July 13, 2013 / 4:36 PM / 4 years ago

UPDATE 1-Italian court upholds release of Nomura assets

* Court says Nomura did not make wrongful gains

* Dispute centres on ‘Alexandria’ derivative contract

* Monte Paschi bank under investigation after big loss (Updates source, adds details from the court ruling)

By Silvia Ognibene

SIENA, July 13 (Reuters) - An Italian appeals court in Siena on Saturday upheld an earlier ruling that Japanese investment bank Nomura did not make wrongful gains in a derivative deal with Tuscan lender Monte dei Paschi, a court order seen by Reuters said.

The ruling confirms the release of 1.8 billion euros ($2.35 billion) of Nomura assets that had been seized in mid-April when prosecutors alleged that the Japanese bank had mishandled the so-called “Alexandria” derivative contract.

The Alexandria deal is one of three trades at the heart of a criminal probe at Banca Monte dei Paschi di Siena, which booked losses of 730 million euros in 2012 after saying details of the complex derivatives deals had only just come to light.

On April 29, preliminary court judge Ugo Bellini challenged a number of allegations made by the prosecutors, including one that Nomura had reaped abnormal gains from the Alexandria contract it entered into with Monte Paschi in 2009.

On Saturday, a panel of three judges in Siena upheld Bellini’s decision, saying that it was impossible to quantify losses, or even determine if there would be any, on a derivatives trade that expires in 2034, the court order read.

The seizure cannot be justified because the valuation of the derivatives contract according to current market conditions is incorrect because “it is not a loss, but an indicator of risk”, according to the court order.

A spokesman at Monte dei Paschi declined to comment on the ruling.

Monte dei Paschi is seeking 700 million euros in compensation from Nomura and two of its own former executives.

The prosecutors’ seizure order, issued on April 15, was aimed at preventing Monte Paschi from putting up more cash with Nomura to meet the collateral requirements of the Alexandria trade.

The prosecutors alleged Japan’s largest broker colluded with former managers of Monte Paschi, the world’s oldest lender, to conceal losses and set up huge hidden bets on Italian government bonds that helped drive the Italian bank close to collapse.

The prosecutors and current management at the Siena-based bank also allege that Nomura earned some 88 million euros in “hidden” fees from the deal.

Nomura says it has done nothing wrong and will defend itself vigorously against any allegation of wrongdoing.

The Tuscan bank is also seeking 500 million euros in compensation from Deutsche Bank for a derivative deal similar to the one made with Nomura.

Deutsche Bank has also denied any suggestion of wrongdoing. ($1 = 0.7661 euros) (Reporting by Silvio Ognibene; writing by Steve Scherer; Editing by Mark Trevelyan and Sophie Walker)

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