Hammer falls on Nomura in Monte dei Paschi trading probe
Hammer falls on Nomura in Monte dei Paschi trading probe
17 Aprile 2013
The list of people and companies implicated in the Banca Monte dei Paschi di Siena SpA scandal grows ever longer - Intervista al Prof. Andrea R. Castaldo di Lorenzo Spoerry su SNL
Italian prosecutors are set to seize €1.8 billion in assets from Nomura Holdings Inc. as part of a probe into secret derivatives trading at Banca Monte dei Paschi. Prosecutors, along with Monte dei Paschi's new managers, accuse Nomura of having colluded with the Italian bank's former managers to structure a secret derivatives deal called "Alexandria," Bloomberg News noted April 17. This was one of two such trades that in total hid losses of up to €557 million. Nomura reportedly received commissions of €88 million for its part in the deal. The Japanese bank denies allegations of misconduct, and in a press release published April 16 pledged to "take all appropriate steps to protect [its] position" and to "vigorously contest" suggestions of wrongdoing.
Deutsche Bank AG, which helped to structure another, similar deal, also denies it behaved improperly, the newswire noted.
Approximately €1.7 billion of the assets set to be sequestered by prosecutors is reportedly margin promised by Monte dei Paschi to Nomura. This payment is said to have been frozen. The account used by the two banks for the trade is based in Germany, and the Bank of Italy is expected to ask the Bundesbank for its cooperation in freezing it, sources told Bloomberg. Since the order to sequester the Nomura funds was given April 16, Monte dei Paschi's share price has risen, settling on a 3% increase by the end of trading April 17. Luigi Tramontana, an analyst at Banca Akros, told SNL that the rise was probably due to market expectations that Monte dei Paschi could recover some of the money lost in the Nomura deal. But, he added, "I'm very skeptical about that. I think the probability is relatively low and in any case it would take a long time before Monte dei Paschi can recover something, [if it gets] anything at all."
He dismissed fears that the widening scandal could cast doubts on contracts made between other Italian banks and foreign counterparties, saying Monte dei Paschi's situation "is pretty unique." "I don't think there is a read-through to the whole industry," he said. Italian investigators are also probing Sadeq Sayeed, Nomura's former European head, and Raffaele Ricci, a managing director in fixed-income sales, for allegedly obstructing regulators and making false statements. The same charges have been leveled against Monte dei Paschi's former managers.
Andrea Castaldo, a criminal lawyer and professor at the University of Salerno, in Italy, told SNL he believes the case raises doubts as to the ability of the Italian authorities to regulate the financial markets.
"It seems strange to me — certainly it merits further study — that there could be [these] very big transactions with such big commissions, but there wasn't any supervision done by the regulatory authorities at the time," he said.
He confirmed that similar sequesters have happened in the past, but "never of this size."
The analyst continued: "There is a reputational problem for Monte dei Paschi, but also for Nomura: Nomura structured the deal, and Nomura proposed it to Monte dei Paschi."
Some €14.4 million of assets is being sequestered from three former Monte dei Paschi managers — Chairman Giuseppe Mussari, General Manager Antonio Vigni and Gianluca Baldassarri, former head of the bank's finance department.
Monte dei Paschi upped the size of its requested bailout to €3.9 billion in November 2012 from €3.4 billion to account for losses arising from the secret trades. The size of the bailout requested by Monte dei Paschi — its second in four years — scandalized the Italian public and became a political hot topic used by the parties in contention to attack each other before national elections in late February. Italy's center-left Democratic Party, which is closely associated with the bank's managers, did considerably worse than pre-election polling had predicted.
Link all'intervista
Deutsche Bank AG, which helped to structure another, similar deal, also denies it behaved improperly, the newswire noted.
Approximately €1.7 billion of the assets set to be sequestered by prosecutors is reportedly margin promised by Monte dei Paschi to Nomura. This payment is said to have been frozen. The account used by the two banks for the trade is based in Germany, and the Bank of Italy is expected to ask the Bundesbank for its cooperation in freezing it, sources told Bloomberg. Since the order to sequester the Nomura funds was given April 16, Monte dei Paschi's share price has risen, settling on a 3% increase by the end of trading April 17. Luigi Tramontana, an analyst at Banca Akros, told SNL that the rise was probably due to market expectations that Monte dei Paschi could recover some of the money lost in the Nomura deal. But, he added, "I'm very skeptical about that. I think the probability is relatively low and in any case it would take a long time before Monte dei Paschi can recover something, [if it gets] anything at all."
He dismissed fears that the widening scandal could cast doubts on contracts made between other Italian banks and foreign counterparties, saying Monte dei Paschi's situation "is pretty unique." "I don't think there is a read-through to the whole industry," he said. Italian investigators are also probing Sadeq Sayeed, Nomura's former European head, and Raffaele Ricci, a managing director in fixed-income sales, for allegedly obstructing regulators and making false statements. The same charges have been leveled against Monte dei Paschi's former managers.
Andrea Castaldo, a criminal lawyer and professor at the University of Salerno, in Italy, told SNL he believes the case raises doubts as to the ability of the Italian authorities to regulate the financial markets.
"It seems strange to me — certainly it merits further study — that there could be [these] very big transactions with such big commissions, but there wasn't any supervision done by the regulatory authorities at the time," he said.
He confirmed that similar sequesters have happened in the past, but "never of this size."
The analyst continued: "There is a reputational problem for Monte dei Paschi, but also for Nomura: Nomura structured the deal, and Nomura proposed it to Monte dei Paschi."
Some €14.4 million of assets is being sequestered from three former Monte dei Paschi managers — Chairman Giuseppe Mussari, General Manager Antonio Vigni and Gianluca Baldassarri, former head of the bank's finance department.
Monte dei Paschi upped the size of its requested bailout to €3.9 billion in November 2012 from €3.4 billion to account for losses arising from the secret trades. The size of the bailout requested by Monte dei Paschi — its second in four years — scandalized the Italian public and became a political hot topic used by the parties in contention to attack each other before national elections in late February. Italy's center-left Democratic Party, which is closely associated with the bank's managers, did considerably worse than pre-election polling had predicted.
Link all'intervista