Probe Launched into MPS Bank's Mediobanca Acquisition

Italy’s Monte dei Paschi di Siena (MPS), recognized as one of the oldest financial institutions in the country, is now facing scrutiny in Milan. The inquiry probes the bank’s recent acquisition of investment firm Mediobanca, valued at €16 billion ($19 billion), and involves its two primary shareholders. Investigators are examining possible breaches of market regulations associated with this major banking transaction.

MPS acknowledged receiving notifications about allegations against its CEO, Luigi Lovaglio, aged 70, and has pledged full cooperation with the investigating authorities. The bank expressed confidence in clarifying its decisions and reaffirmed its trust in the regulatory systems.

The September completion of the Mediobanca acquisition, backed by the Italian government, represented a significant move in the ongoing trend of mergers transforming Italy's banking sector. Allegations suggest that MPS and its principal investors did not adequately inform Italy’s market watchdog Consob, the European Central Bank (ECB), or the insurance oversight body IVASS regarding their coordinated activities during the acquisition process. Investigators are looking into potential manipulation of the market and interference with regulatory bodies.

In light of these developments, shares of MPS dropped by 4.6% upon market closure. Both the ECB and Consob have refrained from offering immediate statements on the matter.

The bank’s major shareholders include Francesco Gaetano Caltagirone, a prominent construction tycoon, and Delfin, which is owned by Italy's Del Vecchio family, helmed by EssilorLuxottica’s CEO Francesco Milleri. Both parties were critical supporters in MPS’s acquisition plans while holding significant stakes in Mediobanca after acquiring their shares during MPS’s recent re-privatization.

The inquiry involving Lovaglio, Caltagirone, and Milleri has been ongoing since June, with public awareness increasing as recent searches by prosecutors unfolded. Both Delfin and Caltagirone have insisted they acted lawfully and are committed to cooperating with the investigation.

This week, sources revealed that MPS's offices were subjected to searches by authorities. The Milan prosecutorial team on this case includes Roberto Pellicano, Luca Gaglio, and Giovanni Polizzi.

The acquisition of Mediobanca shortly followed the Italian Treasury's divestment of its stake in MPS, reducing it from 68% to nearly 12%, thus enabling the bank’s takeover bid. This investigation not only raises concerns about corporate governance but also questions regulatory oversight in Italy’s financial sector, making it crucial for investors and governmental bodies alike.

As the investigation unfolds, its results could have far-reaching consequences for MPS and its stakeholders, influencing the wider banking and investment climate across Europe.