* Central bank board to rule on request for state loans
* Prosecutors reported to suspect fraud, corruption
* Bank of Italy under pressure over role as supervisor
By Gavin Jones
ROME, Jan 26 The four-member board of the Bank
of Italy was meeting on Saturday to consider the position of
scandal-hit bank Monte dei Paschi di Siena and decide whether to
authorise its request for 3.9 billion euros ($5.3 billion) of
Italy's third-largest bank this week revealed loss-making
derivatives trades that could cost it about 720 million euros,
causing heavy losses in its shares and prompting questions about
how the risky deals could have been hidden from regulators.
This issue has shot to the centre of the campaign for next
month's national election and politicians have blamed the Bank
of Italy, which was led by current European Central Bank
president Mario Draghi at the time of the deals, for failing to
spot the problem.
At Saturday's meeting chaired by current Bank of Italy
(BOI)Governor Ignazio Visco, the board will consider whether
Monte Paschi meets the requirements of current and future
stability necessary to receive the state loans it has requested.
Visco told reporters on Friday that "there is no question
that the bank is stable."
The meeting began on Saturday morning, a BOI spokeswoman
said, and the central bank is expected to issue a statement when
At a stormy meeting in Monte Paschi's Tuscan headquarters of
Siena on Friday, its shareholders approved two capital increases
of up to 6.5 billion euros to be carried out if needed in the
next five years, which are a condition of the state bailout.
Outgoing Prime Minister Mario Monti said late on Friday he
considered it a "remote hypothesis" that the bank would end up
needing to be nationalised.
Visco attended the World Economic Forum in Davos on Friday
where he gave a spate of interviews to try to deflect
accusations that the BOI had not done its job properly.
"It is wrong to insinuate that there was a lack of
supervision by the Bank of Italy," he told CNBC television,
adding that his institution had nothing to hide and would
cooperate with prosecutors probing the Tuscan lender.
Draghi also delivered a speech in Davos but took no
questions from reporters.
Visco's task was made more difficult by a report in the
Corriere della Sera daily on Friday which included excerpts of a
document drafted by six BOI inspectors expressing concerns over
the two main trades under scrutiny as long ago as 2010.
That report would have been sent to the BOI's head of bank
supervision at the time, Anna Maria Tarantola, who has since
left the bank to become president of state broadcaster RAI.
In Davos, Visco sidestepped questions about whether Draghi
knew about the derivatives trades, which were conducted between
2006 and 2009 and involved Japanese bank Nomura and
Internal auditors at Monte Paschi already detected anomalies
at the bank's finance department responsible for derivative
operations three years ago, daily Il Sole 24 Ore reported on
Saturday, quoting parts of the audit dated Nov. 26, 2009.
However, the outcome of the audit was "partially favourable"
for the Siena-based bank, contrasting with "partially
unfavorable" rating given by Bank of Italy inspectors led by
Vincenzo Cantarella at the end of an inspection from May-August
Press reports on Saturday suggest the scandal around Monte
Paschi is widening. Corriere della Sera said prosecutors are
investigating a large number of derivatives contracts and
suspect possible accounting fraud and corruption.