Identifier
Created
Classification
Origin
02ROME3652
2002-07-24 09:39:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Rome
Cable title:
THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
how-toThis record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 01 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
SUMMARY
-------
UNCLAS SECTION 01 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 01 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
SUMMARY
--------------
1. (SBU) THE BANK OF ITALY (BOI),LONG A CORNERSTONE OF
THE ITALIAN ECONOMY, FACES CHANGED RESPONSIBILITIES AND
ROLES. WITH THE ADVENT OF THE EUROPEAN CENTRAL BANK,
THE BOI IS ONE OF THIRTEEN NATIONAL CENTRAL BANKS WITH
A VOICE IN THE SINGLE ECB MONETARY POLICY. THE ECB IS
ORGANIZED WITH "CENTRALIZED DECISION-MAKING,
DECENTRALIZED OPERATIONS." ACTING UNDER ECB DIRECTION,
THE BOI RETAINS AN IMPORTANT OPERATIONAL ROLE IN
PRINTING CURRENCY AND MINTING COINS, MANAGING FOREIGN
RESERVES, CONDUCTING PAYMENT OPERATIONS, MANAGING
REPURCHASE AGREEMENTS. THE BOI REMAINS INDEPENDENT IN
TWO KEY AREAS: BANK SUPERVISION AND ECONOMIC STUDIES.
THE BOI CONTINUES TO HAVE AN AUTHORITATIVE, INDEPENDENT
VOICE IN ITALIAN ECONOMIC POLICY. THIS CABLE EXAMINES
THE ROLE OF THE BANK OF ITALY, IN PARTICULAR, AND, MORE
GENERALLY, THE ROLE OF NATIONAL CENTRAL BANKS OF THE
ECB. WE CONCLUDE THAT THE ECB MAY BE ONLY AS STRONG AS
ITS KEY NATIONAL CENTRAL BANKS. END SUMMARY.
THE BANK OF ITALY
--------------
UNCLASSIFIED
PAGE 03 ROME 03652 01 OF 05 240942Z
2. (U) ITALY'S CENTRAL BANK, THE BANK OF ITALY (BOI),
IS ONE OF THE COUNTRY'S MOST HIGHLY RESPECTED ENTITIES.
FOUNDED IN 1893, THE BANK HAS ENJOYED A POWERFUL,
INFLUENTIAL POSITION IN ITALIAN ECONOMIC AND BUSINESS
LIFE. THE BOI IS LARGELY AUTONOMOUS. ITS GOVERNOR IS
TRADITIONALLY A TECHNOCRAT, RATHER THAN A POLITICIAN,
ALTHOUGH APPOINTED BY THE PRIME MINISTER AND APPROVED
BY THE PARLIAMENT. ITALIAN PRESIDENT CARLO CIAMPI WAS
THE PREVIOUS CENTRAL BANK GOVERNOR. THE BOI IS
EXPECTED TO, AND REGULARLY DOES, VOICE INDEPENDENT AND
OFTEN QUITE CRITICAL OPINIONS ON THE GOVERNMENT'S
ECONOMIC POLICY.
3. (U). BEFORE THE ADVENT OF THE ECB, THE BOI HAD A
STAFF OF OVER 9,400 EMPLOYEES. GOVERNOR ANTONIO FAZIO,
A WELL-RESPECTED ECONOMIST, WAS APPOINTED IN 1993, AND
IS FORMER DEPUTY DIRECTOR GENERAL OF THE BANK. HIS
DEPUTY, VINCENZO DESARIO, ALSO STARTED HIS CAREER IN
THE BANK AND IS EXPERT OF BANKING SUPERVISION. THE
BOI HAD 11 DEPARTMENTS, INCLUDING BANK SUPERVISION,
ECONOMIC RESEARCH, INTERNATIONAL AFFAIRS, NOTE ISSUE,
CENTRAL BANKING AND MARKETS, PAYMENT SYSTEM AND
TREASURY OPERATIONS.
ROLE OF THE NATIONAL CENTRAL BANKS (NCBS)
--------------
4. (U) WHEN THE EUROPEAN CENTRAL BANK (ECB) WAS
ESTABLISHED IN 1998, NATIONAL CENTRAL BANKS (NCBS)
FOUND THEMSELVES STRIPPED OF MANY OF THEIR POWERS. THE
UNCLASSIFIED
PAGE 04 ROME 03652 01 OF 05 240942Z
ECB WAS GIVEN AUTHORITY OVER MONETARY POLICY FOR MEMBER
STATES. AS SUCH, THE CREATION OF THE EUROPEAN CENTRAL
BANK HAS DRAMATICALLY ALTERED THE STRUCTURE AND
RESPONSIBILITIES OF THE BOI. WHILE THE BOI RETAINS
RESPONSIBILITY FOR BANK SUPERVISION AND FOR INDEPENDENT
ECONOMIC ANALYSIS, IT NO LONGER HAS AN INDEPENDENT
MONETARY POLICYMAKING ROLE. INSTEAD, THE BOI AND THE
OTHER MEMBER STATE NCBS TOGETHER CONTRIBUTE TO EURO-
ZONE MONETARY POLICY DECISIONS AND ECONOMIC STABILITY
AND GROWTH. WHILE THE GOVERNING COUNCIL OF THE
EUROPEAN CENTRAL BANK SETS MONETARY POLICY, NCBS
IMPLEMENT THIS POLICY. WHILE THE ECB'S COUNCIL FIXES
CRITERIA FOR INVESTMENTS OF FOREIGN CURRENCY RESERVES
AND SETS FOREIGN EXCHANGE POLICY (ALONG GUIDELINES
APPROVED BY FINANCE MINISTERS) , THE NCBS HOLD AND
INVEST A SUBSTANTIAL PART OF THE RESERVES AND THE
LARGER NCB'S CONDUCT FOREIGN EXCHANGE OPERATIONS.
