Four banks in Italian fraud trial

DEUTSCHE Bank, JP Morgan Chase, UBS and Germany’s Depfa Bank have been called to stand trial in Italy over a complex derivatives deal with Milan which was designed to reduce interest payments on a €1.68bn (£1.5bn) bond issued by the city.

The outcome of the trial will prove crucial in determining whether the flood gates will be opened for charges against banks by other Italian local governments, which are facing combined losses of around €2.5bn on derivatives contracts, according to Italy’s central bank.

The trial, which begins on 6 May, centres around a 30-year bond issued by Milan in 2005. The city claims the banks falsely represented the deal terms, leaving it with €100m of losses.

All four accused banks yesterday defended their actions. JP Morgan said it is “vigorously” defending the proceedings and that its employees “acted with the highest degree of professionalism and entirely appropriately”.

UBS said no fraud had been committed, adding that Milan was not deceived over the deal since the transactions “were always communicated in a transparent way [and] always autonomously evaluated by the city”.

Deutsche Bank expressed confidence that its people acted with integrity and that the bank would be cleared, while a spokeswoman for Depfa said: “We see no wrongdoing on behalf of Depfa. We will defend our position.”