A report drafted by the Bank of Italy in 2010 (headed at the time by Mario Draghi, now president of the European Central Bank) shows inspectors were aware that a 2008 trade struck with Deutsche Bank AG was the mirror image of an earlier deal Monte Paschi had with the German lender.

As reported by Bloomberg, the Italian bank was losing about €370m on the earlier transaction, dubbed Santorini, as of December 2008. The new trade posted a gain of roughly the same amount and allowed losses to be s...

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