5. (U) THE ECB HOLDS EURO 46.8 BILLION OF THE
EUROSYSTEM'S EURO 386.7 BILLION IN OFFICIAL RESERVE
ASSETS. THE REST ARE HELD BY NCBS IN ACCORDANCE WITH
ECB GUIDELINES AND INSTRUCTIONS. THE DISTRIBUTION OF
RESERVES HAS BEEN SET BY THE GOVERNING COUNCIL AND
INCLUDES GOLD, JAPANESE YEN AND U.S. DOLLARS. NCBS
MANAGE THEIR OWN FOREIGN CURRENCY RESERVES AS THEY SEE
UNCLASSIFIED
UNCLASSIFIED PTQ6481
PAGE 01 ROME 03652 02 OF 05 240942Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF8165 240942Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5067
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2758
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 02 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 02 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
FIT. THEIR OPERATIONS IN FOREIGN CURRENCY RESERVES,
ABOVE CERTAIN LIMITS, ARE SUBJECT TO ECB NOTIFICATION
OR APPROVAL, IN ORDER TO ENSURE CONSISTENCY WITH THE
MONETARY POLICY OF THE ECB.
6. (U) NCBS ALSO CONDUCT PAYMENT OPERATIONS. TO ENSURE
THE SMOOTH OPERATION OF PAYMENT SYSTEMS, THE TARGET OR
TRANS-EUROPEAN AUTOMATED REAL-TIME GROSS SETTLEMENTS
EXPRESS TRANSFER SYSTEM IS USED. THIS IS A
DECENTRALIZED SYSTEM, CONSISTING OF 15 NATIONAL REAL
TIMES GROSS SETTLEMENT (RTGS) SYSTEMS AND THE ECB
PAYMENT MECHANISM (EPM). THESE ARE INTERLINKED TO
PROVIDE A UNIFORM PLATFORM FOR PROCESSING CROSS BORDER
PAYMENTS IN EURO.
7. (SBU) CARLO MARTENS, DEPUTY HEAD OF THE PAYMENT
SYSTEMS POLICY DIVISION OF THE ECB, NOTED THAT TARGET
EVENTUALLY MIGHT BE CENTRALIZED. THIS MAY BE
PARTICULARLY DESIRABLE WHEN THE EU IS ENLARGED AND
SEVERAL NEW MEMBERS JOIN THE ECB SYSTEM. MARTENS
ENVISIONS AN INCREASINGLY STRONG ECB WITHIN AN ENLARGED
EU. ACCORDING TO MARTENS, NCBS HAVE CONCEDED THIS
UNOFFICIALLY ALREADY, BUT HAVE NOT FIXED A TIME FRAME
UNCLASSIFIED
PAGE 03 ROME 03652 02 OF 05 240942Z
FOR REFORM. (NOTE: SOME NCBS ARE CONCERNED THAT TOO
MANY FUNCTIONS ARE BEING TRANSFERRED TO THE ECB AND
THAT IT MAY BECOME TOO POWERFUL. GOVERNORS AND STAFF
FROM THE BUNDESBANK, THE BANK OF IRELAND AND THE BANK
OF FRANCE HAVE VOICED THIS CONCERN.)
8. (U) THE BANK OF ITALY, LIKE OTHER EUROSYSTEM NCBS,
ISSUES EURO BANKNOTES ACCORDING THE PROCEDURES SET BY
THE ECB GOVERNING COUNCIL. ECB OFFICERS TOLD US THAT,
FOR THE EURO CHANGEOVER ON JANUARY 1, 2002, THE NCBS
WERE RESPONSIBLE FOR PRODUCING EURO BANKNOTES TO MEET
THEIR NATIONAL REQUIREMENTS, AS SET BY THE ECB. NCBS
HAD PRINTED ALL THE FORMATS OF EURO BANKNOTES FROM 5 TO
500 EUROS (92 PERCENT OF THOSE PRINTED). THE REMAINDER
WAS ISSUED BY THE ECB. THE TWELVE NCBS WILL CIRCULATE
ALL EURO BANKNOTES, INCLUDING THOSE ISSUED BY OTHER
NCBS AND BY THE ECB.
9. (U) NCBS WORK CLOSELY WITH THE ECB ON REPURCHASE
AGREEMENTS. THE NCBS COLLECT BIDS AND SEND THEM TO
ECB. THE ECB MAKES A SINGLE RANKING OF ALL BIDS AND
DECIDES ON THE QUANTITY TO ALLOCATE AND THE INTEREST
RATE. THIS DECISION IS THEN COMMUNICATED TO THE NBCS
FOR COMMUNICATION TO THOSE BANKS THAT PARTICIPATED IN
THE TENDER.
