The Italian government named Goldman Sachs managing director Mario Draghi as its new central banker Thursday, moving to contain the damage at the embattled Bank of Italy 10 days after its governor resigned amid a widening banking scandal.
The decision came after the bank’s high council signed off on Draghi’s nomination in a meeting earlier Thursday.
Pending approval by Italy’s president, Draghi will replace Antonio Fazio, who resigned as Italy’s central banker last week after coming under investigation in two disputed bank takeover attempts.
Draghi’s nomination also came after Premier Silvio Berlusconi’s government pushed through reforms to the central bank that included new procedures for the appointment of its governor. Previously, the Bank of Italy’s high council, or its board of directors, appointed its chief to an open-ended term.
The reform transfers powers of appointment to the government. It also weakens the governor’s powers, reducing his open-ended mandate to a six-year, once-renewable term, and transfers some of the central bank’s regulatory powers to Italy’s competition authority.
Fazio had resisted calls for his resignation for months but finally stepped down after coming under investigation for market rigging and insider trading in connection with two bank takeover scandals. He has denied wrongdoing.
The affair damaged Italy’s international credibility, and Berlusconi’s government had been urged to appoint Fazio’s successor swiftly to limit further damage from the case.
Opposition leader Romano Prodi welcomed the nomination. “I am sure the new governor will know how to restore to this institution the dignity that has been sorely tested,” Prodi said in comments reported by the Apcom news agency.
Analyst Lorenzo Codogno, co-head of European economics at the Bank of America in London, also praised the choice.
“Together with a new law rushed through parliament in the aftermath of Fazio’s resignation, the appointment of Mario Draghi is the first step toward restoring both Bank of Italy’s and the Italian banking system credibility,” Codogno said in a statement.
Draghi is no stranger to the top tiers of Italian finance, but he brings an outsider’s perspective to the job. His nomination marks the first time in 49 years that the Bank of Italy’s top job hasn’t been taken by a senior central bank official.
Draghi was director general of the Italian Treasury from 1991 to 2001, where he headed Italy’s privatization program after 1993.
Other candidates for the post had included Tommaso Padoa-Schioppa, whose term as a European central banker ended earlier this year, and Vittorio Grilli, the current director general at the Treasury.
Former EU commissioner Mario Monti, previously reported to be a top contender, stepped out of the running Saturday, saying he had other plans.