Italy’s Lazio Region sues 11 banks over derivatives

* Regional government claims misled into unfair contracts

* UBS, Merrill Lynch, Citigroup among lenders involved

ROME, Dec 28 (BestGrowthStock) – Italy’s Lazio region sued 11
domestic and foreign banks, claiming 82.86 million euros ($108.7
million) in compensation for alleged hidden costs in derivatives
they purchased.

The regional government led by Prime Minister Silvio
Berlusconi’s People of Freedom party said the contracts “implied
a high level of risk which was not consistent with the mere need
to cover interests rates and forex exchange”.

Lazio is the latest of a series of Italian local authorities
who have sought compensation for allegedly being misled by banks
in swap deals they undertook as a means to reduce their debt.

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

On 2.7 billion euros of derivatives deals subscribed by
Lazio between 1998 and 2007, it is paying reimbursements of 270
million euros per year, of which 143 million is interest. The
Economy Ministry banned new derivatives contracts in 2008,
pending new rules.

Among the banks involved, Lazio is suing UBS
(UBSN.VX: )(UBS.N: ) for 28.7 million euros, Citigroup (C.N: ) for
11.8 million, Merrill Lynch (BAC.N: ) for 11.2 million, Dexia
(DEXI.BR: ) for 8.5 million, JP Morgan (JPM.N: ) for 3.3 million and
Unicredit (CRDI.MI: ) for 3.2 million.

Unicredit on Tuesday declined to comment on Lazio’s
initiative, which it announced late on Monday. The other banks
were not immediately available.

Last week Italy’s financial police seized 22 million euros
from banks. They said they were looking at derivatives deals
worth 1.4 billion euros subscribed to by the Tuscany region,
Florence city council and three other local municipalities, with
banks including Bank of America-Merrill Lynch.

In Italy’s most closely watched case, UBS, Deutsche Bank
(DBKGn.DE: ), Depfa and JPMorgan Chase & Co face aggravated fraud
charges over an interest rate swap on a 1.68 billion eurobond
issued by Milan, the biggest issued by an Italian city.

The banks have denied wrongdoing.
(Reporting Valentina Za in Milan; Writing by Giselda Vagnoni;
Editing by David Holmes)
($1=.7625 Euro)

Italy’s Lazio Region sues 11 banks over derivatives