10. (U) THE BANK OF ITALY IS UNIQUE IN THAT IT IS THE
ONLY NCB (AMONG ECB MEMBERS) THAT ACTS AS THE NATIONAL
TREASURY. THE BOI COLLECTS PENDING PROCEEDS, EXECUTIVE
PAYMENT ORDERS ISSUED BY CENTRAL AND LOCAL PUBLIC
ADMINISTRATIONS BASED ON BUDGET AND OFF-BUDGET
UNCLASSIFIED
PAGE 04 ROME 03652 02 OF 05 240942Z
PROCEEDINGS; RECEIVES, HOLDS AND RETURNS BOND AND CASH
DEPOSITS; CARRIES OUT OPERATIONS OF PLACING AND
REIMBURSING STATE BONDS.
11. (SBU) THE ECB HAS VIRTUALLY NO DIRECT ROLE IN BANK
SUPERVISION BUT IS A MEMBER OF AND IS THE SECRETARIAT
FOR THE BANKING SUPERVISION COMMITTEE. IN MANY MEMBER
STATES, INCLUDING ITALY, NCBS RETAIN THIS
RESPONSIBILITY. THE BANK OF ITALY IS RESPONSIBLE FOR
THE SUPERVISION OF THE ACTIVITIES OF BANKS AND NON-
BANKING INTERMEDIARIES, PROMOTION AND CONTROL OF
COMPETITION IN THE BANKING SECTOR, MARKET SUPERVISION
AND THE SUPERVISION OF THE DIRECT OFFER OF PAYMENT
SERVICES. THE BOI ALSO IS RESPONSIBLE FOR PRUDENTIAL
SUPERVISION, WHICH INCLUDES FIVE CATEGORIES:
SUPERVISION OF BANKS AND THE BANKING SYSTEM, THE CREDIT
MARKET, FINANCIAL MARKET INTERMEDIARIES, THE PAYMENT
SYSTEM AND WHOLESALE MARKETS FOR GOVERNMENT SECURITIES
AND TRADING OF INTER-BANK FUNDS.
12. (SBU) A PARLIAMENTARY COMMISSION IS LOOKING AT THE
SUPERVISORY RESPONSIBILITIES OF THE BANK OF ITALY. A
REPORT, TO BE ISSUED IN SEPTEMBER 2002, IS EXPECTED TO
RECOMMEND CHANGING THE DISTRIBUTION OF REGULATORY
POWERS BETWEEN THE BANK OF ITALY AND CONSOB, ITALY'S
UNCLASSIFIED
UNCLASSIFIED PTQ6482
PAGE 01 ROME 03652 03 OF 05 240942Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF8174 240942Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5068
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2759
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 03 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 03 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
EQUIVALENT OF THE SEC. THE COMMISSION'S CHAIRMAN,
GIORGIO LA MALFA, HAS STATED THAT "THE PROGRESSIVE
INTEGRATION OF EUROPEAN MARKETS WITHIN THE CENTRAL BANK
RAISES THE QUESTION OF WHETHER BANK OVERSIGHT SHOULD
TAKE PLACE AT A NATIONAL LEVEL OR BE LODGED WITHIN THE
ECB." (WHEN RELEASED, THE COMMISSION'S FINDINGS WILL
BE REPORTED SEPTEL.)
13. (U) THIS POSITION CONTRASTS WITH RECENT STATEMENTS
FROM THE ECB ITSELF. THE GOVERNING COUNCIL STATED
FIRMLY IN MARCH 2001 THAT "THERE ARE VALID REASONS
ARGUING IN FAVOR OF MAINTAINING A STRONG INVOLVEMENT OF
CENTRAL BANKS IN PRUDENTIAL SUPERVISION." THE ECB'S
BANK SUPERVISION COMMITTEE PROVIDES ADVISORY SUPPORT TO
NATIONAL GOVERNMENTS IN DRAFTING BANK SUPERVISION
LEGISLATION. JUKKE VESALA, THE ECB'S SENIOR EXPERT ON
PRUDENTIAL SUPERVISION, TOLD US THAT THE COMMITTEE CAN
REVIEW ANY PROJECT OF REFORM OF NATIONAL BANK
SUPERVISION LEGISLATION AT AN EARLY STAGE.
14. (SBU) NCBS STILL CONDUCT THE TRADITIONAL CENTRAL
BANK FUNCTIONS OF STATISTICAL SERVICES AND ECONOMIC
RESEARCH. THE BANK OF ITALY'S RESEARCH AND STATISTICAL
UNCLASSIFIED
PAGE 03 ROME 03652 03 OF 05 240942Z
SERVICE IS ESSENTIAL, AS IT PROVIDES AN AUTHORITATIVE,
YET INDEPENDENT, TOP-LEVEL ADVISORY SERVICE FOR THE
CONSTITUTIONAL BODIES (GOVERNMENT AND PARLIAMENT) IN
THE FIELD OF ECONOMIC POLICY AND BUDGET AND FINANCIAL
ISSUES.
