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Bank of Italy Governor Visco investigated for sale of troubled bank after shareholders’ legal action

by Stefano Elli

Bank of Italy Governor Ignazio Visco is among seven people placed under investigation by public prosecutors in Spoleto, Umbria, as part of a 10-month probe into allegations of corruption, abuse of office and fraud related to the placement of Banca Popolare di Spoleto (BPS) under special administration in 2013.

The case, which investigators intended to keep confidential, was initially reported by the newspaper daily Fatto Quotidiano and found formal confirmation in the prosecutors' records. The case however remains unclear and Visco's role still to be verified.

For now, the involvement of the governor seems to be a routine step given Visco's top role at the Bank of Italy, the banking regulator that proposes and authorizes the special administration of troubled banks, whic is in turn executed by the Economy and Finance Ministry. In Italy, being placed under investigation does not indicate guilt.

The Bank of Italy issued a statement saying it could not comment on the newspaper report, but it noted that the Economy Ministry confirmed the troubled bank’s special administration status, and added that the question of whether it was right to put BPS under special administration was still subject to an appeal before Italy's top administrative court.

The problems of the Spoleto bank started long ago. Public prosecutor Gennaro Iannarone had already worked on BPS, one of the many cooperative “popolari” banks in Italy, accused of balance sheet irregularities which led to the investigation of 14 people, including the bank's former chairman Giovani Antonini (and his son). The case awaits a preliminary hearing on allegations of embezzlement, obstacle to supervision, and fraudulent bankruptcy.

Following this first, main part of the investigation, the bank was put under special administration by the Economy Ministry, as requested by the Bank of Italy, in February 2013. In the same year, the control of the bank was sold, following a decision by the central bank, to Banco di Desio and Brianza. The sale prompted protests by the shareholders of the controlling company, Spoleto crediti e servizi, who saw their shares sharply devalued. The group of shareholders filed a complaint with a regional court (Tar), which however confirmed the legitimacy of the special administration requested by the Bank of Italy.

The shareholders therefore filed an appeal with the Council of State, which instead overturned the Tar administrative court ruling, saying that the special administration is legitimate, but the entire process must be annulled because the Economy Ministry did not provide an analytical valuation.

Following this second ruling, in July the shareholders filed a separate complaint with the prosecutors' office, claiming that if the special administration has to be annulled, the sale of the controlling stakes to Banco di Desio must follow suit. The Ministry however has not interrupted the regime of special administration, which continues today.