ECB head mentioned in banking scandal

ECB head mentioned in banking scandal

ROME - Reuters
ECB head mentioned in banking scandal

The ill management at Paschi reportedly goes back to the Draghi era. AFP photo

As European Central Bank head Mario Draghi prepares to become banking supervisor for the eurozone, consumer groups claim that under his leadership, Italy’s central bank let scandal-hit Monte Paschi off the hook with woeful oversight.

The roots of the corruption and derivatives scandal at Monte dei Paschi de Siena, the world’s oldest lender, all stem back to when Draghi was Bank of Italy (BoI) governor between 2006 and 2011, and the central bank’s defense of its record has only reinforced the perception it was lax, dilatory and secretive.

Despite being deeply concerned by Monte Paschi as long ago as 2009 and having specific and growing doubts about its operations and accounts, the BoI revealed that it did not summon the bank’s management until late 2011 and took no sanctions until after the executives had stepped down last year.
Meanwhile, Monte Paschi’s shareholders were kept in the dark about all the inspections and complaints that the BoI raised. Prosecutors in the southern Italian city of Trani, who have previously taken on ratings agency Standard and Poor’s, have opened an investigation against the Bank of Italy over accusations it failed in its regulatory duties.

Separately, a Rome court has summoned the BoI to a hearing last weekend over its decision to authorise state loans for the ailing bank. Both cases were brought by consumer groups. The ECB has declined to comment on the Monte Paschi affair.

Monte Paschi is accused of having overpaid for a 9 billion euro purchase of rival Antonveneta in 2007, stretching its finances to the limit.