LEGAL STATUS OF THE BOI AND NATIONAL CENTRAL BANKS
-------------- --------------
15. (U) THE BANK OF ITALY, LIKE EACH OF THE NCBS, IS A
SEPARATE LEGAL ENTITY ACCORDING TO ITALIAN LAW. A
LEGISLATIVE DECREE OF THE ITALIAN PARLIAMENT STATES:
"THE BANK OF ITALY, THE CENTRAL BANK OF THE ITALIAN
REPUBLIC, IS AN INTEGRAL PART OF THE ESCB. IT SHALL
PERFORM THE TASKS AND FUNCTIONS ATTRIBUTED TO IT IN
THAT CAPACITY IN COMPLIANCE WITH THE STATUTE OF THE
ESCB. IT SHALL PURSUE THE OBJECTIVES ASSIGNED TO THE
ESCB IN CONFORMITY WITH ARTICLE 105 OF THE TREATY AND
ACT IN ACCORDANCE WITH THE GUIDELINES AND THE
INSTITUTIONS OF THE ECB".
16. (U) DESPITE BEING SEPARATE LEGAL ENTITIES, THE NCBS
FORM AN INTEGRAL PART OF THE EUROSYSTEM. AS SUCH, THE
BANK OF ITALY AND THE OTHER NCBS CARRY OUT THE TASKS
ASSIGNED TO THE EUROSYSTEM IN ACCORD WITH ECB RULES.
THROUGH THE PARTICIPATION OF THEIR RESPECTIVE
REPRESENTATIVES IN THE VARIOUS ESCB COMMITTEES, THE
BANK OF ITALY AND THE OTHER NCBS ALSO CONTRIBUTE TO THE
WORK OF THE ESCB. THE BANK OF ITALY MAY PERFORM
FUNCTIONS DEEMED APPROPRIATE BY THE ITALIAN GOVERNMENT,
AS LONG AS THE ECB GOVERNING COUNCIL FINDS THAT SUCH
UNCLASSIFIED
PAGE 04 ROME 03652 03 OF 05 240942Z
FUNCTIONS DO NOT INTERFERE WITH THE OBJECTIVES AND
TASKS OF THE EUROSYSTEM.
ESCB COMMITTEES
--------------
17. (U) ESCB COMMITTEES PLAY AN IMPORTANT ROLE IN THE
EUROSYSTEM/ESCB. AT THE REQUEST OF BOTH THE GOVERNING
COUNCIL AND THE EXECUTIVE BOARD, THEY PROVIDE EXPERTISE
IN THEIR FIELDS OF COMPETENCE AND FACILITATE THE
DECISION MAKING PROCESS. ESCB COMMITTEES ARE COMPOSED
OF REPRESENTATIVES OF THE NCBS, INCLUDING THE BANK OF
ITALY AND, WHERE APPROPRIATE, OTHER COMPETENT BODIES,
INCLUDING NATIONAL SUPERVISORY AUTHORITIES IN THE CASE
OF THE BANKING SUPERVISION COMMITTEE. THERE ARE
THIRTEEN ESCB COMMITTEES: ACCOUNTING AND MONETARY
INCOME (AMICO),BANKING SUPERVISION (SBC),BANKNOTE
COMMITTEE (BANCO),EXTERNAL COMMUNICATIONS (ECCO),
INFORMATION TECHNOLOGY (ITC),INTERNAL AUDITORS (IAC),
INTERNATIONAL RELATIONS (IRC),LEGAL (LEGCO),MARKET
OPERATIONS (MOC),MONETARY POLICY (MPC),PAYMENT AND
SETTLEMENT SYSTEM (PSSC) AND STATISTICAL COMMITTEE
(STC). TWO REPRESENTATIVES OF THE BANK OF ITALY
PARTICIPATE IN EACH OF THESE COMMITTEES.
UNCLASSIFIED
UNCLASSIFIED PTQ6483
PAGE 01 ROME 03652 04 OF 05 240943Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF817D 240943Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5069
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2760
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 04 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 04 OF 05 240943Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
ECB EMPLOYMENT
--------------
18. (U) THE BANK OF ITALY AND THE OTHER ELEVEN MEMBER
COUNTRIES HAVE REPRESENTATIVES WITHIN THE ECB. THE
GOVERNOR OF THE BANK OF ITALY IS A MEMBER OF THE ECB
BOARD. OTHER BANK OF ITALY EMPLOYEES ARE TEMPORARILY
TRANSFERRED TO FRANKFURT FOR A THREE-YEAR TERM. THESE
PEOPLE REPRESENT THE ECB AS AN INSTITUTION AND NOT THE
INTEREST OF THEIR COUNTRY OR THEIR NATIONAL BANK.
CERTAIN BANK OF ITALY REPRESENTATIVES PARTICIPATE IN
MONTHLY ECB MEETINGS. OTHERS PARTICIPATE IN WORKING
GROUPS AS REPRESENTATIVES OF THE BANK OF ITALY.
