Italy names Goldman Sachs vice chair Mario Draghi as new central banker

Italy named outsider Mario Draghi, seen in this photo taken in Rome last year during an Italian bankers meeting, as the central bank's new governor on Thursday, moving swiftly to contain the fallout from a banking scandal that caused his predecessor's resignation. The Bank of Italy's high council on Thursday approved the designation of the Goldman Sachs vice chairman, paving the way for his formal nomination by the Italian Cabinet, a member of the council said. PHOTO: AP

Italy on Thursday named Mario Draghi, a vice chairman of Goldman Sachs International, to lead the country's central bank, moving quickly to restore faith in one of its top institutions after a scandal that led to the resignation of his predecessor.

Draghi, who has a long academic background and was a respected chief of Italy's Treasury, is expected to bring calm and gravitas to a post that has been the center of controversy this year. His predecessor, Antonio Fazio, has been accused of impeding two takeovers of Italian banks by foreign institutions; prosecutors contend he also improperly accepted gifts, including expensive watches, rare books and gold necklaces with a total value of US$60,000.

"The new governor will know how to rebuild the dignity of this institution that has been severely tested during the dramatic events that have battered the Italian financial system," Romano Prodi, leader of Italy's opposition political party, said.

The selection of Draghi will "assure the country the prestige and the role that it deserves on the international stage."

Draghi, 58, is a vocal advocate of tearing down remaining national barriers to competition in the EU's still imperfect single market. His move to one of Europe's most influential financial posts is likely to lead to more liberal policies toward foreign takeovers.

At the same time, he will be an important voice on the board of the European Central Bank as it considers further controversial moves to raise interest rates, despite signs of a slow recovery in the European economy. Analysts said Draghi would probably not keep the bank from raising rates.

Fazio, dogged by controversy, resigned from his lifetime appointment as governor of the Bank of Italy last week after 12 years in office. As Italy's chief banking regulator, he was accused of actively blocking bids by two foreign banks, and is the subject of two criminal inquiries in connection with those bids.

As chief of the central bank, Draghi, who earned a PhD in economics from the Massachusetts Institute of Technology, was expected to make it easier for foreign banks to buy Italian banks, which could benefit consumers and businesses with lower bank fees through increased competition.

"The institution and Italy have really suffered a lot, and it will be a very hard job," said Luigi Buttiglione, a former official of the Bank of Italy when Draghi served as an adviser there for one year in 1990. "I am not sure anyone can succeed in regaining confidence, but Draghi can play some good cards."

Draghi has worked at the World Bank and was a professor at the University of Florence during most of the 1980s. But he made his reputation as a top manager when he served as director-general of the Italian Treasury for a decade beginning in 1991 -- a tenure under 10 governments that demonstrated a knack for political impartiality.