Institute for Religious Works (IOR), in 2009. The IOR's board ousted him from that post last year. The Lazio Regional Administrative Court (TAR) said on Thursday that it had called senior Bank of Italy officials to report on the situation MPS. The TAR said it had summoned Bank of Italy Director-General Fabrizio Saccomanni and the central bank's head of supervision, Luigi Signorini, to appear on Saturday. It said it wanted the officials, or their representatives, to provide "documents of clarification" about controversial plans to give the troubled bank a loan of 3.9 billion euros of public money. The court move comes after a petition by consumers' association Codacons. On Wednesday prosecutors in the southern city of Trani opened an investigation into the supervisory actions of both the Bank of Italy and market watchdog Consob regarding MPS. Italian prosecutors denied media reports that their probe into alleged fraud at MPS was escalating to include more serious potential charges. Prosecutors said in a statement that the reports were "unfounded", stressing that they were "considering the opening of criminal procedures for insider trading and market rigging". Some newspapers and TV networks said the prosecutors were looking into possible allegations of criminal association, an extremely serious charge. There have also been reports of bribery and corruption by bank officials regarding, among other things, the costly nine-billion-euro acquisition of rival Antonveneta in 2008. Former chairman Giuseppe Mussari quit as the head of Italian banking association ABI soon after the scandal broke. He is said to have personally authorised at least one of the derivative operations at the centre of the furore. He denies any wrongdoing. The executive of Italian banking association ABI appointed Antonio Patuelli as its new president on Thursday after Giuseppe Mussari reigned as chief. The MPS scandal has rocked the Italian financial system as Italy's banks were thought to have avoided the type of risky operations that put lenders in the United States and Britain in difficulty in recent years. But Patuelli, who is also the president of the Cassa di Risparmio di Ravenna bank group, stressed that in Italy "obligations must prevail, distant from the models of the most risky capitalism of the other side of the ocean". Economy Minister Vittorio Grilli has said that there was no evidence other Italian banks were in the same plight as MPS. "We believe in, and work for, healthy prudent management of banks, which are the most complex of companies, with rigour and the precision of the physical and mathematical sciences," Patuelli said. The new ABI chief also said he believed banks should be "absolutely independent, distant and distinct from the political world and from any risk of interference and conflict of interest". This is significant as the MPS scandal has become an election issue because local authorities run by the main centre-left Democratic Party have a big presence in the foundation that controls the Tuscan bank. Outgoing Italian Premier Mario Monti said Thursday that banks and the political world should be kept separate. The Democratic Party, which is leading the centre-left coalition that is favourite to win next month's election, has a big presence in the foundation that controls the Tuscan bank. "Let's keep the parties far from the banks," said Monti, who is running for office on a reform ticket backed by centrist parties. Monti has been also criticised in the affair by centre-right politicians after his emergency technocrat government authorised a 3.9 billion aid package for MPS. Democratic Party (PD) leader Pier Luigi Bersani said that he was in "absolute agreement" with Monti's comment on Thursday that political parties should steer away from involvement with banks. "Parties out of the banks? I agree tenfold. And I would add that bankers should get out of the parties," Bersani said, making a reference to Monti's connection to the world of banking and finance. Monti formerly consulted for Goldman Sachs global investment bank. Last Friday Bersani expressed irritation at Monti's latest jab at the PD, which has a big presence in the foundation that controls the troubled Monte dei Paschi di Siena (MPS) bank. Monti said Friday that political involvement in banks had to be "rooted out", calling it "an ugly beast". "The PD is involved (in the MPS case), it has always had a lot of influence on the bank and on Siena's political life," Monti said.

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