19. (SBU) ACCORDING TO MANFRED KOLBER, ECB
COMMUNICATIONS DIRECTOR, THE ECB EMPLOYS ABOUT 1,100
PEOPLE. THE DISTRIBUTION OF ECB EMPLOYMENT BY
NATIONALITY IS NOT FULLY IN LINE WITH THE NCB'S
CONTRIBUTION TO ECB CAPITAL. KOLBER SAID THAT IN HIS
DEPARTMENT, THE CRITERIA FOR RECRUITMENT ARE
CANDIDATE'S PROFESSIONAL AND LANGUAGE SKILLS. ONLY IN
A CASE OF EQUALLY QUALIFIED CANDIDATES MIGHT
NATIONALITY BECOME A CRITERION, TO COMPENSATE UNDER-
UNCLASSIFIED
PAGE 03 ROME 03652 04 OF 05 240943Z
REPRESENTED MEMBER STATES. ACCORDING TO OTHER SOURCES,
ECB MANAGEMENT IS SENSITIVE TO AVOIDING A BLOATED
BUREAUCRACY, AND IS ATTEMPTING TO KEEP PERSONNEL
NUMBERS DOWN.
20. (SBU) AS ECB RANKS HAVE GROWN, EMPLOYMENT AT NCBS
HAVE FALLEN. THE NUMBER OF JOBS IN THE BOI DECLINED
FROM MID-1998 TO MID-2001 BY ABOUT 400 POSITIONS. AT
ITS PEAK IN 1995, THE BOI EMPLOYED 9,423 PEOPLE. THE
BOI IS PLANNING TO REDUCE EMPLOYMENT BY ANOTHER 20
PERCENT, AROUND 1,500 POSITIONS, PRIMARILY THROUGH
ATTRITION. THE REMAINING BOI STAFF WILL, THUS, NUMBER
AROUND 7,500 PEOPLE. AMONG NCBS, EMPLOYMENT RANGES
FROM THE 16,800 PEOPLE EMPLOYED BY THE BANK OF FRANCE,
AND 15,900 EMPLOYED BY THE BUNDESBANK, TO THE 172
EMPLOYEES OF THE CENTRAL BANK OF LUXEMBOURG. ECB
SOURCES TELL US THAT THE BANK OF FRANCE HAS CUT AROUND
1,500 POSITIONS, BUT THAT OTHERS -- GERMANY AND
PORTUGAL, FOR EXAMPLE -- HAVE KEPT NUMBERS RELATIVELY
STABLE, ALTHOUGH THE GERMAN BUNDESBANK RECENTLY
ANNOUNCED STAFF REDUCTIONS IN CONJUNCTION WITH ITS
REORGANIZATION.
NCB CONTRIBUTIONS TO ECB CAPITAL
--------------
21. (U) THE ECB HAS A TOTAL CAPITAL OF FOUR BILLION
EURO, WHICH IS EXPECTED TO INCREASE TO FIVE BILLION
EURO OVER THE NEXT FEW YEARS. THE PRINCIPAL PURPOSE OF
ECB CAPITAL IS TO ACT AS A RESERVE FUND, PROVIDING THE
BANK WITH SUFFICIENT INCOME WHILE MAINTAINING AN
UNCLASSIFIED
PAGE 04 ROME 03652 04 OF 05 240943Z
APPROPRIATE LEVEL OF FINANCIAL SECURITY. IN ACCORDANCE
WITH ARTICLE 29 OF THE STATUTES OF THE ESCB AND THE
ECB, EACH NCB CONTRIBUTES TO THE ECB'S CAPITAL
ACCORDING TO A WEIGHTING SCHEME. THIS SCHEME IS BASED
ON EACH MEMBER STATE'S SHARE OF EU POPULATION AND
NOMINAL EU GDP. THE ASSIGNED WEIGHTS ARE TO BE
ADJUSTED EVERY FIVE YEARS AND UPON ACCESSION OF ANY NEW
EU MEMBER.
22. (U) THE GOVERNING COUNCIL OF THE ECB IS AUTHORIZED
TO INCREASE THE CAPITAL UP TO A FURTHER E5BN. ON THE
BASIS OF ALL FIFTEEN EU MEMBER STATES, THE BUNDESBANK,
BANK OF FRANCE AND BANK OF ITALY ARE THE THREE LARGEST
CONTRIBUTORS OF ECB'S CAPITAL. HOWEVER, ONLY TWELVE
COUNTRIES CURRENTLY PARTICIPATE IN THE EUROSYSTEM, AND
ONLY THESE COUNTRIES HAVE FULLY PAID THEIR
CORRESPONDING CAPITAL SHARES (81 PERCENT OF FIVE
BILLION EURO). THUS, THE GERMAN SHARE IS 30 PERCENT,
THE FRENCH SHARE IS 20.8 PERCENT AND THE ITALIAN SHARE
IS 18.4 PERCENT. THESE THREE MAKE UP 69.2 PERCENT OF
THE ECB'S AGREED FIVE BILLION EURO CAPITAL. THE
CENTRAL BANKS OF DENMARK, SWEDEN AND THE UNITED KINGDOM
HAVE AGREED TO PAY THE REMAINING NINETEEN PERCENT (950
MILLION EURO) BUT HAVE TO DATE PAID ONLY FIVE PERCENT.
ECB SOURCES TELL US THAT THIS FIVE PERCENT IS DESIGNED
UNCLASSIFIED
UNCLASSIFIED PTQ6484
PAGE 01 ROME 03652 05 OF 05 240943Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF8182 240943Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5070
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2761
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 05 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 05 OF 05 240943Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
TO PRODUCE AN INCOME COVERING COSTS RELATED TO THE
THREE NCBS OUTSIDE THE EUROSYSTEM.
