Bank of Italy chief faces insider trading inquiry

The governor of the Bank of Italy, Antonio Fazio, faced calls for his resignation yesterday as Italian newspapers reported he was under investigation for suspected insider trading.

The embattled central bank governor, who is known for his personal piety and close links to the Vatican, has been under pressure for months over his attempts to protect Italian banks from takeover by foreign rivals.

He has been criticised in particular for his close friendship with Gianpiero Fiorani, the head of the Banca Popolare Italiana, who was arrested for fraud on Tuesday. Mr Fazio allegedly favoured Mr Fiorani against the Dutch Bank ABN Amro in a battle for control of the Banca Antonveneta, another medium-sized north Italian bank.

The Milan daily Corriere della Sera said Mr Fazio was suspected of passing market-sensitive information to Mr Fiorani and his colleagues in the course of the Antonveneta bid.

The crisis has spawned parallels with the Banco Ambrosiano affair, which brought to light illicit links between the Vatican, freemasons and organised crime more than 20 years ago, and has further undermined confidence in the Italian banking system.

Mr Fazio's support for Mr Fiorani may have been influenced by his personal intimacy with the banker as well as by his penchant for the "made in Italy" brand.

Investigators have discovered a Christmas gift list dating from 2003 in Mr Fiorani's computer which showed the central bank governor received presents ranging from Dom Perignon champagne to the writings of St Thomas Aquinas.

The latter was a particularly thoughtful choice, given Mr Fazio's closeness to the conservative Roman Catholic organisation Opus Dei. The governor is reportedly an external supporter of the organisation, sent his children to study in its schools and has a priest relative who is deputy head of its Rome university.

Other gifts received from Mr Fiorani in 2003 included a luxury food hamper, a cashmere jumper, a Sony television set and a Cartier fountain pen. The governor has dismissed the gifts as part of the gift-giving tradition among friends.

In a phone call intercepted by police, Mr Fazio allegedly told Mr Fiorani he was giving the green light to his public offer for the Antonveneta.

Mr Fiorani responded: "Ah Tonino, I'm touched, I've got goose bumps, thank you, thank you. Look, I'd give you a kiss on the forehead right now, if I could."

This and other conversations showed signs of "illegitimate pressure on one side and illicit favouritism on the other, in total violation of the rules governing the system of controls overseen by the Bank of Italy," commented Clementina Forleo, the Milan judge responsible for the case, in an official document.

Mr Fazio has his defenders however. "I have always seen the governor operate with autonomy and ethical conduct beyond reproach. I can't imagine that a pen or a television set would make him deviate from a correct evaluation of the facts," said Paolo Blasi, a member of the Bank of Italy's oversight board.

Mr Blasi told an Italian news agency that he didn't think any other central bank had bothered to regulate such issues, "covering itself in ridicule".

Il Sole 24 Ore, Italy's leading financial daily, was less forgiving. "This is a case of incompetence, if not of collusion," it said yesterday. "It is simply extraordinary that Fazio hasn't yet resigned."