All the papocchi in the Monte dei paschi di Siena
What happened in the Monte dei Paschi di Siena? The article by Camilla Conti and Alessandro Da Rold for La Verità
On March 4, 1472 with 196 votes in favor and only 14 against, the Council of the Campana of the Municipality of Siena approved the establishment of a Monte di Pietà or Monte pio, in order to grant the loan to "poor or miserable or needy people" with a minimum interest rate. Thus Monte dei Paschi was founded. 550 years have passed, and now Mps is experiencing its umpteenth year of change.
With a new CEO, Luigi Lovaglio who has to find a white knight to bring the state down from Monte. Ambitious undertaking, to put it mildly. Because the ghosts of the past always come back and still weigh on the accounts of the bank, technically bankrupt already in 2013 as the governor of Bank of Italy, Ignazio Visco, admitted at the end of December of that year. And those ghosts spit out from the still open investigations and trials that see cited former presidents and CEOs from 2007 to 2020.
All revolve around capital increases and accounting tricks made to try to plug the gap opened by the unfortunate acquisition of Antonveneta authorized by Mario Draghi's Bank of Italy and costing almost 17 billion. But to undermine the foundations of the oldest institute in the world – thanks to the "harmonious tangles" between finance and politics – it was not only the alleged or ascertained malice.
It was also bad handling of the real time bomb that would go off sooner or later, and that the 2007 Antonveneta affair only triggered faster. The bomb is non-performing loans. And how dangerous it was, even for those who for years tried to keep the bank alive at a high price for taxpayers, can be understood precisely from the papers of the most recent investigations that La Verità was able to consult.
The key to everything is the ECB report (at the time already chaired by Draghi) which on 2 June 2017 reported to Rocca Salimbeni the results of the inspection carried out from 17 May 2016 to 17 February 2017. But also the immense expertise of the experts Giangaetano Bellavia and Fulvia Ferradini who are appointed by the investigating judge Guido Salvini to verify the correct accounting, between 2012 and 2015, of the adjustments in the financial statements on billions of impaired loans and the related provisions.
From the maxi-expert report, taken as evidence in the trial with probative incident, it emerges that over the course of those years MPS had not promptly recorded credit adjustments in its financial statements for a total of € 11.42 billion, equal to € 7.77 billion net of tax effect, a figure "of an amount almost similar" to the 8 billion requested from the market with the "capital increases that took place between 2014 and 2015".
The report also questions the correctness of the 2016 and 2017 accounts, and this in the event of an imputation could lead the EU Commission to interpret as state aid the 5.4 billion that the Treasury, in 2017, paid to Mps as a precautionary recapitalization for avoid closing it. Net of the consequences, which are still unpredictable, what the cards certainly show is how in 2015 the credits that were difficult to collect or already bad for customers and companies were managed.
Let's start with the 85 pages of the ECB inspection report drawn up on 2 June 2017. The inspection team had examined a sample of 1,534 performing and / or impaired credit positions present in the financial statements of the Mps group at 31 December 2015. The inspection estimates that additional provisions of € 7.55 billion will be required, compared to the € 22.7 billion existing at the end of 2015.
What went wrong in Monte's risk management? The findings are merciless. "The process for identifying impaired credit risk exposures is not working properly: as a result, the probability of default is not correctly estimated," reads the Central Bank's report. "The examination of the collateral documentation in the sampled credit documentation revealed a double or multiple count", the bank's board of directors "is not sufficiently informed of the deterioration in the quality of credit risk", gaps in the collection and aggregation processes are highlighted data, and "deficiencies in the bank's computer systems".
Not only. The checks on real estate guarantees carried out by the inspectors showed that the cadastral data of a significant number of real estate guarantees in the group's databases are missing and "the same real estate guarantee with different identification numbers can be found in different companies of the group or in the same company of the group referred to various debtors ".
For example, in 2007 the customer Nuova Orli Sri was granted a mortgage loan by Mps capital services but in 2012 the parent company Mps granted another; the property used as a real estate guarantee was the same, with a second degree mortgage; the same real estate guarantee was given a different identification number in the computer systems of the subsidiary and the parent company ". Faults that led to an underestimation of capital requirements and to show performing loans that had already deteriorated or became non-performing.
An entire chapter of the 5,662-page report by the experts Bellavia and Ferradini delivered to the Court of Milan on April 26, 2021 starts from this inspection. ECB which in some cases revised the classification of cases and in others corrected – increasing it – the amount of the necessary provisions. Among the positions "reviewed" by Frankfurt there is everything.
Large clients such as Sorgenia, Lucchini or Unicoop Tirreno, but also pizzerias, agritourisms, wine producers, shipping companies, real estate companies and many other apparently less well-known names such as companies attributable to the deceased former owner of Palermo, Maurizio Zamparini, or as Credsec spa of the lawyer Giovanni Lombardi Stronati (reclassified from probable default to non-performing with almost 8 million euro of estimated provisions) which in the spring of 2007 had taken over Siena Calcio (of which Mps was a sponsor) and in which in 2007 it had invested also Giovanni Consorte's Intermedia.
The long list also includes Alberto Parri, involved in the investigation into the bankruptcy of the AC Siena, whose position was reclassified by Utp to bad debts also because the valuation of the boat ("Squadrone 78") which became the property of the bank after the revocation of the leasing contract "is lower than the prices of the same boats on specialized sites", the documents read. On page 3623 there is also the Graphic arts of the former president of Confindustria, Vincenzo Boccia (passed from performing to probable default).
And among the classifications of "probable default" confirmed by the ECB but with a provision of 1 million euros more than the 401,000 euros budgeted by the institute, also Nicoletta Mantovani, widow of Luciano Pavarotti, who, it is explained, "deals with residual exposures as a family office ". Many years have passed but the effects of that disastrous management, and the rubble left behind, can still be seen today.
Both because the report also questions the correctness of the 2016 and 2017 accounts, and this in the event of an imputation could complicate negotiations with the EU Commission as well as the approach of a possible new partner. Both because Montepaschi is putting the accounts of Amco, the Treasury subsidiary that deals with recovering non-performing loans, in the red : it closed the 2021 financial year with a loss of 422 million, which reduced its net assets from 2.8 to 2.4 billion. 529 million adjustments on the approximately 7.5 billion impaired loans purchased by Mps at the end of 2020 were responsible for the red.
Article published on laverita.info
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutti-i-papocchi-nel-monte-dei-paschi-di-siena/ on Sun, 03 Apr 2022 05:07:49 +0000.