COMMENT
--------------
23. (SBU) DESPITE THE STRENGTH OF THE ECB, THE
EUROSYSTEM IS STILL BASED ON THE BASIC PRINCIPLE OF
"CENTRALIZED DECISION-MAKING, DECENTRALIZED
OPERATIONS". NATIONAL CENTRAL BANKS, INCLUDING THE
BANK OF ITALY, CONTINUE TO PLAY A KEY ROLE. AS THE
EUROSYSTEM EXPANDS THROUGH EU ENLARGEMENT, THE
INEFFICIENCIES AND COSTS OF DECENTRALIZED OPERATIONS
ARE LIKELY TO INCREASE. THIS WILL BE A CHALLENGE FOR
THE EUROSYSTEM. THE LARGEST AND MORE EFFICIENT -- SUCH
AS THE BANK OF ITALY -- ARE EXPECTED TO HOLD THE SYSTEM
TOGETHER. THE EUROSYSTEM MAY ONLY BE AS STRONG AS
THESE KEY NATIONAL CENTRAL BANKS.
25. THIS MESSAGE WAS COORDINATED WITH TREASURY ATTACHE
AT CONGEN FRANKFURT.
SEMBLER
UNCLASSIFIED
PAGE 03 ROME 03652 05 OF 05 240943Z
UNCLASSIFIED
>
2002ROME03652 - Classification: UNCLASSIFIED
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 01 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EFIN PGOV ECON ITALY'>IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
SUMMARY
--------------
1. (SBU) THE BANK OF ITALY (BOI),LONG A CORNERSTONE OF
THE ITALIAN ECONOMY, FACES CHANGED RESPONSIBILITIES AND
ROLES. WITH THE ADVENT OF THE EUROPEAN CENTRAL BANK,
THE BOI IS ONE OF THIRTEEN NATIONAL CENTRAL BANKS WITH
A VOICE IN THE SINGLE ECB MONETARY POLICY. THE ECB IS
ORGANIZED WITH "CENTRALIZED DECISION-MAKING,
DECENTRALIZED OPERATIONS." ACTING UNDER ECB DIRECTION,
THE BOI RETAINS AN IMPORTANT OPERATIONAL ROLE IN
PRINTING CURRENCY AND MINTING COINS, MANAGING FOREIGN
RESERVES, CONDUCTING PAYMENT OPERATIONS, MANAGING
REPURCHASE AGREEMENTS. THE BOI REMAINS INDEPENDENT IN
TWO KEY AREAS: BANK SUPERVISION AND ECONOMIC STUDIES.
THE BOI CONTINUES TO HAVE AN AUTHORITATIVE, INDEPENDENT
VOICE IN ITALIAN ECONOMIC POLICY. THIS CABLE EXAMINES
THE ROLE OF THE BANK OF ITALY, IN PARTICULAR, AND, MORE
GENERALLY, THE ROLE OF NATIONAL CENTRAL BANKS OF THE
ECB. WE CONCLUDE THAT THE ECB MAY BE ONLY AS STRONG AS
ITS KEY NATIONAL CENTRAL BANKS. END SUMMARY.
THE BANK OF ITALY
--------------
UNCLASSIFIED
PAGE 03 ROME 03652 01 OF 05 240942Z
2. (U) ITALY'S CENTRAL BANK, THE BANK OF ITALY (BOI),
IS ONE OF THE COUNTRY'S MOST HIGHLY RESPECTED ENTITIES.
FOUNDED IN 1893, THE BANK HAS ENJOYED A POWERFUL,
INFLUENTIAL POSITION IN ITALIAN ECONOMIC AND BUSINESS
LIFE. THE BOI IS LARGELY AUTONOMOUS. ITS GOVERNOR IS
TRADITIONALLY A TECHNOCRAT, RATHER THAN A POLITICIAN,
ALTHOUGH APPOINTED BY THE PRIME MINISTER AND APPROVED
BY THE PARLIAMENT. ITALIAN PRESIDENT CARLO CIAMPI WAS
THE PREVIOUS CENTRAL BANK GOVERNOR. THE BOI IS
EXPECTED TO, AND REGULARLY DOES, VOICE INDEPENDENT AND
OFTEN QUITE CRITICAL OPINIONS ON THE GOVERNMENT'S
ECONOMIC POLICY.
3. (U). BEFORE THE ADVENT OF THE ECB, THE BOI HAD A
STAFF OF OVER 9,400 EMPLOYEES. GOVERNOR ANTONIO FAZIO,
A WELL-RESPECTED ECONOMIST, WAS APPOINTED IN 1993, AND
IS FORMER DEPUTY DIRECTOR GENERAL OF THE BANK. HIS
DEPUTY, VINCENZO DESARIO, ALSO STARTED HIS CAREER IN
THE BANK AND IS EXPERT OF BANKING SUPERVISION. THE
BOI HAD 11 DEPARTMENTS, INCLUDING BANK SUPERVISION,
ECONOMIC RESEARCH, INTERNATIONAL AFFAIRS, NOTE ISSUE,
CENTRAL BANKING AND MARKETS, PAYMENT SYSTEM AND
TREASURY OPERATIONS.
