New chief set to open up Italy's banking sector

The appointment of Mario Draghi at the helm of the Bank of Italy is expected to lead to a more open and transparent Italian banking market that is likely to attract foreign buyers, analysts said yesterday.

Italy's government named Goldman Sachs executive Mario Draghi (58) as new Bank of Italy governor to succeed Antonio Fazio, who quit last week over a bank takeover scandal that has tarnished the country's image.

Mr Draghi, a former director general at the Italian treasury, enjoys international respect and is largely expected to show a far less hostile stance than his predecessor on foreign takeover bids for Italian banks. He is also expected to push for more competition among Italian banks, whose retail clients pay some of Europe's highest fees.

"Draghi is an excellent appointment who should be able to quickly re-establish the credibility of the Bank of Italy," said Lorenzo Codogno, an economist at Bank of America. "His appointment should lead to a more open Italian bank market and more competition."

Although attracted by the Italian market, major bank players had refrained from launching bids for Italian banks due to Mr Fazio's perceived opposition to foreign takeovers.

Mr Draghi's open support for European integration and recently approved rules reining in the discretional power of the Bank of Italy governor should mean an end to the subjective decisions that had brought Fazio under such heavy criticism, analysts say. In a speech last year, Mr Draghi said Europe's bank market was generally inefficient and lamented the inability of firms and governments "to overcome national barriers and fully exploit the greater scale that European integration offers".

Dutch bank ABN Amro was the first foreign lender to pry open Italy's closed banking system by taking over Banca Antonveneta. But this was possible only after a fierce battle with Banca Popolare Italiana.

The takeover row triggered a criminal investigation which eventually led to the fall of Mr Fazio, who was criticised for favouring Pop Italiana. "Most market participants are relieved that the old times are over," said Rainer Guntermann, an economist at Dresdner Kleinwort Wasserstein in Frankfurt.

"One of the big criticisms has been that Italy has kind of protected its banking system. Now, with a change here, the international interest in the Italian banking market may also increase."

Spain's Santander and Credit Agricole of France have already bought stakes in Sanpaolo IMI and Banca Intesa respectively, making the two Italian banks potential prey.

ABN is also Capitalia's top shareholder with 9 per cent and some analysts have said the Dutch lender may look beyond Antonveneta once it has completed its acquisition.

Shares in such potential targets rallied after Mr Fazio quit but were flat yesterday, taking the widely expected appointment of Mr Draghi in their stride.

Mr Draghi's first test case may be a review of a €5 billion takeover offer by insurer Unipol for Banca Nazionale del Lavoro. The bid has been contested by Spain's Banco Bilbao Vizcaya Argentaria, which had launched an all-share offer for BNL.

Observers said Mr Draghi was well-placed to decide on the offer and on bank mergers in general as he drafted Italy's rules for company takeovers and corporate governance in 1998, known as the Draghi Law.

Reuters