Banca Monte dei Paschi di Siena

Background information

“That he be hanged by the neck until he is dead on the gallows…”. So goes the report of the execution of Armenio Melari, treasurer at Monte dei Paschi di Siena, in year 1629. He had been convicted to death for having stolen money from the bank. No appeal was conceded while his family properties were seized.X5The sentence, though, was not a court ruling, but a decision by the board of directors of Monte dei Paschi, which, at that time, had powers of life and death over its employees and even over its borrowers! That was the way things were going in XVII century Siena. Two hundred years past, it was then the town government who owned the approval of the bank’s balance sheet along with the right of hiring and firing people at the bank. So it is not a surprise that even Benito Mussolini had serious problems to deal with Il Monte, as he failed to react when his Podestà, the fascist era city mayor, was slammed on his face by angry citizens in Piazza del Campo, the main square where the Palio horse race is run. Nevertheless, in 1936 Monte became a government controlled institution and remained so until 1995, when it was transformed into a proper limited company with the controlling stake held by a bank foundation, which in turn was run by the city government. The grip of the local community on the bank remained pretty much strong over years: in 1983 the chairman nominated Piero Barucci, even if he was from the Tuscany’s capital of Florence, had to take his residency in the Siena’s district to become effectively in charge. In 1999 some 28% of the bank’s shares was offered to the public. But until the “Great Scandal” erupted in 2012/13 the Foundation was capable to secure that the control of the bank remained in the hands of local mandarins.
Nowadays those very mandarins dream of a time machine: the Foundation ran out of money while the bank desperately needs fresh capital and the city of Siena risks to lose its control over the oldest bank of the world, founded on March 4th, 1472 as the secular city government decided to create an alternative to the pawnshops then managed by friars. Giving up the bank sounds like blasphemy to the people of this part of Tuscany whose “affair” with Monte used to be not just economic even if the mission of the bank have always been that of distributing its dividends to the city in a variety of fashions: from investments to sports, “panem et circenses” let’s say. Troubles began in 2007. In Siena they believe the original sin was the acquisition of Antonveneta from Spain’s Santander for the monster price of 9 billion euros just a couple of months later that the Spaniards bought it from ABN Amro at a book value of 6.6 billion. Antonveneta was a once solid lender from North-Eastern Italy bought by the Dutch after a group of Italian bankers failed to take it over amid a scandal involving even the then governor of the Bank of Italy Antonio Fazio. Monte piled up a mountain of debt for funding the buying along with its parent Foundation. Shortly thereafter, as Lehman went bankrupt, the weight of the debt became unbearable and Monte was ultimately forced to seek the Treasury financial help. The Monte’s top executives who led the conquest of Antonveneta, director general Antonio Vigni and chairman Giuseppe Mussari, were forced to resign. Alessandro Profumo was called in Siena for a desperate rescue mission. Early in 2013 comes the scandal as it was unveiled that Mussari and Vigni hid huge losses over years through complex derivatives contracts designed to the purpose. Monte dei Paschi will almost certainly survive as a bank, but Siena almost certainly has lost its bank after almost five hundred and a half centuries.

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