MNI EXCLUSIVE:Italy Moves To Make Gold Reserves State Property

By Silvia Marchetti

     ROME (MNI) - Italy's Lower House of parliament has approved a proposal to

make the Bank of Italy's gold reserves state property so that they can be used

as a "financial shield", and to give the government more control over

appointments to the central bank's governing board, officials told MNI.

     The reform, supported by the co-ruling League and Five-Stars Movement but

approved also by centre-right opposition parties in the vote late on Wednesday,

would also grant a mandate to the government to advocate at a European level for

an overhaul of the European Central Bank, which should be more "financially

supportive" of countries facing hard times.

     "The ECB has wide supervision and intervention powers but it does nothing

to help ailing banks or economic sectors. This is asymmetric. The central bank

should be like the Federal Reserve and the Bank of England, which are lenders of

last resort", said Francesca Anna Ruggiero, the Lower House member who sponsored

the proposal, who is a member of the governing coalition's populist Five-Stars

Movement.

     The ECB should also assist European banks with their NPLs, including by

issuing guarantees for their disposal on the market, according to the

legislative proposal. If banking supervision takes place at an EU-level, so

should the management of banks' risk, argued a source from the right-wing

League, which shares the governing coalition.

     The reform, which would allow the government to make appointments to the

governing board of the Bank of Italy, subject to parliamentary approval, also

aims to clarify the ownership of its roughly 2,500 tonnes of gold reserves in

favour of the state. Italy's is the world's third-largest holder of gold, behind

the U.S. and Germany.

     "We would never use the gold to fund debt reduction or budget measures, but

to boost the stability of Italy's financial sector as a form of shield. We want

to know where our gold is globally and repatriate it," explained Ruggiero.

     "We have no clear picture of where part of our gold lies, and we do not

want it at the Bundesbank or anywhere elsewhere", said another Five-Stars

Movement source.

     The reform must now be approved by the Senate.

     What Italy needs, argued the officials, is a public bank which lends money

to the real economy especially in hard times, whether it be the European Central

Bank or the Bank of Italy.

     "Some central banks in Europe are more powerful than others and have

greater freedom of intervention, like the Bank of France, which often steps in

to support firms and families through equity plans. We need common standards

across the bloc and the BOI needs stronger governance," said Ruggiero.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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