(ANSA) - The European Commission on Tuesday is expected to give its green light to initiating legal action against Italy for its handling of takeover bids by foreign banks seeking to enter the Italian banking sector.
Already last month,European Internal Market Commissioner Charlie McCreevy said he expected to "sign the letter before Christmas for the start of proceedings" against Italy. At the center of the action is Bank of Italy Governor Antonio Fazio, who has been accused of unfairly favouring Italian banks over foreign ones in two recent takeover battles for Italian lenders.
The Italian central banker is alleged to have broken European Union rules on the free movement of capital and the freedom for businesses to operate in other member states.
The move follows a complaint from Dutch bank ABN Amro that the Bank of Italy illegally favoured Italian rival Banca Popolare Italiana (BPI) in the recent tussle for another Italian lender, Banco Antonveneta. ABN Amro eventually prevailed in its bid after Italian judicial probes blocked the BPI operation.
Fazio, 69, is now under judicial investigation in Italy for abuse of office.
Premier Silvio Berlusconi and the opposition have called on Fazio to step down, saying the case risks damaging Italy's international standing and financial market credibility.
But Fazio, who has an open-ended mandate, has resisted all pressure to resign, insisting that he did nothing wrong and has not broken any laws. Published transcripts of wiretaps ordered by magistrates appear to show that Fazio and his wife worked behind the scenes to help BPI and its then chief executive Gianpiero Fiorani - a family friend - against ABN Amro.
Fiorani, who has resigned as BPI's chief executive, is under investigation for alleged price-fixing, insider trading and hindering the work of market regulators as he tried to engineer the failed takeover of Antonveneta - a bank whose market value (about $9.8 billion) was more than three times that of BPI.
Prosecutors are questioning Fazio about his July 11 approval of BPI's bid for Antonveneta and the processes that led to that decision despite a negative internal report.
In September, ABN Amro won its battle for control of Antonveneta by acquiring BPI's shares in the lender. It is the first foreign bank to buy an Italian one.
Spain's No.2 bank, Banco Bilbao Vizcaya Argentaria (BBVA), has also complained about the Bank of Italy, saying it blocked its bid for Banca Nazionale Del Lavoro (BNL). BBVA lost out to the small Italian insurer Unipol but is now challenging the takeover operation in court.
ABN Amro chief Rijkman Groenik said recently that "Fazio's attempt to stop the expansion of big foreign banks on the national market was a strategic error."
The governor has long been accused of discriminating against foreign banks, accusation which he denies. Foreign banks are interested in cracking into the lucrative Italian market because of Italy's high savings quotas and the fact that Italian banks charge among the highest fees in the world for high-street banking services.
The European Commission notified Fazio back in February that it was examining his position on cross-border mergers and acquisitions in the banking sector after complaints of bias from several European banks. But last month, the European Central Bank said Fazio had used the discretionary powers given him by national law when dealing with foreign takeover bids.
"The ECB's Governing Council has concluded that the procedures followed (by the Bank of Italy) during cross-border Italian banking operations were based on national law, which allows an amount of discretionary power which is not necessarily in line with the principles and the objectives of the EU," ECB chief Jean-Claude Trichet said.
Trichet stressed in his statement that this was the ECB's "opinion" and was not meant to influence investigations by Italian authorities or the European Commission.
Fazio's critics have long complained that the governor's lifetime mandate gives him anomalous powers and influence.
Fazio is the only Group of Seven central banker with an open-ended mandate. He is also the highest paid and in 2003, earned a basic $743,000 which was more than four times outgoing American Federal Reserve Chairman Alan Greenspan's salary.
A financial regulation bill which contains a number of important reforms to the Bank of Italy is currently passing through parliament but the measures would only apply to Fazio's successor. The bill includes the introduction of a seven-year limit
to the governor's tenure and the central bank's return to public ownership.
At the moment, the Bank of Italy is mainly owned by private banks and insurance groups - the very institutes which it is tasked with overseeing. The reform would also curb the governor's powers by giving the central bank's senior directors more influence
over decision-making.
