Major banks convicted in Milan fraud case

Deutsche Bank, JP Morgan Chase, UBS and Depfa Bank have been convicted by a judge in Milan for their role in overseeing fraud by their bankers in the sale of derivatives to the city.

Judge Oscar Magi yesterday ordered that about €90 million (HK$926 million) of assets be seized from the banks and that the firms pay sanctions of €1 million each. He also convicted nine bankers of fraud.

The trial, the first of its kind in Italy, was seen as a litmus test for hundreds of local governments facing big losses from complex financial contracts.

The convictions come as global authorities investigate claims that more than a dozen banks altered submissions used to set benchmarks such as Euribor and Libor to profit from bets on interest-rate derivatives. UBS was fined US$1.5 billion by US, British and Swiss regulators for trying to rig global interest rates.

In Italy, opaque derivatives fashioned by securities firms are costing taxpayers more than €1.3 billion, according to June data from the central bank.

"This is part of a pattern that indicates there was no section of the financial system that was free of illegality," Christopher Taylor, a former executive director of the Municipal Securities Rulemaking Board in the US, said before the ruling.