* Central bank okay clears final hurdle to state loans
* Prosecutors reported to suspect Monte Paschi fraud, bribes
* Bank of Italy under pressure over role as supervisor
By Gavin Jones and Silvia Aloisi
ROME/MILAN, Jan 26 Italy's central bank on
Saturday gave its approval to a request by scandal hit bank
Monte dei Paschi di Siena for 3.9 billion euros ($5.3
billion) of state loans, the latest step in the battle to revive
the ailing bank.
The Bank of Italy's backing was the final stage required to
free up the financial help for Italy's third biggest lender,
which this week revealed loss-making derivatives trades that
could cost it about 720 million euros.
After a meeting that lasted most of Saturday, the central
bank issued a brief statement to say its board had given "a
favourable opinion" on the bailout. It gave no further details.
The scandal surrounding Italy's oldest bank has hit its
share price and prompted questions about how the risky deals
could have been hidden from regulators.
The issue has shot to the centre of the campaign for a Feb.
24-25 national election and politicians have blamed the Bank of
Italy (BOI), led by current European Central Bank President
Mario Draghi at the time of the deals, for failing to spot them.
At Saturday's meeting the BOI's four member board, chaired
by Governor Ignazio Visco, had to judge whether the bank's
current and future capital adequacy and stability were
sufficient to receive the loans.
The Tuscan bank was forced to seek state aid last year for
the second time since 2009 after becoming one of just four
European lenders that failed to meet tougher capital
requirements set by regulators.
Under the loan scheme the bank will issue 3.9 billion euros
of bonds to the Italian Treasury, with just under half of these
replacing 1.9 billion euros of existing state help.
The lender's new management, appointed last year to turn it
around, said on Friday the situation was "completely under
The bank will pay a hefty 9 percent coupon on the bonds,
which are worth more than its current market capitalisation of 3
billion euros. The coupon will increase by 0.5 percentage point
every two years up to a maximum of 15 percent.
At a stormy meeting at Monte Paschi's Siena headquarters on
Friday, shareholders approved two capital increases for 6.5
billion euros to be carried out if needed in the next five
years, which are a condition of the state bailout.
That raises the prospect of possible nationalisation,
because if the bank cannot repay the state bonds or the coupons
attached to them, it will have to issue shares to the Treasury.
Prime Minister Mario Monti said late on Friday he considered
nationalisation a "remote hypothesis".
Monti, bidding for a second term in the election, defended
his government's decision to rescue it with taxpayers' money.
"It's a loan, with a high interest rate," he said.
At the World Economic Forum in Davos on Friday Visco sought
to deflect accusations 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 said, adding the BOI would
cooperate with prosecutors investigating the lender.
Draghi, also in Davos, took no questions from reporters.
Visco's task was made more difficult by a report in the
Corriere della Sera daily 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 document 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.
Visco sidestepped questions about whether Draghi knew about
the 2008-09 derivatives trades, which involved Japanese bank
Nomura and Deutsche Bank.
Internal auditors at Monte Paschi had detected anomalies at
the bank's finance department responsible for derivative trades
three years ago, daily Il Sole 24 Ore said on Saturday.
Monte Paschi was already under investigation over its
9-billion-euro cash acquisition of smaller lender Antonveneta
from Spain's Santander in 2007.
Santander had bought Antonveneta for 6.6 billion euros in a
three-way break-up bid for Dutch bank ABN AMRO, and almost
immediately sold it on to Monte dei Paschi netting a hefty gain.