* Monte dei Paschi says trades were not submitted to board
* Board to examine findings of review by mid-Feb
* Monte Paschi says 500 mln euro aid request should absorb
* Shares down 8.3 percent
(Updates with bank's statement)
By Silvia Aloisi and Stephen Jewkes
MILAN, Jan 23 Banca Monte dei Paschi di Siena
, Italy's N.3 bank, said on Wednesday it was reviewing
three loss-making structured trades made in 2006-09 after its
shares plunged for the second day in a row on fears of a
mounting shortfall in its accounts.
Seeking to reassure investors, the Tuscan bank said the 500
million euros it requested in extra state aid in November would
be enough to absorb a hit on its capital from those trades,
which were linked to its vast Italian government bond portfolio.
The deals under scrutiny are the so-called "Alexandria"
trade with Japanese bank Nomura, the "Santorini" trade
with Deutsche Bank and a previously undisclosed
derivative, called "Nota Italia", with an unspecified bank.
The findings of the review are expected to be submitted to
the board by mid-February.
Shares in Monte dei Paschi, the world's oldest bank, fell
8.4 percent to 0.2541 euros on Wednesday before the statement
They had already dropped 5.7 percent on Tuesday after
reports the bank would have to book a loss of at least 220
million euros ($292 million) on the Alexandria deal alone.
The scandal over the trades, which has thrust the bank into
Italy's election campaign, is the latest setback for Monte dei
Paschi and analysts have called for the lender to quickly come
clean and get its house in order.
The lender requested 3.9 billion euros in state aid last
year to plug a capital hole stemming from its government bond
portfolio and hedging bets gone wrong.
In the statement, the bank said the Alexandria and Santorini
transactions were investments in long-term Italian BTP bonds
funded through repo operations. The deals involved asset swap
trades meant to protect the bank from fluctuations in interest
It said the initial investment on Alexandria was reimbursed
in December 2012 and the Santorini one was liquidated in 2009.
The Nota Italia trade, dating back to 2006 and also linked
to Italy's sovereign debt, was restructured recently.
Monte dei Paschi said none of the operations, which were
carried out under the bank's previous management, had been
submitted to its board for approval.
Former Monte dei Paschi Chairman Giuseppe Mussari stepped
down as head of Italy's banking association late on Tuesday,
although he has denied any wrongdoing.
The bank's Chief Executive Fabrizio Viola, who was appointed
last year alongside Chairman Alessandro Profumo to turn the bank
round, said there had been no proper accounting of the deals.
He told Sky Italia television he believed Italian regulators
had not received sufficient information about the trades at the
time they were negotiated.
"Market flucutations led to a negative performance (of those
deals) which came on top of a negative starting position," Viola
The Bank of Italy, which oversees domestic lenders, said in
a statement the management of Monte dei Paschi was working with
regulators to clarify the circumstances surrounding the deals.
It said the true nature of those trades had not been previously
revealed to authorities.
"It is essential for the bank's management to clarify, in an
exhaustive and timely manner, the exposure to derivatives and
potential losses that can arise from those positions," said Luca
Comi, banking analyst at ICBPI Equity Research.
"If losses above 500 million euros emerged, the group would
struggle even more to fix its capital position."
(Reporting by Silvia Aloisi and Stephen Jewkes; Editing by Greg