Italian Court Reportedly Charges Deutsche Bank With Monte dei Paschi False-Accounting Crimes

The legal woes of  Deutsche Bank (DB)   escalated  over the weekend with news that  a Milan court on Saturday pressed charges over allegations it colluded with Monte dei Paschi di Siena with accounting measures which inflated the Italian institution's market value. Bankers at Japanese institution Nomura are also implicated in the case.

Deutsche Bank and Nomura did not immediately respond to requests for comment and  Monte dei Paschi wouldn't comment on the court decision, which was reported by outlets including Bloomberg.  The Italian bank said in July it is seeking a plea bargain agreement over the allegations. That could help the beleaguered bank to reduce its financial liability to €10 million ($12 million), it said at the time.

The Italian investigation stems from allegations of false accounting and market manipulation and has been dogging all three institutions for about three years. Shareholders claimed that advisers from across the three banks colluded to hide losses at Monte dei Paschi. Prosecutors reportedly concluded that the transactions led to inaccurate financial statements and inflated the bank's market value. 

The news comes as balance-sheet worries at  Deutsche Bank have in recent weeks sent the stock to record lows. Deutsche Bank said on Sept. 15 that the Department of Justice had asked it for $14 billion to settle charges that it  missold mortgage-backed securities in the U.S. before the credit crisis.

However, news on Friday that it was close to agreeing on a pact which would slash the fine sent the bank's stock up 14% in New York.  Sentiment was also lifted by comments from CEO John Cryan on Friday.  He insisted that its capital base is solid and much of the share price reaction had been unwarranted.

The news comes as Monte dei Paschi works on its third bailout in less than three years as it grapples with non-performing loans that are equivalent to more than 20% of its assets.

Last last month the Tuscan lender reported that it is now considering a debt-for-equity swap. Its July 29 rescue blueprint had previously consisted of the sale of bad loans through securitizations and the issue of up to  €5 billion of new stock.

Monte dei Paschi shares were down by 1.4% to €0.1863 just before noon in London. Nomura stock rose by 2.9% in Tokyo on Monday. The Frankfurt stock market was closed for a public holiday on Monday.

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