Mario Draghi – the current president of the European Central Bank – was chief of Italy’s central bank when the loss-making derivatives contracts and alleged fraud at Monte dei Paschi di Siena (MPS) began in 2007, but a senior Bank of Italy source told Reuters that he had little control over what has been termed “ineffective oversight.”
Since the bank’s derivative losses became known at the end of January, after the world’s oldest bank was forced to ask for a 3.9 billion euro ($5.28 billion) taxpayer bailout, questions have been raised about the oversight of Italy’s banking system and the close ties between MPS and the government, fermenting further political debate ahead of Italy’s most important election in years. The resulting commotion has drawn in the central bank, the government, the center-left Democratic party, and even Draghi.
Most of the criticism has come from Monte Paschi shareholders, account holders, and politicians.
The Bank of Italy has said it did “everything in its powers” to regulate Monte Paschi, Reuters reported; it force the bank to raise new capital and pressured executives to resign. These executives are now under criminal investigation…