Italian bank scandal: Governor investigated

Prosecutors have notified the embattled governor of the Bank of Italy that he is under investigation for his role in a takeover battle between two banks, and that they plan to question him, his lawyer said yesterday.

Governor Antonio Fazio was formally notified yesterday, lawyer Franco Coppi said, partly confirming several days of news reports based on anonymous sources.

Coppi said, however, that he would advise Fazio to think carefully about whether to answer prosecutors’ questions, given what he said was the recent spate of leaks and unconfirmed reports that appeared in the media concerning the case.

“The only way to avoid all of this is to keep quiet,” Coppi said.

The lawyer declined to say what exactly Fazio was suspected of, although Italian news agencies had reported that the central banker was being investigated for abuse of power. Coppi also declined to say when prosecutors planned to question Fazio.

The accusations against Fazio centre on his handling of a struggle between Banca Italiana Popolare Scarl and Dutch rival ABN Amro Holding NV for control of Banca Antonveneta SpA.

Wiretapped conversations published in the Italian media suggested Fazio unfairly favoured the Italian bank’s bid. Fazio has denied wrongdoing.

The acquisition struggle has since ended in favour of Amro. On Wednesday, the Bank of Italy announced it was revoking its approval of Popolare’s bid for Antonveneta. The move allows prosecutors to unfreeze Popolare’s 29.5% stake in the Italian bank so that Popolare can sell the controlling stake to Amro.

The case has prompted widespread calls for Fazio’s resignation, including by Premier Silvio Berlusconi, but the governor has been clinging to his job.

The scandal has tarnished the institution’s reputation. It prompted Economy Minister Domenico Siniscalco to resign in protest last week and to criticise the government as ”immobile” in the controversy.

The government cannot directly force the central bank governor to step down, and experts have said that only the bank’s board has the power to oust him because Fazio has an open-ended term.

On Thursday, the board released a statement expressing confidence in the governor.

Berlusconi has named Deputy Premier Giulio Tremonti as the new economy minister. Tremonti, who served as economy minister before Siniscalco, is one of Fazio’s fiercest critics.