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By Silvia Marchetti
     ROME(MNI) - Italy's co-governing League party will soon propose a reform to
boost political control over appointments to the Bank of Italy's governing
board, sources at the party told MNI.
     After a month of stalemate on Tuesday night the government approved the
nomination of three new board members, averting the danger that the Bank would
not fulfil the necessary legal requirements to be able to operate. But the
League gave its green light "with reserve," and was particularly unsatisfied
with the choice of two "external" figures designated by governor Ignazio Visco,
one of whom is seen as critical of government spending plans, a top League
official said.
     "The BOI needs a major overhaul. Its governance model is outdated and needs
to be upgraded in order to meet European standards. The model we take as
reference for this key reform is Germany's Bundesbank", said the source, noting
how the power of appointment of the German entity's board members was more
political, being shared between the federal government and upper house of
parliament in Berlin.
     The League's Five-Star Movement coalition partners have also indicated
support for the proposal to overhaul the BOI.
     At present new governing board members are designated by the Bank's
governor together with the board of directors, before approval by the Council of
Ministers. The League sources also noted that the Bundesbank Act allows for the
possibility of disagreements between the central bank and government.
     Rome's populist government has regularly blamed "bad supervision" by the
Bank of Italy for bank failures and has called on it to work more explicitly
towards Italian interests within the ECB and to be accountable for its actions.
     The League recently also questioned the ownership of the Bank of Italy's
gold reserves, insisting that even though the European Central Bank may handle
the gold and decide how it is used, the reserves actually belong to the Italian
state and people.
     Four new board members will take office on May 9. Current deputy director
Luigi Signorini, whose mandate expired in February, has been reconfirmed while
deputy governor Fabio Panetta has been promoted to senior deputy governor,
making him second in command to Visco. Panetta also chairs the BOI-supervised
IVASS insurance authority.
     The two outsiders are Daniele Franco, director of the Treasury's State
General Accounting Department and a former Bank of Italy official, and
Alessandra Perrazzelli, former country manager at Barclays Italia. Perrazzelli
was chosen by Visco after vetting several other top female figures, but the
League believes she has was not the right choice. Franco is seen as too critical
of the government's fiscal policies and budget measures.
     "The internal human resources within the Bank of Italy should be the
natural reservoir for the board's high-level figures", one of the League
officials said.
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$E$$$,M$I$$$,M$X$$$,MC$$$$,MT$$$$,MX$$$$]