An Italian appeals court in Milan has acquitted JP Morgan, UBS, Deutsche Bank and Depfa Bank of fraud in the sale of derivative instruments.
The judge’s decision overturned a 2012 ruling, which ordered the seizure of €89m and imposed a further fine of €1m on each bank. Nine bank employees who had received suspended jail sentences of up to eight months were also acquitted.
Deutsche Bank said in a statement that it welcomed the verdict, which showed the bank and its employees had “acted properly and in compliance with all laws and regulations”, while UBS said it was “pleased that the Milan appeal court overturned all findings of liability/convictions.”
The trial began in 2010 following a three-year investigation into the four banks, which were accused of hiding the risks in the derivative financial products they sold to the city of Milan while restructuring its debt, promising that the products would save the city money.
The case revolves around a €1.7bn bond issue by Milan on which the banks sold derivatives. The city estimated its potential losses at about €300m, but the banks protested from the outset that they were not responsible.
Many local governments unwittingly signed damaging derivatives deals in the past and the trial – the first of its kind in Italy – was closely watched for the precedent it would set on taking lenders to court.
“The judges have declared that the incompetence of the political class is not proof of a scam, and that therefore anything signed by both bank and city is fully legitimate,” financial daily Sole 24 Ore commented. “From a legal point of view, that sounds just. But politically, it can only be seen as a defeat.”
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