Goldman Executive Draghi
Set to Be Bank of Italy Chief
By GABRIEL KAHN
Staff Reporter of THE WALL STREET JOURNAL
December 29, 2005 9:11 a.m.
ROME – Italian Prime Minister Silvio Berlusconi named Mario Draghi, a former treasury official and now a managing director at Goldman Sachs, as the new Bank of Italy governor, in a move aimed at winning back international credibility for the scandal-plagued central bank.
The first order of business for Mr. Draghi, should he be confirmed by Italian President Carlo Azeglio Ciampi, will be to clean up the mess left by Antonio Fazio, who resigned in disgrace last week as prosecutors, investigating him for insider trading and abuse of office, began to close in. The affair surrounding Mr. Fazio raised questions about the powerful and loosely-defined role played by the Bank of Italy in regulating the country's banking sector as well as about the clubby nature of Italian finance.
Mr. Draghi, 58 years old, is also expected to mark a break with one of the most controversial policies of Mr. Fazio, who strongly opposed allowing foreigners to mount takeovers of Italian banks. Mr. Draghi "has a lot of international experience and I don't think he would have any particular motive to defend keeping Italian banks in Italian hands," said Stefano Caselli, a professor of banking and finance at Bocconi University in Milan. The current scandal surrounding the Bank of Italy stems in part from allegations that Mr. Fazio used his powers as the country's top banking regulator to block two foreign banks from taking over a pair of Italian lenders. Mr. Fazio has insisted repeatedly that he acted appropriately and has pledged to cooperate with prosecutors.
Before joining Goldman Sachs in 2002, Mr. Draghi spent 10 years as the director general of the Italian Treasury Ministry, where he led a group known as the "Draghi boys" who pioneered a massive sell-off of state companies. He is also credited with having shaped the legislation that governs Italy's financial markets, the so-called "Draghi law." Mr. Draghi was among several top candidates – all but one of whom were Bank of Italy outsiders – who the government hoped could turn over a new leaf at the central bank.
But Mr. Draghi will face a difficult task in winning back credibility for the Bank of Italy, once considered one of the country's most prestigious institutions. Prosecutors have accumulated massive evidence indicating that Mr. Fazio had gone out of his way to make sure that two Italian lenders – Banca Antonveneta SpA and Banca Nazionale del Lavoro SpA – both of whom were being stalked by foreign banks, stayed in Italian hands.
Leaked wiretaps of his phone conversations last summer appeared to show Mr. Fazio conspiring with the chief executive of Banca Popolare Italiana Scarl, Gianpiero Fiorani, to beat out a rival bid for Antonveneta by the Netherlands' ABN Amro HoldingNV. Prosecutors also revealed that Mr. Fazio and his family had accepted thousands of euros worth of gifts, including designer watches, from Mr. Fiorani.
In another deal, Spain's Banco Bilbao Vizcaya Argentaria SA complained that Mr. Fazio had thrown up regulatory hurdles to its bid for BNL.
Mr. Fazio's efforts to keep out foreigners appear to have backfired, however. BPI's Mr. Fiorani has been thrown in jail and his bid for Antonveneta unraveled as the criminal investigation widened. ABN Amro is now negotiating to take control of Antonveneta. Meanwhile, the chairman of Unipol, Giovanni Consorte, who had been poised to take control of BNL, is now also under criminal investigation and plans to resign next month. Prosecutors are looking closely at the way in which Unipol financed its bid.
Perhaps the biggest blot Mr. Fazio left behind at the Bank of Italy was his refusal to step down even after he emerged as a central focus in the criminal investigations. That created an acute embarrassment for Mr. Berlusconi, who appeared powerless to remove him. Mr. Fazio also continued to represent Italy on powerful organizations such as the European Central Bank, where he was a member of the governing council. Mr. Fazio's intransigence highlighted one of the anachronisms at the Bank of Italy – the post of governor had no term limit, carried broad discretionary powers and operated with little accountability.
As pressure mounted for Mr. Fazio to leave, the government drafted a bill that clipped some of the Bank of Italy's powers, set a term of six years that can be renewed once, and gave the government the power to nominate the new governor. The president, Mr. Ciampi, himself a former Bank of Italy governor who was replaced by Mr. Fazio in 1993, signed the bill into law on Wednesday |
