* Seizure needed to stem "landslide of money" towards
* Monte dei Paschi's collateral on deal at 1.866 bln euros
* Prosecutors say seizure order freezes Alexandria trade
* Nomura rejects any suggestion of wrongdoing
By Silvia Ognibene and Silvia Aloisi
SIENA/MILAN, April 17 Italian prosecutors took
steps in Germany and Britain on Wednesday to carry out the
seizure of up to 1.95 billion euros ($2.6 billion) of assets
from Japan's Nomura, which they say is needed to halt
further losses from Italy's Monte dei Paschi bank.
Prosecutors in Italy accuse Japan's largest broker of
colluding with former managers of Monte dei Paschi, the world's
oldest bank, to set up huge hidden bets on Italian government
bonds that helped drive the Italian bank close to collapse.
Nomura says it has done nothing wrong. It said on Tuesday
none of its assets had been seized in connection with the Monte
dei Paschi probe and it would take all appropriate measures to
protect its position.
Shares in Nomura, Japan's biggest brokerage, closed down
2.33 percent on Wednesday amid uncertainty over the impact of
the Monte dei Paschi scandal. The Italian bank, which has shed
nearly a third of its value in the past 12 months, was trading
0.41 percent higher.
The seizure order was aimed at preventing Monte dei Paschi
from sending more cash to Nomura as collateral for the
"Alexandria" trade, a huge bet on Italian government debt made
more costly by an interest rate swap that forces the Italian
bank to take losses when rates are lower than expected.
The funds are held in accounts outside Italy, which means
the Siena-based prosecutors are trying to seize the money
through "Target 2", the interbank payment system that links
European banks through the central banks of individual countries
that use the euro, a judicial source told Reuters on Wednesday.
The source said the Bank of Italy had contacted the
Bundesbank to block a Nomura account held with Citigroup
in Frankfurt, but had not yet heard back from the German central
Prosecutors are also seeking to seize funds held on behalf
of Nomura in London accounts with Citigroup and Bank of
America. Neither Citigroup nor Bank of America are part
of the investigation. Citigroup declined to comment. Bank of
America did not return a call seeking comment.
The prosecutors' seizure warrant, seen by Reuters, says that
between Feb 19 and April 5, Monte dei Paschi deposited more than
370 million euros with Nomura as collateral to help cover
mounting losses. In total, it had 1.87 billion euros on deposit.
"This requires urgently stemming this landslide of money
towards Nomura that is increasing by the day," the prosecutors
said in the document, explaining why they did not wait for a
judge to authorise the seizure, made public on Tuesday.
The prosecutors' warrant says that by freezing the
derivative contract, they will be able to block all related
Part of the 1.95 billion euros figure is some 88 million in
"hidden" fees the prosecutors and Monte dei Paschi say Nomura
received from the deal.
Monte dei Paschi, Italy's third-largest bank, received a
state bailout of 4 billion euros in February to plug a capital
shortfall exacerbated by derivative deals. It faces the prospect
of partial nationalisation from next year.
Italian prosecutors are investigating Nomura's former top
executive in Europe, Sadeq Sayeed, and its managing director in
fixed income sales for the Europe, Middle East and Africa
region, Raffaele Ricci, over allegations of aggravated fraud and
Sayeed, who left Nomura in March 2010, denied the
allegations. Ricci did not return calls for comment.
The seizure warrant said Nomura "took advantage of Monte dei
Paschi's economic and financial difficulties" when it negotiated
a restructuring of the Alexandria deal in 2009.
The prosecutors allege that the Japanese bank colluded with
former managers at the Italian bank to conceal losses and
engineered "disproportionate and abnormal" contract clauses at
the expense of the Tuscan lender.
"All this determined, is determining now and will continue
to determine in the future...huge negative consequences for the
liquidity and operative functioning of Monte dei Paschi," the
The Alexandria trade involved the purchase by Monte dei
Paschi of Italian government bonds for 3 billion euros financed
through a long-term repurchase agreement with Nomura.
The trade also involved an interest rate swap that according
to the prosecutors ensured Nomura effectively received a 5
percent coupon on the government bonds, while the interest rate
received by Monte dei Paschi was 0.34 percent.
The transaction had an initial negative fair value of 308
million euros for Monte dei Paschi that was not revealed in the
bank's financial accounts, including "hidden" fees for Nomura,
the prosecutors said.
As the decline in the bonds' value during the euro zone debt
crisis swelled Monte dei Paschi's losses on the trade, the
Tuscan lender was forced to deposit as much as 2.45 billion
euros as collateral in mid-May 2012, they said.
A judicial source told Reuters the prosecutors' seizure
order had effectively frozen the Alexandria transaction and all
related payments had been suspended. A judge now has around 10
days to decide whether to ratify the prosecutors' move.
Monte dei Paschi booked a pretax loss of 730 million euros
in 2012 linked to the Alexandria trade and a similar deal with
Deutsche Bank known as Santorini.
When asked whether the prosecutors could also take steps
against Deutsche Bank, the judicial source said their
examination of the Alexandria trade was at a more advanced stage
than that of Santorini but that they could consider such a move.