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ITALY: Italy bank chief hands in resignation

by Aidan LewisAssociated Press
December 19th, 2005

Italy's central bank chief Antonio Fazio, who is under criminal investigation for alleged abuse of power, handed in his resignation Monday -- pre-empting government efforts to get him out of office.

Fazio submitted his resignation as governor of the Bank of Italy to a member of the bank's Superior Council, which will have to decide Tuesday during a previously scheduled meeting whether to formally accept it, according to a bank statement.

The resignation is widely expected to be accepted, Luigi Leone, head of the union representing the majority of the central bank staff, told Class-CNBC, an Italian-language financial TV channel.

Bank of Italy Director General Vincenzo Desario, the bank's second-highest officer after Fazio, will take the helm of the central bank temporarily, Leone said.

Fazio, who assumed the lifetime post in 1993 after rising through the ranks of the bank, is under investigation by Italian prosecutors for alleged abuse of power for his role in takeover battles and reportedly also for insider trading.

His decision, "autonomously taken with a clear conscience, is aimed at restoring calm in the higher interests of the country and of the Bank of Italy," the central bank said.

Fazio, 69, has been under investigation for allegedly abusing his position in dealings involving Banca Popolare Italiana Scarl's takeover war with Dutch bank ABN Amro Holding NV for Antonveneta. Milan prosecutors are also reportedly investigating Fazio for insider trading in connection with the same bid.

He has repeatedly denied wrongdoing. Since the summer, Fazio had resisted mounting calls for his resignation from politicians both in the government and in the opposition.

Italian Premier Silvio Berlusconi said Monday he had been expecting the resignation "because I expected from Fazio a gesture of seriousness and of responsibility."

"I believe that Fazio is an honest and responsible person," Berlusconi said, adding that he was withholding judgment on the allegations.

"Fazio served his country. Now let's see what will emerge against him. In any case, he who resigns deserves the respect of others for a choice that is made with sacrifice," the conservative premier said during the taping of a state TV talk show.

The European Central Bank said in a statement that its president, Jean-Claude Trichet, was informed by Fazio on Monday of his intention to resign.

"The ECB fully respects this decision," the bank said, describing the resignation as being in the best interests of Italy and Bank of Italy.

Fazio's move came as bankers jailed in the case have been grilled by Milan prosecutors, the latest interrogation reportedly a 10-hour session Sunday in prison with former BPI Chief Executive Gianpiero Fiorani.

Fiorani, who was picked up on a warrant for market rigging, and several other bankers were jailed last week. Italian newspapers reported Monday that Fiorani told prosecutors about his close relationship with Fazio and that he enjoyed the favor of the central bank.

Fazio, who took up his post when Carlo Azeglio Ciampi became premier, had vast powers of surveillance and antitrust in the banking sector in his role as central bank governor.

The last few days had seen Economy Minister Giulio Tremonti, a Fazio foe, trying to come up with a way to ease the governor out of office.

The government was working on a reform of the central bank that would be attached to a long-awaited bill to protect small savers.

The proposed reform called for fixing a five-year term for the governor that could be renewed or revoked. According to the proposal, the governor would be nominated by the government, instead of being an internal nomination approved by the president.

It was not immediately clear how Fazio's resignation would affect the reform, which was scheduled to be discussed Tuesday in a special Cabinet meeting.

Opposition leader Romano Prodi, expected to challenge Berlusconi in spring parliamentary elections, said the opposition wanted to work with the government to find a new bank chief.

"We must work to find a replacement who repairs the damage of the last months and gives back to Italy the credibility and international prestige that our country needs," the Italian news agency ANSA quoted Prodi as saying.

Lorenzo Codogno, co-head of European economics at Bank of America in London, called Fazio's resignation a "necessary step" toward restoring Italy's credibility internationally, but said it was "not a sufficient step."

"The proposed reforms ... fall short," Codogno said, adding that the changes should include separating banking supervision from monetary policy.

The Bank of Italy came under fire last year for allegedly failing to heed signals that something was wrong at Parmalat before a massive fraud scandal engulfed the Italian dairy giant. Tremonti and consumer groups contended that the central bank didn't adequately evaluate the soundness of the investments being offered.

Fazio rejected any blame, saying Parmalat management deserved the fault.



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