ROLE OF THE NATIONAL CENTRAL BANKS (NCBS)
--------------
4. (U) WHEN THE EUROPEAN CENTRAL BANK (ECB) WAS
ESTABLISHED IN 1998, NATIONAL CENTRAL BANKS (NCBS)
FOUND THEMSELVES STRIPPED OF MANY OF THEIR POWERS. THE
UNCLASSIFIED
PAGE 04 ROME 03652 01 OF 05 240942Z
ECB WAS GIVEN AUTHORITY OVER MONETARY POLICY FOR MEMBER
STATES. AS SUCH, THE CREATION OF THE EUROPEAN CENTRAL
BANK HAS DRAMATICALLY ALTERED THE STRUCTURE AND
RESPONSIBILITIES OF THE BOI. WHILE THE BOI RETAINS
RESPONSIBILITY FOR BANK SUPERVISION AND FOR INDEPENDENT
ECONOMIC ANALYSIS, IT NO LONGER HAS AN INDEPENDENT
MONETARY POLICYMAKING ROLE. INSTEAD, THE BOI AND THE
OTHER MEMBER STATE NCBS TOGETHER CONTRIBUTE TO EURO-
ZONE MONETARY POLICY DECISIONS AND ECONOMIC STABILITY
AND GROWTH. WHILE THE GOVERNING COUNCIL OF THE
EUROPEAN CENTRAL BANK SETS MONETARY POLICY, NCBS
IMPLEMENT THIS POLICY. WHILE THE ECB'S COUNCIL FIXES
CRITERIA FOR INVESTMENTS OF FOREIGN CURRENCY RESERVES
AND SETS FOREIGN EXCHANGE POLICY (ALONG GUIDELINES
APPROVED BY FINANCE MINISTERS) , THE NCBS HOLD AND
INVEST A SUBSTANTIAL PART OF THE RESERVES AND THE
LARGER NCB'S CONDUCT FOREIGN EXCHANGE OPERATIONS.
5. (U) THE ECB HOLDS EURO 46.8 BILLION OF THE
EUROSYSTEM'S EURO 386.7 BILLION IN OFFICIAL RESERVE
ASSETS. THE REST ARE HELD BY NCBS IN ACCORDANCE WITH
ECB GUIDELINES AND INSTRUCTIONS. THE DISTRIBUTION OF
RESERVES HAS BEEN SET BY THE GOVERNING COUNCIL AND
INCLUDES GOLD, JAPANESE YEN AND U.S. DOLLARS. NCBS
MANAGE THEIR OWN FOREIGN CURRENCY RESERVES AS THEY SEE
UNCLASSIFIED
UNCLASSIFIED PTQ6481
PAGE 01 ROME 03652 02 OF 05 240942Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF8165 240942Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5067
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2758
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 02 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 02 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
FIT. THEIR OPERATIONS IN FOREIGN CURRENCY RESERVES,
ABOVE CERTAIN LIMITS, ARE SUBJECT TO ECB NOTIFICATION
OR APPROVAL, IN ORDER TO ENSURE CONSISTENCY WITH THE
MONETARY POLICY OF THE ECB.
6. (U) NCBS ALSO CONDUCT PAYMENT OPERATIONS. TO ENSURE
THE SMOOTH OPERATION OF PAYMENT SYSTEMS, THE TARGET OR
TRANS-EUROPEAN AUTOMATED REAL-TIME GROSS SETTLEMENTS
EXPRESS TRANSFER SYSTEM IS USED. THIS IS A
DECENTRALIZED SYSTEM, CONSISTING OF 15 NATIONAL REAL
TIMES GROSS SETTLEMENT (RTGS) SYSTEMS AND THE ECB
PAYMENT MECHANISM (EPM). THESE ARE INTERLINKED TO
PROVIDE A UNIFORM PLATFORM FOR PROCESSING CROSS BORDER
PAYMENTS IN EURO.
7. (SBU) CARLO MARTENS, DEPUTY HEAD OF THE PAYMENT
SYSTEMS POLICY DIVISION OF THE ECB, NOTED THAT TARGET
EVENTUALLY MIGHT BE CENTRALIZED. THIS MAY BE
PARTICULARLY DESIRABLE WHEN THE EU IS ENLARGED AND
SEVERAL NEW MEMBERS JOIN THE ECB SYSTEM. MARTENS
ENVISIONS AN INCREASINGLY STRONG ECB WITHIN AN ENLARGED
EU. ACCORDING TO MARTENS, NCBS HAVE CONCEDED THIS
UNOFFICIALLY ALREADY, BUT HAVE NOT FIXED A TIME FRAME
UNCLASSIFIED
PAGE 03 ROME 03652 02 OF 05 240942Z
FOR REFORM. (NOTE: SOME NCBS ARE CONCERNED THAT TOO
MANY FUNCTIONS ARE BEING TRANSFERRED TO THE ECB AND
THAT IT MAY BECOME TOO POWERFUL. GOVERNORS AND STAFF
FROM THE BUNDESBANK, THE BANK OF IRELAND AND THE BANK
OF FRANCE HAVE VOICED THIS CONCERN.)
