MNI INSIGHT: Bank Of Italy Board Fears Government Ousters

--Government Could Fail To Reappoint Three Out Of Five Governing Board Members

--Potential Ousters Come As Government Targets Gold Reserves

By Silvia Marchetti

     ROME(MNI) - The Bank of Italy fears three of its five board members will be

ousted by the end of May, after fierce criticism from a populist government

which blames it for tolerating banking failure and is taking aim at the

country's gold reserves, MNI understands.

     Deputy Governor Luigi Signorini's mandate will expire on Feb. 11 and the

government has not yet called a cabinet meeting to decide his fate. On May 31

the terms of both Valeria Sannucci and Salvatore Rossi - second in command after

Governor Ignazio Visco -- will also come to an end.

     Sources close to the renewal process told MNI it was "highly unlikely the

remaining deputy governors will be reappointed for another six years." The

process is a "pure political matter" and "it is clear what the government's

position has been: looking for a scapegoat to feed to voters," people close to

the central bank said.

     The populist 5-Stars Movement and nativist League have launched regular

attacks on the Bank of Italy since their campaigns for last year's election,

pledging to "make those responsible for all recent bank defaults pay," a League

source said.

     "The Bank of Italy is independent, but it cannot be irresponsible. There

have been failures in its supervisory role in recent years, with many lenders

placed under resolution, and savers have had to pay for this. It is not fair,

the supervisors failed to do their job and must go", said a source with ties to

the co-ruling 5 Stars Movement.

     --THE GOVERNMENT'S GOLD?

     Tensions between the government and the central bank are set to escalate

further in coming weeks as the Lower House debates a bill proposed by the League

aimed at clarifying whether Italy's E87 billion in gold reserves belong to the

central bank or to the state.

     The bill, currently being discussed by a legislative finance committee,

will likely be approved given the parliamentary majority held by 5-Stars and the

League. While dismissing any suggestion that the government intends to draw on

the gold for its budget, sources close to the matter said a key objective of the

bill was to make both the Bank of Italy and the European Central Bank more

accountable to nation states.

     "European and monetary treaties on gold holdings are unclear and

overlapping, we believe the only body able to give a definitive answer is the

European Central Bank, which we would like to summon to parliament for a

hearing. Treaties say that governments can and should ask the ECB to brief on

any issues related to its role and functioning which impact individual members",

said the 5-Stars source.

     Bank of Italy data shows reserves of 2,452 tonnes of gold, of which 141

were transferred to the ECB in 1999.

     "We are certain that the gold belongs to the state and to the Italian

people, so why is most of it parked outside of this country, in foreign central

banks? We do not want to use it for budget ends, but neither do we want to let

others have it."

     The 5-Stars Movement official argued that the main concern was how "our

gold is being handled, and where it is. We don't want it to be used by countries

such as Germany just to fund its huge current account surplus."

     --VISCO SECURE

     While the tenure of three of the Bank of Italy's board is in jeopardy,

Governor Visco and a fifth member, Fabio Pannetta, are secure. Visco was

nominated for a second mandate in October 2017 by the former center-left

government, while Pannetta was recently granted a fresh term.

     Of those in danger, Rossi is a key figure. A senior deputy governor, he is

head of Italy's insurance authority IVASS. The sector has been targeted by the

new government with additional taxes in 2019. Signorini is usually in charge of

addressing parliament at key Bank of Italy hearings.

     Deputy governors are reappointed via a joint designation from the prime

minister, Giuseppe Conte, following a decision by the council of ministers, and

Italy's head of state, Sergio Mattarella, who issues the final decree.

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

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