* Governor Visco says BOI not to blame
* ECB chief Draghi was governor when trades done
* Consumer group announces legal action against central bank
* Economy Minister Grilli to address parliament
By Gavin Jones
ROME, Jan 25 The Bank of Italy scrambled on
Friday to deflect charges that it failed to prevent risky
derivatives trades by the country's third-largest lender, which
took place when ECB chief Mario Draghi headed Italy's central
The escalating scandal over Monte dei Paschi di Siena, the
world's oldest bank, has rocketed to the centre of the campaign
for next month's Italian election with concerns that the ailing
bank may need to be nationalised.
Politicians rushed to make capital out of the affair,
alleging lack of control by the Bank of Italy.
Former Economy Minister Giulio Tremonti, an election
candidate for the federalist Northern League, said the central
bank was clearly to blame and had kept the matter hidden.
"I want to understand why their supervisors learn what has
happened from the newspapers, I think they have known everything
since the acquisition of Antonveneta," he said in a television
Monte dei Paschi was under judicial investigation before
this week's derivatives scandal over the 2007 acquisition of
smaller rival Antonveneta for a massive 9 billion euros in cash.
Bank of Italy (BOI) Governor Ignazio Visco said
responsibility for the derivatives trades, which could cost
Monte dei Paschi some $1 billion, lay squarely with the bank's
former management and there had been no failings in the central
However, Corriere della Sera newspaper said a Bank of Italy
document showed that its inspectors expressed concerns over the
two main trades under scrutiny as long ago as 2010, when Draghi
was governor. The paper published large excerpts from the
That appeared to contradict a BOI statement on Wednesday
that the nature of the trades, conducted between 2006 and 2009,
had been "kept hidden" from it and was only recently divulged by
new management appointed last year to turn the bank around.
Draghi was Bank of Italy chief between 2006 and 2011, before
leaving to head the European Central Bank where he has won
glowing plaudits for his role in battling the euro zone crisis.
Visco, appearing at the World Economic Conference in Davos,
gave a spate of interviews to try to play down the bank's role
in the crisis which is now at the centre of the campaign for the
Feb. 24-25 election.
"NOTHING TO HIDE"
"It is wrong to insinuate that there was a lack of
supervision by the Bank of Italy," he told CNBC television,
adding that his institution had nothing to hide and would
cooperate with prosecutors probing the Tuscan lender.
He sidestepped questions on whether Draghi had been aware of
the derivative operations and drew a distinction between the
individual derivative trades, which he said the bank was aware
of, and the damaging link between them which he said was not
known until recently.
"One thing is the two operations that are under
investigation and the other is the connection between the two
which only came to be known in the late months of last year," he
An ECB spokeswoman contacted on Thursday declined to comment
on the matter, saying that it was "the responsibility of
However, as Economy Minister Vittorio Grilli promised to
address parliament on the scandal and a consumers' body
announced legal action against the central bank, many bankers,
politicians and enraged Monte Paschi shareholders kept up the
"The one that really comes out badly is the Bank of Italy,"
said a Milan-based banking analyst who asked not to be named.
"The central bank knew about bits of these trades but it didn't
put it all together. It's ridiculous and it's a bad blow to
An investor with long experience of the Italian market, who
also requested anonymity, said the structured deals undertaken
by Monte Paschi went through the BOI's Treasury office and so
the bank would have seen them "and should have asked more
If the central bank is shown to have been negligent, the
case could have uncomfortable echoes with Ireland, where the
financial regulator was forced to resign in 2009 when it emerged
his staff had known about a loan scandal at Anglo Irish Bank,
the lender at the heart of Ireland's banking crisis.
One of the roots of Monte Paschi's problems - the 2007
Antonveneta deal - also took place under Draghi's watch.
Prosecutors are investigating why the bank paid such a high
price for Antonveneta, stretching its finances to the limit,
just months before the global financial crisis hit.
Tremonti on Thursday directly pointed the finger at Draghi
over the scandal but most politicians have avoided making any
link with the man who headed the Bank of Italy at the time.
This may be because there is far more political capital to
be gained by blaming rival parties than by trying to draw in a
national hero who, as ECB president has bought Italian
government bonds and helped to save Italy from financial
Grilli, who on Thursday had stressed that banking oversight
lay firmly with the Bank of Italy rather than the government, on
Friday tried to distance both Visco and Draghi from blame.
"I have absolute confidence in the Bank of Italy of
yesterday and today," he said in Davos.