Embattled Fazio finally resigns

Embattled Bank of Italy governor Antonio Fazio resigned yesterday in the wake of a six-month banking scandal that has seen him investigated for abuse of office and insider trading in judicial enquiries in Rome and Milan.

The scandal, which has also led to the arrests of prominent bankers suspected of embezzlement and market rigging, has dealt a serious blow to the credibility of the Italian banking and business system.

At the heart of the scandal are this summer's takeover battles for two Italian banks, Banca Antoniana Popolare Veneta Spa (Antonveneta) and Banca Nazionale del Lavoro Spa (BNL), which were targeted by Dutch bank ABN AMRO Holding NV and by Spain's Banco Bilbao Vizcaya Argentaria respectively.

With regard to the Antonveneta takeover, Rome and Milan investigators believe that 69-year-old Mr Fazio may have unfairly favoured a bid by the Banca Popolare Italiana (POP) at the expense of ABN AMRO.

Mr Fazio's position became difficult following the arrest last Tuesday of the former POP chief executive, Gianpiero Fiorani, suspected of embezzlement, market rigging and other financial crimes in the wake of POP's unsuccessful takeover bid.

Mr Fazio's position became even more untenable when it emerged on Friday that he was under investigation on charges of "insider trading" in relation to the Antonveneta takeover. In particular, investigators are concerned about the close friendship between Mr Fazio and Mr Fiorani.

Transcripts of a wiretap record of one late night phonecall in July in which Mr Fazio rang Mr Fiorani record Mr Fazio telling Mr Fiorani that he had approved the POP bid for Antoveneta.

In response, Mr Fiorani, calling Mr Fazio by the familiar name of "Tonino", told him that he would like to thank him with a kiss on the forehead.

Although Mr Fazio claimed on Friday that he had "always acted in full respect of the law", his direct involvement in the Milan-based enquiry prompted widespread calls for his resignation.

At first, it seemed that the Governor was determined to stick it out. But in the end, Mr Fazio may have succumbed to pressure from within the Bank of Italy since he announced his resignation after meeting yesterday with two of the bank's superior council members, Paolo Emilio Ferreri and Cesare Mirabelli.

Commenting on the resignation last night, Italy's prime minister Silvio Berlusconi said "given the way things have developed" it was "necessary and important" that the governor resign.