Oldest Bank In The World Plunges, Halted As Chairman Resigns In Aftermath Of Latest Derivatives Fiasco

Tyler Durden's picture

Last week, following documentation from Deutsche Bank (and Nomura), it became clear that Italy's Monte Paschi (BMPS) bank (the oldest in the world) has engaged in derivatives with the German and Japanese banks in order to save itself during the financial crisis. The derivatives, according to Bloomberg, were done off-market and allowed the booking of large upfront gains which covered losses optically that the bank faced as European liquidity dried up completely - the offsetting 'losses' are now coming due. Today, amid growing outcry over the 'deal', the former head of BMPS has resigned. Bloomberg reports that Giuseppe Mussari, now Italy's top banking lobbyist, was the Chairman of BMPS during the derivative deal period. BMPS shares were halted after plunging dramatically as investors are still unclear of the extent of losses it faces on derivatives. If that was not enough chicanery, there is a twist in that none other than Mario Draghi, as Director of the Bank of Italy, would have had to vet Mussari (and his banks' regulated books) during this period - as BMPS accumulated what is obviously undocumented derivatives positions to intentionally obscure losses. Once again, years later, it seems the truth comes out - and of course we would expect no-one to go to jail - and the lying in Europe (then and now) continues unabated - as the reality of financial system health remains hidden from view.


Via Bloomberg,

Former Banca Monte dei Paschi di Siena SpA Chairman Giuseppe Mussari quit as Italy’s top banking lobbyist as scrutiny of the lender’s use of derivatives deepens.


The resignation is effective immediately, he said in a letter posted to the Italian Banking Association today. He leaves as Monte Paschi, where he was chairman from 2006 until April, comes under growing pressure to disclose the extent of losses it faces on derivatives.


The lender fell 5.7 percent to 27.75 cents in Milan trading today, the biggest decliner in Europe’s 46-member Stoxx 600 Banks Index, after Il Fatto Quotidiano reported Monte Paschi’s former managers signed contracts with Nomura Holdings Inc. (8604) three years ago that will reduce 2012 earnings by 220 million euros ($293 million). Nomura said in a statement Mussari “fully reviewed and approved” the trade.


I always acted according to the law,” Mussari, 50, wrote. “I took the decision to not damage the association.”


Monte Paschi said on Jan. 17 it will review its accounts after Bloomberg News first reported that the lender engaged in a derivative with Deutsche Bank AG in 2008 that obscured losses before the Siena-based bank sought a government bailout. The Italian lender, which was bailed out in 2009, is seeking 500 million euros more from taxpayers, bringing the total cost of its rescue to 3.9 billion euros.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ebworthen's picture

When you don't have to back your gambling with anything tangible this is what happens.

When banks can gamble with deposits, and be given binary funny money by central banks, there is no money.


If central banks can print binary digits with keystrokes that become "money" for banks, they can do it for every person.

There is no reason for anyone to work anymore, or pay taxes.

disabledvet's picture

"mark to model" puts the human ego in charge. "mark to money" does not.

Glass Seagull's picture

Lots of bodies buried in the OTC market, that's why they'll never regulate it.

Quinvarius's picture

They aren't buried.  They are just lying there all bloated.  They are waiting for a warlock with knowledge of the dark arts to re-animate them and lead them into the final battle.

fuu's picture

How was Tilson positioned? What was Stolper's recommendation?


shovelhead's picture

The world has become a 'no credit event' free zone. All sinners will be saved.

Bennie & Co. has ink... AND HE AIN'T AFRAID TO USE IT.

The Ponzi must go on.

NoDebt's picture

Color me shocked.

As I look at that chart, does it appear somebody knew this YESTERDAY?  It had a hefty drop shortly after open, even the day before.  Not a gap-down, but like somebody was piling out pretty damned quick yesterday shortly after opening.  Or perhaps we're just getting the article today when the news actually broke yesterday.

No, there will be no "contagion" from this.  Just another bail-out.  No bank will ever be allowed to fail.  Certainly not the oldest one on the continent.

doggis's picture




Yamaha's picture

Nothing Corzine couldn't have accomplished without going to jail.

Quinvarius's picture

But Jamie Dimon reported he lost 7 billion and it didn't even show up on the quarterly report.  He actually lost multiples of that, but I think you see where I am going here.

caimen garou's picture

looks like this world is experiencing resignitus, like rats jumping off a sinking ship!

Super Broccoli's picture

don't worry, the taxpayers will bail this shit out as usual

All we have to do is have the state borrow billions to a not-yet-bankrupt bank to bail this one out :-)

IamtheREALmario's picture

Scusi un attimo - but don't most derivatives either pull profits forward or lock in future profits. Seems these guys did it backwards by locking in future losses. I am aghast that such a scheme could ever fail or would have been priced incorrectly.

Those oh so clever (and dishonest, morally and ethically bereft and corrupt) banks can pull 30 years of mortgage interest onto today's P&L (so big bonuses can be paid) through creative derivative creation. One would think they could have found some way to paper this over.

Wondering if these guys had any relationship with the Vatican bank. Talk about throwing a mongoose into a convention of rats.

sodbuster's picture

Don't know what everyone is upset about- this bank is just a mini-clone of the rest of the banks in Europe.

rsnoble's picture

I can tell the bank is going to hell just by looking at the nitwit in the photo.

Let The Wurlitzer Play's picture

First the news from Spain earlier today now this - Im really going to double  down on my Euro longs and debt holdings.



ironmace's picture

I am Jack's complete lack of surprise.

Coldfire's picture

There is a crucial JPM angle here.

Vooter's picture

It would be hilarious if guys like this shot themselves in front of their kids. I would laugh, anyway...

Uncle Zuzu's picture

Why can't our big banks go under?  Why should foreigners always have all the fun?

q99x2's picture

Redistribute the stolen wealth. We are too advanced to remain primative. Somebody do something.

The Navigator's picture

The beginning of the end.

Bahamas's picture

Bankrupting a bank is worth it if only to get your mug shot here on ZH.

paulie's picture

For the record Mussari is very closed to the Italian democratic party. In fact he used to be part of the Italian communist party. Today he is a banker oh wait the leader of the Italian baking association.

CheapBastard's picture

Giuseppe could not be reached for comment at  his $20 million chateau.