* Shareholders blast "casino" management
* PM Monti says problems confined to historic Tuscan lender
* Bank of Italy rejects criticism of supervision
* Management under pressure at angry shareholder assembly
By Silvia Aloisi and Stefano Bernabei
SIENA, Italy, Jan 25 Enraged shareholders of
Monte Paschi bank lashed out at its management on Friday as
questions grew about central bank oversight of the historic
lender following the uncovering of nearly $1 billion of losses
in complex derivatives deals.
The turmoil surrounding Italy's third largest bank has
rocked the country's financial establishment and exposed both
the government and the Bank of Italy to difficult questions over
how the risky deals could have been hidden from regulators.
It has also become a potentially explosive issue in the
bitter campaign for a looming election on Feb. 24-25.
The Tuscan bank, which is already seeking a 3.9 billion euro
($5.2 billion) government bailout, this week revealed
derivatives and structured finance trades that could cost it as
much as 720 million euros.
Prime Minister Mario Monti promised "maximum clarity and
transparency" but denied his government shared responsibility
for the crisis at the world's oldest bank.
He said the problems affected only Monte Paschi and
expressed "full and total confidence" in the Bank of Italy,
which was headed by European Central Bank President Mario Draghi
at the time the opaque deals were made.
"Italian savers should know, and I think they know, that
Italian banks have been among the most solid during the crisis,"
he said, adding that the problems at Monte Paschi did not affect
the rest of the Italian banking sector.
Economy Minister Vittorio Grilli is due to appear before the
parliamentary finance committee next Tuesday to answer questions
on the case.
However there was stinging criticism from furious
shareholders at a special assembly in the picturesque Tuscan
town of Siena, where Monte dei Paschi - which says it is the
world's oldest bank - was founded in 1472.
"It's as if they were playing poker at the casino, and the
more money they were losing, the more they kept gambling," said
Pietro Rizzo, a pensioner and former employee of the bank, who
was awarded shares as part of his severance payment.
"They were sinking and kept trying to find a way to stay
afloat to hide the losses. They should have told the truth," he
Known as "Daddy Monte" because of its enormous influence and
patronage, the bank plays a dominant role in the ancient city of
Siena, known to countless tourists as the venue for the
traditional Palio horse race. Monte Paschi, based in a
magnificent palazzo, has an art collection that spans six
Bank of Italy Governor Ignazio Visco rejected criticism of
the central bank's oversight, and said the deals in question had
been deliberately concealed from authorities. He put the blame
squarely on the Monte dei Paschi management at the time.
But Visco said there was no threat to the stability of Monte
dei Paschi, which is already under investigation for the
9-billion-euro cash acquisition of smaller rival Antonveneta in
2007 - a deal that stretched its finances to the limit months
before the global financial crisis.
"There is no question that the bank is stable," he said.
"LIKE A CASINO"
In Siena, where Monte Paschi held the special shareholders'
meeting on Friday to approve the terms of the state bailout,
Chairman Alessandro Profumo said the bank was still evaluating
the impact of the derivatives trades on its finances.
The bank management faced a fiery mood from shareholders
enraged by a scandal that has raised the spectre of
nationalisation and recalled some of the darkest financial
scandals in recent Italian history.
The issue has also forced its way into the election campaign
because of the close links between the bank and the centre-left
Democratic Party (PD), which is leading in the opinion
The left has run Siena, in what is one of the so called "red
regions" of Italy, for decades. The main shareholder in Monte
Paschi is a charitable foundation controlled by local
The town hall and the province of Siena, both run by the PD,
name 13 out of the 16 board members at the foundation, which in
turns picks the majority of Monte Paschi's board
"What they did to Monte dei Paschi is worse than Bribesville
and Parmalat put together," said Beppe Grillo, head of the
anti-establishment 5 Star Movement, who attended the meeting. He
was referring to Italy's two most notorious modern scandals.
"That's the scale of the damage they've done. They've turned
the party into a bank and the bank into a party," he said.
Monte Paschi shares, which had fallen 20 percent this week,
rebounded strongly on Friday, rising almost 9 percent as prices
recovered after the recent losses.
The crisis broke out over an opaque series of deals,
involving Japanese bank Nomura, Deutsche Bank
as well as a trade which several sources said was
structured by JP Morgan. JP Morgan declined to comment.
However doubts were raised about the Bank of Italy's
assertion that it was unaware of the trades at the centre of the
scandal by reports in the Corriere della Sera daily.
It quoted central bank documents saying inspectors had
expressed misgivings about the supervision of both the
Alexandria and Santorini deals as long ago as 2010.
No immediate comment on the report was available from the
Bank of Italy.
The management team in charge at the time of the losses had
already been replaced over Monte Paschi's failure to meet
European capital adequacy tests.
Visco said the central bank had pushed for a change of
management as soon as became aware of the problems at the bank.
The crisis forced former Monte dei Paschi chairman Giuseppe
Mussari, who left the bank in April, to step down as head of the
Italian banking association this week.