(Bloomberg) -- Italian lender Banca Monte dei Paschi di Siena SpA is facing a new probe into past financial statements, adding a new chapter to the bank’s legal saga dating back more than 15 years.

The investigation focuses on alleged fraud against the Italian state linked to the bank’s rescue, according to documents seen by Bloomberg. Rome moved to bail out the bank in 2017. Financial newspaper MF previously reported on the new probe.

A judge in Milan instructed public prosecutors to examine Paschi’s methodology for recording bad loans to assess whether it had a minimum capital level to trigger a so-called precautionary recapitalization process and whether public funds were deployed to cover potential hidden losses.

Monte Paschi shares fell as much as 7.1% in Milan on Wednesday. A representative for the bank declined to comment. An Italian Finance Ministry official also declined to comment. 

“While we could see some weakness in the share price after the strength of the bank year to date we think that the strong fundamentals and the solid capital base with a CET-1 above 18% should allow the bank to weather the potential responsibility linked to this new case,” Exane analysts wrote in a note.

The court’s move was spurred by a complaint filed by Giuseppe Bivona. Paschi’s recapitalization was illegitimate and “in breach of European Commission state aid rules,” Bivona said by phone. 

State Holding

The probe comes as Prime Minister Giorgia Meloni looks to complete her government’s exit from its holding in Paschi as agreed with the European Commission.

Paschi has already been subject to years of legal action, though judges have so far overturned convictions involving its conduct.

Italy’s top court in October upheld acquittals over derivatives transactions, dubbed Santorini and Alexandria, allegedly used in 2008 and 2009 to hide Paschi’s losses. And a Milan court cleared former Chief Executive Officer Fabrizio Viola and ex-Chairman Alessandro Profumo of false accounting and market manipulation.

Those rulings have helped reduce legal risk and enabled the lender to release provisions, making it more attractive for potential buyers.

A new probe could be a “completely useless procedural phase,” said Giuseppe Iannaccone, a lawyer who represents former executives at the bank linked to the proceeding, including ex-CEO Marco Morelli. “The Milan prosecutor’s office has already ascertained the perfect good faith of my clients, who respected all the obligations of correct preparation of the financial statements.”

Italy’s Treasury has already sold stakes in Paschi, which was first bailed out in 2009 after souring loans and bad derivatives deals nearly led to its demise.

Paschi piled up more than €20 billion in losses as it burned through the cash that shareholders and taxpayers kept shoveling into it through various financing rounds. The bank has since been restored to a stable footing, allowing the state to begin disposing of its holding.

--With assistance from Alessandra Migliaccio.

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