Campaigning Italian politicians seize on Montepaschi scandal as shareholders seek answers

Five Stars movement leader Beppe Grillo arrives in Siena, Italy, Friday, Jan. 25, 2013, to participate in a meeting of shareholders of embattled Italian bank Monte dei Paschi di Siena, who lining up to question managers about a scandal involving potential trading losses that had reportedly been concealed. The world's oldest running bank convened shareholders Friday in Siena to approve capital increases as a condition to receive up to €3.9 billion ($5.22 billion) in state aid. The scandal over the trades caused shares to plunge this week and became a flashpoint in the campaign for national elections. (AP Photo/Riccardo Sanesi, Lapresse) ITALY OUT (The Associated Press)

MILAN – An Italian comedian-turned-political activist attacked the head of Monte dei Paschi bank over a trading scandal on Friday. Angry shareholders, meanwhile, sought explanations for millions in expected losses before accepting a capital increase needed to safeguard the bank.

Beppe Grillo, a popular comedian whose anti-establishment 5 Stelle movement is fourth in the polls ahead of next month's elections, accused the bank of covering up a hole he estimated at €14 billion (€19 billion).

Such a loss would put it on par with the fraud that sank dairy company Parmalat, the largest to date in Europe. It is also far above most estimates for the loss from three trades, which range in the hundreds of millions of euros.

Chairman Alessandro Profumo, the former head of Unicredit who took over last year, challenged Grillo, a shareholder, to back up his allegation.

"Tell me where this comes from? There is no hole," Profumo said, according to Italian news agency LaPresse.

The heated exchange took place at a shareholders' meeting that approved capital increases needed for the bank to receive up to €3.9 billion ($5.22 billion) in state aid. The aid includes €500 million to cover losses from three transactions that had been allegedly covered up. The lion's share of the aid will help the bank, which has been hit hard by the European debt crisis, meet new capital requirements.

Profumo said it was too early to provide details of the three complex financial transactions, one of which will reportedly result in a €200 million loss in 2012. The bank is investigating the transactions and is due to present the results in mid-February.

The scandal at the world's oldest running bank has quickly become fodder for campaigning politicians, with accusations flying of a lack of oversight and political meddling in the bank.

Italian Economics Minister Vittorio Grilli said the problems with the trades "could come to light now" because some of them carried such long expiration dates, meaning losses were only booked recently.

Grilli is set to testify to a parliamentary finance committee on Tuesday. He will have to answer questions over the handling by Premier Mario Monti's 13-month-old government's handling. It has been criticized for failing to provide adequate oversight and for providing aid to Monte dei Paschi.

Monti, speaking on RAI state radio, said Italian banks were "among the most solid in Europe" and that the government would be repaid the bailout money.

The board of Montepaschi, as it is more commonly known, on Thursday issued a statement expressing concern over what it called the "exploitation" of the events by politicians and other public figures — and warned that the use of such phrases as "failure" were both without basis and damaged the bank's clients, shareholders and employees.

The scandal over the transactions caused shares to lose 20 percent of their value in three days of trading. The rebounded a full 14 percent to €0.26 on Friday as investors bought into expectations that Italy would not allow the bank, founded in 1472, to fail.

The bank's former chairman has resigned from his latest job at the Italian Banking Association as a result of the revelations. The Bank of Italy claims the former management hid the transactions, which were only revealed by the new team that took over last year.

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Angela Charlton contributed from Davos, Switzerland.