See January 4th posting for part I of this saga. I am sure the Banks will net out positively on the transactions, with the municipality saving some face for buying something they clearly did not understand.
April 28 (Bloomberg) -- Milan’s financial police seized 476
million euros ($620 million) of assets belonging to UBS AG,
Deutsche Bank AG, JPMorgan Chase & Co. and Depfa Bank Plc as
part of a probe into an alleged fraud.
The police froze the banks’ stakes in Italian companies,
real estate assets and accounts, the financial police said in a
statement today. The assets seized yesterday also include those
of an ex-municipality official and a consultant, the police said.
The City of Milan is suing the four banks after it lost
money on derivatives it bought from the lenders in 2005. The
securities swapped a fixed rate of interest on 1.7 billion euros
of bonds for a variable rate. The city said it was losing 298
million euros on the securities as of June. Milan is among about
600 Italian municipalities that took out 1,000 derivatives
contracts worth 35.5 billion euros in all, the Treasury said.
“Milan is an important case because it can be used as an
example by others,” said Alfonso Scarano, who is heading a
study into the trades by AIAF, a group representing Italian
financial analysts. “This is a unique time for borrowers to
shed light on their potential losses and renegotiate contracts”
to take advantage of interest rates that have fallen to record
lows. AIAF will next week testify before the Italian Senate’s
inquiry into the cities’ use of derivatives contracts.