Bank of Italy fights back in Parmalat affair

Italy's central bank fought back at the weekend against government accusations that it had neglected its regulatory duties and ignored warnings about the multibillion euro fraud at the Parmalat food group.

Officials at the Bank of Italy denied that the bank had received specific early warnings from the centreright government about Parmalat, and said any such warnings should in any case have been sent to Consob, Italy's stock market regulator, and to judicial authorities.

The bank's riposte turned up the heat in a battle that pits Antonio Fazio, the central bank governor, against Giulio Tremonti, the finance minister who is seeking to take advantage of the Parmalat scandal to reform Italy's financial markets regulatory system and cut back the Bank of Italy's powers.

No government minister has yet called for the resignation of Mr Fazio, who was appointed governor for life in 1993. But Alessandro CO, the leader of the populist Northern League party in the Senate, or upper house of parliament, suggested on Friday that Mr Fazio should go.

"By now it is clear from the succession of events that there are very serious responsibilities on the part of the Bank of Italy's governor. If there were still a modicum of decency in Fazio, he should draw the consequences," Mr Ce said.

Other government legislators have suggested over the past week that the governor's job should have a fixed term rather than be a life appointment.
These manoeuvres have prompted opposition politicians to charge that the issue of regulatory reform is at risk of being swamped by the dispute between Mr Tremonti and Mr Fazio.

"This is weakening the credibility of our country on the financial markets," said Piero Fassino, leader of the Democrats of the Left, the largest opposition party.

"The polemics between Tremonti and Fazio are neither useful nor appropriate." Mr Fazio gave a coded warning last Thursday that the government's criticisms of the Bank of Italy might jeopardise not only the bank's independence but the stability of the European central banking system and the European economy.

Describing the strengths of a central bank as "independence, professionalism, authoritativeness and experience", Mr Fazio told a conference in Naples: "These are qualities that constitute a guarantee for the future of the European system of central banks and for the stability of economies."
Mr Fazio is due on January 27 to testify to a parliamentary inquiry into the Parmalat affair.
According to documents submitted by Mr Tremonti to parliament last week, he raised the subject of Parmalat's corporate bonds issuance with Mr Fazio at a meeting on July 2003.

However, the documents do not give any indication that the government or any of Italy's regulators w aware last summer of the sheer scale of the Parmalat fraud.

The Bank of Italy supervises corporate bond issuance but, under Mr Tremon ti's proposed reform, would lose that power to a "sup( authority" that would replace Consob. The central bank would also lose responsibility for overseeing competition in the banking sector to Italy's antitrust watchdog.