Stefano Rellandini/Reuters
The headquarters of Monte dei Paschi in Siena, Italy. At 541 years old, it is the world's oldest bank.
SIENA, ITALY — Cut into the stonework of the imposing Palazzo Salimbeni here is a name that has been entwined in the fortunes of this Tuscan city for five centuries: Monte dei Paschi, or Mount of Pastures.
Massimo Berruti for The International Herald Tribune
Alessandro Profumo said Monte dei Paschi was undone in part by its dealings with several large, international banks.
Since the days of the Medici in Florence, to the north, the banking house of Monte dei Paschi has rained wealth on the people of Siena. For 541 years, it has endured war, plague and panic, and it stands today as the world’s oldest bank.
But beyond the arched entrance of the Salimbeni palace, inside the stately offices of Monte dei Paschi di Siena, a modern disaster has done what the centuries could not. Monte dei Paschi, founded in 1472, has been brought to its knees by 21st-century finance. To howls across Italy, the government has hastily arranged a €3.9 billion, or $5.1 billion, bailout. The widening scandal, which hit at a time of growing economic distress in Italy, has boiled over into an issue in nationwide elections to be held Sunday and Monday.
Nowhere is the shock greater than in Siena. For many here, Monte dei Paschi is more than a bank. It is “Babbo Monte” — Daddy Monte — the city’s largest employer and greatest patron. For as long as anyone can remember, its money has helped pay for myriad charities and civic works, including Siena’s signature annual event, the colorful Palio horse races around the Piazza del Campo each summer. The bank’s largest shareholder, the charitable Monte dei Paschi Foundation, has long operated as a sort of shadow government here.
Now, everyone wonders what will happen without Babbo Monte’s money.
“Nothing falls from the sky anymore,” said Mario Marzucchi, the president of Misericordia di Siena, which provides health care to the city’s poor and operates a fleet of ambulances. The charity is struggling to maintain services and was hoping to renovate its clinic, which is located inside a former Benedictine monastery.
Caterina Barbetti, the director of a cooperative that operates nursery schools, said she has had to cut back free child care to the city’s poor. She used to depend on Babbo Monte, too. “Now,” she said, “he has left.”
Monte dei Paschi has occupied its palace in Siena’s old town since the bank was founded, although it has added modern trappings like bulletproof glass doors. The bank’s archives are located in a vaulted room once used to store weapons. In the piazza out front stands a statue of Sallustio Bandini, an 18th-century Tuscan economist who was an early advocate of free trade.
Where Monte dei Paschi goes from here will be determined largely by Alessandro Profumo, a prominent banking executive brought in from Milan. Mr. Profumo, 56, is no stranger to controversy. In 2010, he was removed as the chief executive of another Italian bank, UniCredit, after the Libyan government acquired a large stake in that bank.
Seated in an office that is decorated with a fresco, begun in the 1400s, of the Virgin Mary protecting the citizens of Siena, Mr. Profumo said Monte dei Paschi was undone in part by its dealings with several large, international banks. JPMorgan Chase and others helped arrange transactions that ultimately hurt the Italian bank. The foreign banks have not been accused of wrongdoing, but Mr. Profumo suggested they profited at Monte dei Paschi’s expense.
“Clearly many investment banks made a lot of money on Monte dei Paschi,” Mr. Profumo said. “I would say too much money.”
The picturesque setting aside, the outlines of what went wrong here are all to familiar. In Siena, as in much of Europe, banks controlled by politicians provided loans and jobs in return for votes, and sponsored charities and civic organizations to buy good will. Vincenzo Loi, the chief financial officer of A.C. Siena, the city’s soccer team and another long-time beneficiary of Monte dei Paschi’s largess, likened the system to the way the Roman emperors kept their citizens happy with bread and circuses. The bank’s troubles have been exploited as an issue by the right and left in Italian politics. At a meeting of the bank’s shareholders in January, Beppe Grillo, a comedian turned populist political leader, delivered a tirade about the bank’s longtime connections to the Democratic Party, which for decades was the dominant political force in the city.
The Patron of Siena, Monte Dei Paschi, Stumbles
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