Court voids swaps in UniCredit derivatives case

* UniCredit ordered to pay 651,632.43 euros plus interest

* Case stems from 3 contracts signed in 2001-2003

* Court ruled on “merely formal aspect” of case-source

By Ian Simpson

MILAN, Oct 22 (BestGrowthStock) – An Italian court has cancelled
interest rate swaps between UniCredit SpA (CRDI.MI: ) and the city
of Rimini in the first ruling backing a local government in a
derivatives case, Rimini municipal government said on Friday.

UniCredit, Italy’s biggest bank, has been ordered to pay
back Rimini 651,632.43 euros ($906,600), the amount the city had
lost on three rate swap contracts, plus interest, the city said
in a statement on its website.

Rimini, about 240 km (150 miles) north of Rome, was among
hundreds of Italian cities that has faced losses from
derivatives deals. The contracts involve switching fixed rates
on loans to variable ones with banks.

Numerous local governments have taken banks to court. The
Rimini case stemmed from contracts the city signed between 2001
and 2003.

Rimini court ruling, made on Oct. 12, is “the first judicial
precedent favouring a local entity in this type of case”, the
city said.

A source close to UniCredit said the court had not accepted
city officials’ contentions of irregularities in the contracts.

The ruling was on a “merely formal aspect” and the
compensation was well below that sought by Rimini, the source

Economists last year estimated that Italy’s cities and
regional bodies had an exposure to derivatives of about 40
billion euros, with losses of more than 6 billion euros.

The Economy Ministry banned new contracts in 2008 pending
new rules.

In Italy’s most high-level derivatives case, UBS AG
(UBSN.VX: ), Deutsche Bank (DBKGn.DE: ), Germany’s Depfa and
JPMorgan Chase & Co (JPM.N: ) face aggravated fraud charges over
an interest rate swap on a 1.68 billion euro bond issued by
Milan, the biggest issued by an Italian city.
(Reporting by Ian Simpson; Editing by Karen Foster)
($1=.7187 Euro)

Court voids swaps in UniCredit derivatives case