Banca Monte dei Paschi di Siena S.p.A. (MPS) is the oldest surviving bank in the world and Italy‘s third largest bank. Founded in 1472 by the magistrate of the city state of Siena, Italy, as a “mount of piety“, it has been operating ever since. Today it has approximately 3,000 branches, 33,000 employees and 4.5 million customers in Italy, as well as branches and businesses abroad. A subsidiary, MPS Finance, handles investment banking. The bank’s main shareholder is the Fondazione Monte dei Paschi di Siena.
On 8 November 2007, Monte dei Paschi di Siena announced that it has reached an agreement with Banco Santander to buy Antonveneta for € 10.3 billion
excluding the subsidiary Interbanca that is owned by the Spanish bank. Antonveneta is the bank that after the Bancopoli scandal was acquired by ABN AMRO and was supposed to go to Banco Santander after the purchase of the Dutch bank by the consortium of RBS, Santander, Fortis.
Global financial crisis (2008-2012)
In the wake of rising yields and declining valuations on Italian government debt in the European sovereign-debt crisis, MPS lost over $2 billion in the first half of 2012, had to recapitalize, and faced restructuring or worse. The majority owner until the recapitalization, the Fondazione Monte dei Paschi di Siena, long resisted issuing new capital which would dilute its holding. In September 2012, even after the dilution, the bank “appear[ed] poised” also to give the national government a greater ownership stake in return for more capital.
Hidden losses (2013)
In 2009, the Santorini and Alessandria operations began creating huge losses. In order to hide them in the bank’s financial statements, the top management, including Giuseppe Mussari, the bank president, chose to enter into derivative contracts with Deutsche Bank and Nomura.
Estimates of the losses accumulated by the Santorini and Alessandria operations in the period leading up to the derivative contracts range from € 500 to € 750 million.
The documentation concerning these operations were never communicated to the bank’s own auditors or the Banca d’Italia. The derivative contracts and related documentation were discovered and made public by the new board of the bank in the end of November 2012. The documentation has been forwarded to the Banca d’Italia between December and mid January 2013.
The shareholders and the analysts have ascertained that the bank had not declared losses from derivatives.
The January 22, 2013 the bank loses on the Stock Exchange (-5.6%) and the ex president Giuseppe Mussari of bank resigns from president of Associazione Bancaria Italiana.
The next day, January 23, 2013 it was broke out the scandal hidden derivatives. The bank collapses on the Stock Exchange (-8.43%).The January 24, 2013 the bank loses again on the Stock Exchange (-8%).
The January 25, 2013 is convened an extraordinary general meeting of the shareholders of the bank which resolved to grant the Board of Directors the power to increase the share capital by a maximum amount of € 4.5 billion to service the exercise of conversion rights of bank of the Monti Bonds. Mps called for intervention of € 3.9 billion, including € 1.9 billion for the replacement of the previous Tremonti Bonds. The delegation of the extraordinary to the Board of Directors has also included the possibility of increasing the share capital of € 2 billion at the exclusive service of the payment of interest payable in shares. He voted for more than 98%.
The bank earns on the Stock Exchange (+11.36%) after three sessions in three days with a total loss of more than 20% of the value.
Main shareholders of Monte dei Paschi di Siena, situation reported 29/08/2012:
- 37.56% Fondazione Monte dei Paschi di Siena
- 2.527% JPMorgan Chase
- 4% Aleotti Alberto, president, Menarini pharmaceuticals
- 2.727% Unicoop Firenze Società Cooperativa
- 2.052% AXA
The share owned by the Fondazione dropped from over 55% at 10/12/2009 due to a 2012 recapitalization in the face of investment losses.