English translation of the Italian press release for courtesy and convenience only. Please note that in this document, Italian legal, economic, accounting and financial concepts and meanings may be expressed in English terms and not in their original Italian terms. The concepts and the meanings concerned may not be identical to the concepts and meanings described by the same English term as they are conceived in English. In case of any inconsistency between this English translation and the Italian press release, the latter shall prevail.
Banca Monte dei Paschi di Siena S.p.A. (hereinafter the “Bank” or “BMPS”) acknowledges that CONSOB (hereinafter the “Supervisory Authority” or the “Commission”), in accordance with resolution 19459 dated 11 December 2015 (hereinafter the “Resolution”), having concluded the investigation activities ascertained the non-compliance of the consolidated and stand-alone financial statements as of 31 December 2014 and of the semiannual accounts as of 30 June 2015 in respect of the regulation setting forth the criteria of the application of IAS 1, IAS 34 and IAS 39 with specific and exclusive reference to the accounting treatment (on an open account basis or as a CDS derivative) of the items referred to the “Alexandria” transaction which has been settled between the Bank and Nomura International plc (hereinafter “Nomura”) on 23 September 2015.
As a consequence of the above CONSOB requested to the Bank to issue to the market the following information: (i) a description of the international accounting principles that are applicable to the asserted violations; (ii) an outline of the lack of information and incorrectness of the consolidated financial statement as of 31 December 2014 and of the semiannual accounts as of 30 June 2015; (iii) some information aimed to represent the effect of the application of the IAS 8 in connection with the mistakes related to the recognition measurement and presentation of the transaction as a CDS derivative with the consequent accounting of the transaction as a derivative in accordance with the definition of the paragraph 9 of IAS 39.
The Bank acknowledged what is set forth by CONSOB in the Resolution and, precisely:
a) CONSOB overcame the elements of uncertainty relating to the interpretation of the accounting treatment of the “Alexandria” transaction “only after the new information acquired through the investigation activities carried out by the Public Prosecutor of Milan in 2015 that allowed to appreciate the real intention of the parties (i.e. the Bank and Nomura)” insofar that the interpretation of such new information drove CONSOB to consider that the accounting treatment of the “Alexandria” transaction should be carried out as a CDS
derivative and not presented on an open account basis.
b) “The Bank has already disclosed by means of pro-forma financial statements the impacts that an accounting treatment of the transaction as a CDS would have caused on the balance sheet profit and loss and on the net equity as of 31 December 2014 and as of 30 June 2015”.
In connection with the first aspect the Bank, supported by an independent accounting opinion – regardless the complexity of the interpretation of the International Accounting Principles, in particular when referred to structured finance transaction such as the “Alexandria” transaction – does not believe that the accounting facts and circumstances on which basis the “Alexandria” transaction has been treated, would have been changed, from an accounting perspective, in the financial statements as of 31 December 2012 after the restatement. Such circumstances can be confirmed at least until the Bank has been informed regarding the change of the opinion of CONSOB based exclusively on the interpretation of the new information assumed by the Public Prosecutor Office of Milan. The Bank is not in the position to confirm neither to reject CONSOB’s new opinion – based on the interpretation of the information rendered available by the Public
Prosecutor Office of Milan – relating to the “real intention of the parties” at the time of the execution of the “Alexandria” transaction, on this basis CONSOB believes the necessity to account the “Alexandria” transaction as a CDS derivative.
The Bank confirms the validity of the accounting policy choice made in connection with the 2012 restatement and in the subsequent financial years considering the information available from time to time. Having acknowledged, on one side, the evaluations made by the Supervisory Authority after its interpretation of the new information recently produced in connection with the criminal investigation; on the other side, the fact that the “Alexandria” Transaction has been settled in the second part of 2015 (i.e. meaning that the accounting treatment as a CDS derivative does not have any impact on the forward looking statements of the Bank) and considering the possibility to challenge the interpretation of the real intention of the parties in the execution of the agreement, based on discretionary elements, nonetheless the Bank intends to comply with the prescriptions of the Supervisory Authority set forth in the Resolution.
In connection with the second aspect, the Bank clarifies that the pro-forma financial statements attached hereto reflect, as acknowledged by CONSOB, information already disclosed to the market by the Bank in connection with the publication of the consolidated and stand-alone financial statements as of 31 December 2014 and the semiannual account as of 30 June 2015, made respectively on 18.03.2015 and 12.08.2015. Moreover, the Bank clarifies that, starting from the publication of the consolidated and stand-alone financial statements as of 31 December 2012, disclosed to the market pro-forma financial statements included in the year end and semiannual financial statements, the impacts in connection with the accounting treatment of the “Alexandria” transaction, as a CDS derivative, in the statement of assets and liabilities, in the profit and loss account and on the net worth of the Bank.
Having said that, complying with CONSOB prescriptions the information requested to the Bank by the Supervisory Authority are herein disclosed.
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