Gianluca Baldassarri is the first person to be arrested in a widening scandal that has rocked the world’s oldest bank and stirred up a financial and political storm before parliamentary elections on 24-25 February.
The prosecutors are investigating Monte dei Paschi’s costly acquisition of smaller rival Antonveneta from Santander in 2007 as well as a series of loss-making derivative and structured finance trades dating back to 2006-09.
They accuse Baldassarri of helping to mislead regulators over the true nature of a secret derivative contract that was found in a safe by the bank’s new management in October 2012.
Baldassarri left Monte dei Paschi shortly after the arrival of new chief executive Fabrizio Viola in January 2012.
Baldassarri has never commented publicly on the allegations.
Monte dei Paschi won final approval last month for a €3.9bn state bailout.