Italian banking. Year-end accounts

Antonio Fazio, governor of the Bank of Italy, resigns. About time

FIVE months ago, the rise of Gianpiero Fiorani looked unstoppable: the ambitious, well-connected banker seemed to have pulled off a stunning coup, the hostile takeover by Banca Popolare Italiana (BPI), of which he was chief executive, of the much larger Banca Antoniana Popolare Veneta (Antonveneta). Mr Fiorani's fall has been steep, culminating in his arrest on December 13th. Six days later it brought down a much grander figure: his friend and steadfast supporter in that bid, Antonio Fazio, governor of the Bank of Italy.

Mr Fazio's handling of the takeover had politicians on all sides calling for his resignation for months. The law, drawn up to safeguard the central bank's independence, made him all but unsackable and Mr Fazio had defied his critics. The government was preparing a rushed new law, in an effort to unseat him, when he quit. His successor, who the cabinet has agreed will have a renewable six-year term, must now restore both confidence in Italian banking and the reputation of what was once Italy's most respected public body.

Mr Fiorani's arrest and the news that Mr Fazio himself was being investigated for misusing privileged information about Antonveneta appear to have been the final straws. The warrant issued against Mr Fiorani by a Milanese judge claimed he had organised a criminal gang that had in effect enriched itself at the expense of BPI's depositors. The warrant refers scathingly to the central bank, which is responsible for banking supervision. By defending BPI it had, wrote the judge, betrayed savers.

When it bid for Antonveneta, BPI was challenging ABN Amro, a Dutch bank (and the eventual winner). Telephone taps in investigations of suspected market abuse and insider trading revealed that BPI had political support to keep its target in Italian hands. But, noted the judge, keeping banks Italian was in effect a pretext for protecting the flow of large and illicit profits.

The new governor's first test could be to rule on another controversial takeover fight, for Banca Nazionale del Lavoro (BNL). This also involves a foreign bidder. Spain's BBVA, which owns almost 15% of BNL and has been an important shareholder since BNL was privatised in 1998, made an unsuccessful bid in March. A group of property speculators who had bought large stakes in BNL sold to allow Unipol, an Italian insurer, to gain a controlling interest. BBVA's offer lapsed in July.

However, the battle for BNL is not over. Unipol's bid is subject to approval by three regulators. The insurance industry's watchdog has given its opinion, but only to the Bank of Italy. Neither the central bank nor the stockmarket regulator has yet given a nod. Attention is focused on the central bank, which was due to reply to Unipol's request for approval by December 25th, but the deadline has now slipped.

With magistrates probing BPI's operations and with some actors in the BPI-Antonveneta saga also tied up in the Unipol-BNL affair, the banking supervisors will have extra reason for caution. One reason for prudence is that Giovanni Consorte, Unipol's chairman, is reportedly under investigation--although the company says that neither it nor he has been notified of this; another that he is on trial for insider trading in Unipol bonds (which he denies).

In addition, the arrest warrant for Mr Fiorani states that BPI granted Mr Consorte and Unipol's chief executive unsecured loans of euro4m each. These loans, made in December 2004, when BPI was secretly preparing its move on Antonveneta, were used to finance equity trades, perhaps involving derivatives. According to the judge, the Unipol executives each netted euro1.7m from these deals and withdrew their profits by means of banker's drafts.

Had Mr Fazio stayed in office, the central bank would have been in an impossible position: whether he had approved Unipol's bid or denied it, his judgment could have been questioned. Bankers and investors elsewhere in Europe will hope that Italy will now be more welcoming to foreign takeovers. At least, under a new governor Italy's banking industry can make a fresh start.