Monte Paschi, Italy's third-biggest bank, suffered a loss of € 720 million of derivative transactions. After discussing the prospect of feasibility and stability of the bank's capital, the four members of the BOI board chaired by Governor Ignazio Visco, agreed to give bailout.
Under the scheme, the bank will release the bonds by € 3.9 billion to be bought by the Italian Treasury. The grants also help to restructure previous year € 1.9 billion.
This bank will later pay the bond coupon of 9%. Coupons will increase 0.5% every two years to reach the level of 15%. As part of the bailout scheme, shareholders of Monte Paschi willing to inject capital twice for € 6.5 billion in five years.
Waiting Monti
However, it's not as easy as Monte Paschi get help. A day earlier, Prime Minister of Italy, Mario Monti said he would check the financial books Monte Paschi from all sides. "This is a loan on the taxpayer, with high interest rates," Monti said in Davos, Switzerland. Monti should really consider because it could help lead to the nationalization of banks. When Monte Paschi fail to pay, the government will get sick bank stocks.
Monte Paschi Chairman, Alessandro Profumo said the bank is in control of the safe. The case was revealed after it was rumored, Monte Paschi losers derivative transactions with Deutsche Bank AG in 2008. Transaction is related to Project Santorini. However, on 23 January, the bank claimed to find a loss in three derivatives, namely Santorini, Alexandria, and the Memorandum of Italy.
Santorini projects financed by Deutsche Bank made a loan of € 1.5 billion. The project used Monte Paschi derivatives to mitigate losses of € 367 million, also from Deutsche Bank. Monte Paschi also suffers from derivative transactions with Nomura Holdings Inc., which has eroded their income € 220 million.
Not only BOI busy restore reputation, Italian prosecutors are now investigating the case involved alleged fraud and bribery.
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