Bank of Italy says risky bond derivative weighs on Carige: newspaper
MILAN, Sept 10
MILAN, Sept 10 (Reuters) - Carige has a risky derivatives contract with Deutsche Bank that is absorbing more capital than the Italian lender is worth on the market, daily La Stampa said on Tuesday, quoting a central bank report.
Bank of Italy, Carige and Deutsche Bank declined to comment.
According to La Stampa, a confidential Bank of Italy report said a derivatives contract over Italian government bonds had forced Carige to put aside 1.1 billion euros ($1.5 billion) as collateral at the end of June.
Carige, Italy's No. 10 bank by number of branches, has a market capitalisation of 1 billion euros and is already struggling to plug an 800 million euro capital shortfall through asset sales, including its troubled insurance business. It said earlier this month that it was fundamentally stable.
The position open with Deutsche "has become very risky," the Bank of Italy was quoted as saying in its report, drafted at the end of a four-month inspection at Carige that ended in late July.
The bank is rapidly becoming Italy's biggest banking headache after larger Banca Monte dei Paschi di Siena, which is also struggling under risky derivative products that are at the centre of a judicial investigation.
The collateral reportedly posted as guarantee for the derivatives contracts amounts to 3.8 percent of Carige's loans.
The central bank has requested a change of management at Genoa-based Carige after criticising lending practices.
Shares in Carige fell 2 percent, against a 0.7 percent rise in Italy's all-share stock index. ($1 = 0.7546 euros) (Reporting by Valentina Za; Editing by Lisa Jucca/Ruth Pitchford)
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