Italy bank stocks hit by Parmalat
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Tanzi: Once on the board of Italian bank Capitalia, the bank with the largest exposure to Parmalat.
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Italian police detained the founder of scandal-struck Parmalat.
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MILAN, Italy (Reuters) -- Parmalat's massive accounting scandal sent shares of Italian banks lower again Monday due to worries about their loans to the crippled group and their past dealings with its top executives.
The spotlight was on Capitalia, the Italian bank with the largest exposure to the food multinational.
Parmalat's founder Calisto Tanzi once sat on Capitalia's board and his ties to the bank's chairman Cesare Geronzi have added to worries for Geronzi, who is already under investigation over the collapse of another food group, Cirio, in 2002.
Tanzi is among nine arrested in what U.S. regulators have called one of the world's biggest corporate fraud scandals.
Newspapers have said Geronzi and Corrado Passera, the chief executive of Banca Intesa -- Italy's biggest bank by assets -- might be called before prosecutors this week.
There was no confirmation from prosecutors or the banks of newspaper reports, published Sunday and Monday.
Newspapers have quoted Tanzi and Parmalat's former finance director Fausto Tonna as telling prosecutors that Geronzi had pressed Tanzi in 1999 to spend 330 million euros ($425 million) to buy a milk firm belonging to Cirio, to which the bank had also lent money.
Capitalia hit back in a statement on Monday, saying it had documents to prove it acted correctly over the deal.
The bank said it was "appalled that comments by people accused of an unprecedented corporate collapse caused by widespread and continuous use of incorrect information... are not properly weighed up by the media."
Capitalia shares were down 1.9 percent at 2.20 euros by lunchtime -- taking their fall in just over a month to 25 percent -- while Intesa was down 2.4 percent. The DJ Stoxx index of European banking stocks was down 1.5 percent.
Intesa will make writedowns to cover between 50 and 60 percent of its 360 million-euro exposure to Parmalat, a financial source said.
Buyback pressure
Traders said Italian banking stocks were also under pressure after Capitalia said on Friday it planned to spend up to 60 million euros to refund clients who bought bonds in Parmalat, Cirio and other firms which subsequently slumped into insolvency.
"It's not an admission of guilt," Capitalia Chief Executive Matteo Arpe was quoted as saying in Monday's Financial Times. "It's an admission that we have a responsibility to protect our clients, who have lost confidence in their banks."
Capitalia has said it has 393 million euros of exposure to Parmalat and has set aside 130 million euros in provisions.
Even before Parmalat's crisis exploded last month Italian banks had already been facing criticism over the sale to investors of bonds issued by Cirio and Argentina, which defaulted in 2002.
Intesa and UniCredito are considering refunds to investors.
Foreign banks are also in the eye of the storm.
Italian police searched the Milan offices of Bank of America for 10 hours on Friday and the former head of the bank's corporate finance unit in Italy, Luca Sala, is among 25 people being investigated by prosecutors in the city.
Sala has denied he worked with Parmalat to support the price of the food group's securities despite being aware of the state of its finances, as stated in a warrant for Friday's search.
Deutsche Bank representatives were quizzed last week by prosecutors, and sources said the German bank may be called back for another meeting with investigators.
Tetra Pak, the Swedish packaging group, has become the latest foreign company named in the Parmalat crisis.
Newspaper Il Sole 24 Ore said Tonna told investigators Tetra Pak helped the Tanzis funnel 70 million euros out of Parmalat via discounts and rebates which went to the Tanzi family.
"The information given in the Italian newspaper worries us. We are now investigating why the the Parmalat finance director is saying this," a Tetra Pak spokesman in Sweden said.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
