On January 23, the Italian financial community was shaken after the oldest bank in the world, Banca Monte dei Paschi di Siena, appeared to have taken a severe economic hit after a derivatives deal between it and Japan-based bank Nomura soured. With a potential cost of at least 220 million euros during 2013, the collapsed deal and subsequent blow to its reputation are imperiling a financial institution that has been in continuous operation since 1472.
According to Bloomerg, the growing scandal seems to have brought down the career of Giuseppe Mussari, who was the head of a consortium of Italian banking lobbyists and a former head of Monte dei Paschi who ran the bank between 2006 and 2012. In a press statement, Mussari claimed innocence from any wrongdoing, and explained his resignation from the Italian Banking Association as a move to spare it public scrutiny.
Prices on Monte dei Paschi stocks plummeted following the news, shedding 5.7 percent of their worth before settling at 27.75 cents, the source stated.
Another complication involving the troubled bank is the alleged coziness between its operations and the actions of the Partito Democratico (PD), a center-left political organization. Critics argue that this purported relationship emboldened Monte dei Paschi officials to take on riskier deals, including the one with Nomura. Furthermore, some Italian economists and politicians are attacking current Premier Mario Monti for approving a 3.9 billion euro loan to the bank last year in a bid to pull it back from the brink of insolvency.
As this story is still developing, stay with GreatWealthStrategies.com’s blog for more updates. The complications arising from this scandal have the potential to increase volatility in European equity markets, which may cause additional problems for investors. Wealth preservation is important during a time like this, so be sure to investigate our services, which are designed to help you succeed financially.