Grilli tells Wall Street Journal MPS bank is still 'solid'

Lender's CEO says there is no deposit flight

Grilli tells Wall Street Journal MPS bank is still 'solid'

Rome, February 11 - Monte dei Paschi di Siena is still a "solid" bank, Italian Economy Minister Vittorio Grilli said in an interview Monday with the Wall Street Journal. Speaking on the sidelines of an Italy-United States business forum in New York, Grilli noted that the framework for bank supervision is changing Europe, to become more centralized. Supervision of the troubled bank has become a central issue since MPS was thrown into crisis in January, when it emerged that a shady series of derivative and structured finance deals produced losses of 720 million euros. In fact, the amount of "junk" on the bank's books came as a surprise, Fabrizio Viola, the bank's new chief executive, said last Friday. "I didn't expect so much junk under the carpet," Viola said in a radio interview. "But frankly, in view of recent events, I wouldn't have expected to find such a serious situation". Still, Grilli repeated his reassurances on the bank's solidity in an interview Monday with the Reuters news agency, suggesting that the potential losses of MPS won't affect the overall solid standing of the bank. Siena prosecutors are conducting a series of probes into alleged bribery, corruption, tax evasion and other illicit operations at MPS, which were either related to the bank's nine-billion-euro acquisition of rival Antonveneta in 2008 or the period following the takeover. Before the scandal broke, the Italian government had approved a 3.9-billion-euro bailout loan to MPS, which may be converted into equity if the bank cannot make its payments to the State. Grilli told the Italian parliament in late January that, given the share price at the time, the Treasury could wind up with 82% of the bank's capital if it defaults. "It wouldn't be tragic (if the Italian treasury became an MPS shareholder)," Viola said. "But we are working to avoid it". Viola has also said there were no more high-risk derivatives on the bank's books and that "there is no deposit flight" from Italy's third-biggest lender.

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