Monte dei Paschi, Venerable Italian Bank, Yields to Change
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Version 0 of 1. SIENA, Italy — Ending a five-century tradition of local control and patronage, shareholders of the troubled bank Monte dei Paschi di Siena voted on Thursday to lift ownership restrictions and encourage new outside investors, in a move that may lead to similar changes at Italy’s other big banks. While the move was considered essential to the survival of the bank, Italy’s third-largest, it was seen as tragic by local residents, who lined up at the shareholder meeting to hurl invective at bank management. “You did nothing to relaunch the bank,” Gabriele Corradi, a former Monte dei Paschi employee and candidate for the mayoral race in 2011, said to the three top managers of the bank sitting in front of him. The new management team arrived last year, brought in to salvage the operation. “The bank is still doing badly,” Mr. Corradi said. “It’s still losing money.” Nonetheless, shareholders on Thursday passed changes in bank bylaws to weaken dominance by the Monte dei Paschi Foundation, a charitable organization. The foundation owns one-third of the shares and for decades lavished bank profits on the community of Siena — until there were no more profits. Financially devastated and with little choice, the foundation supported Thursday’s change. Previously, no shareholders other than the foundation could exercise votes equal to more than 4 percent of the total. Other changes approved at the meeting will allow more frequent turnover on the board, which had been dominated by the foundation and Sienese political interests. The problems of Monte dei Paschi, which led to a 4.1 billion euro ($5.4 billion) government bailout late last year, have contributed to a nationwide debate about the powerful and secretive foundations that play a large role in the Italian banking system. In the 1990s, many Italian banks were privatized and converted to stock corporations, but with local foundations receiving large, sometimes controlling stakes. For Monte dei Paschi, the change was mostly formal because it had always belonged to the city in one way or another. In recent times, no major decision was taken without the approval of the foundation, which supported the ill-advised acquisition of a rival that stretched bank finances and led to its downfall. Despite the bank’s overwhelming problems, many citizens of Siena refuse to accept that the bank can no longer serve as all-purpose community benefactor and patron, one that has subsidized the local university and a hospital. “The abolition of the 4 percent limit simply cancels the Sienese identity of the bank,” Paolo Emilio Falaschi, a lawyer in Siena who in the past has also represented the bank, said at the shareholder meeting, which was held in a local auditorium owned by the bank. “It’s incredible.” Monte dei Paschi plans to sell 1 billion euros of new shares next year to replenish its capital after a loss of 3.2 billion euros last year. That move will inevitably water down the foundation’s stake in the bank, and perhaps allow another institution or a private equity fund to become the largest shareholder. Alessandro Profumo, who became chairman of Monte dei Paschi last year in the effort to salvage the bank, said at a news conference that he hoped the change in bank governance would make it easier to sell the new shares. The bank also needs cash to repay the 4.1 billion euro bailout loan, known as a Monti bond for former Prime Minister Mario Monti, who was still in office when the bailout was granted. “The fact that M.P.S. has a chance to restore itself totally and reimburse the Monti bonds is good news for the country,” Mr. Profumo told reporters after the five-hour shareholder meeting. There had been little doubt about the outcome of the shareholder vote. Still, dozens of Sienese citizens, wearing linen shirts or short sleeves in the heat, used the event to vent their anger at previous managers, who accumulated huge debts; at the Monte dei Paschi Foundation, for giving up all its power; and at current managers, whom they said they doubted would be able to reverse the bank’s fortunes. Mr. Profumo, the former chief executive of UniCredit, Italy’s largest bank, was also accused of not loving the city and ignoring the bond between the community and the bank, the oldest lender in the world. Many of the speakers were former employees, some of whom received a portion of their severance pay in the form of devalued bank shares. Mr. Profumo countered his critics by saying the changes approved Thursday would help the bank headquarters to remain in Siena, where it occupies a 15th-century palazzo in the medieval city center. “To remain based in Siena, we need to stay independent,” Mr. Profumo said. If the bank is not able to raise more capital and repay the government loan, he said, it risks being nationalized. Many shareholders demanded that changes in the bylaws be postponed a few months, until new managers take over the foundation. One speaker suggested that citizens of Siena band together to buy up the share issue next year. But Gabriello Mancini, president of the Monte dei Paschi Foundation, said changes in bank rules were inevitable, because of pressure from regulators. Mr. Profumo acknowledged that finding new investors would not be easy, when Italy is in the midst of a deep recession. Ideally, he said, the bank would attract a large long-term investor that is not another bank. Fabrizio Viola, chief executive of Monte dei Paschi, said the bank was seeking European Commission approval for a restructuring plan, but said he could not predict when approval might come. European authorities scrutinize cases involving government aid, and can reject any plan that includes government subsidies that might create an unfair disadvantage for competitors. Mr. Profumo and Mr. Viola replaced managers at the bank who are now under investigation by prosecutors for risky derivatives transactions that contributed to the bank’s problems and were concealed from regulators. No formal charges have been filed yet. Magistrates in Siena are also investigating the acquisition in 2008 of a regional lender, Banca Antonveneta, for $11.7 billion, a sum that was considered excessive even at the time of the deal. Short of cash, Monte dei Paschi then tried to raise money without compromising its capital base and concealed certain features of the transaction, according to the Bank of Italy, the country’s central bank. The Siena magistrates are expected this summer to finish an investigation into allegations of bribery related to the Antonveneta deal. While sentiment at the shareholder meeting was overwhelmingly opposed to the changes in bank governance, a few people spoke in favor. Silvano Crolla, the 62-year-old owner of a driving school in Molise, a region in southern Italy that is well beyond the reach of the foundation’s generosity, said he bought shares of the bank earlier this year for his wife and himself. “It makes little difference to me whether the headquarters of the bank are in Siena or elsewhere,” Mr. Crolla said. “The local grip over the bank is already over, and we can’t maintain the old systems. It’s time to change.” <NYT_AUTHOR_ID> <p>Gaia Pianigiani reported from Siena, Italy, and Jack Ewing from Frankfurt. |