Bank of Italy governor Antonio Fazio steps down

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ITALY'S central bank chief Antonio Fazio, who is under criminal investigation, succumbed to months of intense pressure yesterday and handed in his resignation - pre-empting government efforts to force him out of office.

Bank of Italy officials said Fazio had turned in his resignation to a member of the bank's Superior Council, which will have to decide today on whether formally to accept it during a previously scheduled meeting.

Fazio, who assumed the lifetime post in 1993, is under investigation by Italian prosecutors for abuse of power for his role in bank takeover battles and reportedly also for insider trading.

His decision, "autonomously taken with a tranquil conscience, is aimed at restoring serenity in the higher interests of the country and of the Bank of Italy," a statement from the bank said.

Fazio has been under investigation for allegedly abusing his position in dealings involving Banca Popolare Italiana Scarl's failed takeover war with Dutch bank ABN Amro Holding NV for Antonveneta. Milan prosecutors are also reportedly investigating Fazio for insider trading in connection with the same bid.

Fazio has repeatedly denied wrongdoing and, since last summer, had resisted mounting calls for his resignation.

On Saturday, deputy premier Gianfranco Fini said he hoped Fazio had the sense to resign.

Fazio's decision came as bankers who have been jailed in the case were questioned by Milan prosecutors, the latest interrogation reportedly a ten-hour session in prison with former Popolare chief executive Gianpiero Fiorani.

Fiorani and several other bankers were jailed last week. Fiorani was picked up on a warrant for market rigging.

The last few days had seen economy minister Giulio Tremonti, a Fazio foe, working to come up with a way to ease the governor out of office.

The government was working on a reform of the central bank that would be attached to a long-awaited bill to protect small savers. It was not immediately clear how Fazio's resignation would affect the reform, scheduled to be discussed today in a special cabinet meeting.

The proposed reform called for fixing a five-year term for the governor that could be renewed or revoked. It also suggests that the governor would be nominated by the government, instead of being a presidential appointment.

Premier Silvio Berlusconi's government has been seeking opposition support for central bank reform to ensure swift approval in parliament.

Italian newspapers including Corriere della Sera and La Repubblica reported yesterday that Fiorani told prosecutors about his close relationship with Fazio and that he enjoyed the favour of the central bank.

Analysts said that Italy's bank battles have underscored the need for more transparent supervision of the sector.

"Irrespective of whether Fazio stays or goes, the striking mallet of the Bank of Italy's diktats seems to be a thing of the past," said one yesterday.

Fazio fact box

• Studied at Massachusetts Institute of Technology under Nobel prize winners Paul Samuelson and Franco Modigliani

• Joined BoI in 1960, aged 24, and became head of the research department at 36

• Constructed its economic forecasting model in the 1970s, which is the basis of the model still used

• Became governor in May 1993, taking over from Carlo Azeglio Ciampi.