8. (U) THE BANK OF ITALY, LIKE OTHER EUROSYSTEM NCBS,
ISSUES EURO BANKNOTES ACCORDING THE PROCEDURES SET BY
THE ECB GOVERNING COUNCIL. ECB OFFICERS TOLD US THAT,
FOR THE EURO CHANGEOVER ON JANUARY 1, 2002, THE NCBS
WERE RESPONSIBLE FOR PRODUCING EURO BANKNOTES TO MEET
THEIR NATIONAL REQUIREMENTS, AS SET BY THE ECB. NCBS
HAD PRINTED ALL THE FORMATS OF EURO BANKNOTES FROM 5 TO
500 EUROS (92 PERCENT OF THOSE PRINTED). THE REMAINDER
WAS ISSUED BY THE ECB. THE TWELVE NCBS WILL CIRCULATE
ALL EURO BANKNOTES, INCLUDING THOSE ISSUED BY OTHER
NCBS AND BY THE ECB.
9. (U) NCBS WORK CLOSELY WITH THE ECB ON REPURCHASE
AGREEMENTS. THE NCBS COLLECT BIDS AND SEND THEM TO
ECB. THE ECB MAKES A SINGLE RANKING OF ALL BIDS AND
DECIDES ON THE QUANTITY TO ALLOCATE AND THE INTEREST
RATE. THIS DECISION IS THEN COMMUNICATED TO THE NBCS
FOR COMMUNICATION TO THOSE BANKS THAT PARTICIPATED IN
THE TENDER.
10. (U) THE BANK OF ITALY IS UNIQUE IN THAT IT IS THE
ONLY NCB (AMONG ECB MEMBERS) THAT ACTS AS THE NATIONAL
TREASURY. THE BOI COLLECTS PENDING PROCEEDS, EXECUTIVE
PAYMENT ORDERS ISSUED BY CENTRAL AND LOCAL PUBLIC
ADMINISTRATIONS BASED ON BUDGET AND OFF-BUDGET
UNCLASSIFIED
PAGE 04 ROME 03652 02 OF 05 240942Z
PROCEEDINGS; RECEIVES, HOLDS AND RETURNS BOND AND CASH
DEPOSITS; CARRIES OUT OPERATIONS OF PLACING AND
REIMBURSING STATE BONDS.
11. (SBU) THE ECB HAS VIRTUALLY NO DIRECT ROLE IN BANK
SUPERVISION BUT IS A MEMBER OF AND IS THE SECRETARIAT
FOR THE BANKING SUPERVISION COMMITTEE. IN MANY MEMBER
STATES, INCLUDING ITALY, NCBS RETAIN THIS
RESPONSIBILITY. THE BANK OF ITALY IS RESPONSIBLE FOR
THE SUPERVISION OF THE ACTIVITIES OF BANKS AND NON-
BANKING INTERMEDIARIES, PROMOTION AND CONTROL OF
COMPETITION IN THE BANKING SECTOR, MARKET SUPERVISION
AND THE SUPERVISION OF THE DIRECT OFFER OF PAYMENT
SERVICES. THE BOI ALSO IS RESPONSIBLE FOR PRUDENTIAL
SUPERVISION, WHICH INCLUDES FIVE CATEGORIES:
SUPERVISION OF BANKS AND THE BANKING SYSTEM, THE CREDIT
MARKET, FINANCIAL MARKET INTERMEDIARIES, THE PAYMENT
SYSTEM AND WHOLESALE MARKETS FOR GOVERNMENT SECURITIES
AND TRADING OF INTER-BANK FUNDS.
12. (SBU) A PARLIAMENTARY COMMISSION IS LOOKING AT THE
SUPERVISORY RESPONSIBILITIES OF THE BANK OF ITALY. A
REPORT, TO BE ISSUED IN SEPTEMBER 2002, IS EXPECTED TO
RECOMMEND CHANGING THE DISTRIBUTION OF REGULATORY
POWERS BETWEEN THE BANK OF ITALY AND CONSOB, ITALY'S
UNCLASSIFIED
UNCLASSIFIED PTQ6482
PAGE 01 ROME 03652 03 OF 05 240942Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF8174 240942Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5068
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2759
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 03 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 03 OF 05 240942Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
EQUIVALENT OF THE SEC. THE COMMISSION'S CHAIRMAN,
GIORGIO LA MALFA, HAS STATED THAT "THE PROGRESSIVE
INTEGRATION OF EUROPEAN MARKETS WITHIN THE CENTRAL BANK
RAISES THE QUESTION OF WHETHER BANK OVERSIGHT SHOULD
TAKE PLACE AT A NATIONAL LEVEL OR BE LODGED WITHIN THE
ECB." (WHEN RELEASED, THE COMMISSION'S FINDINGS WILL
BE REPORTED SEPTEL.)
13. (U) THIS POSITION CONTRASTS WITH RECENT STATEMENTS
FROM THE ECB ITSELF. THE GOVERNING COUNCIL STATED
FIRMLY IN MARCH 2001 THAT "THERE ARE VALID REASONS
ARGUING IN FAVOR OF MAINTAINING A STRONG INVOLVEMENT OF
CENTRAL BANKS IN PRUDENTIAL SUPERVISION." THE ECB'S
BANK SUPERVISION COMMITTEE PROVIDES ADVISORY SUPPORT TO
NATIONAL GOVERNMENTS IN DRAFTING BANK SUPERVISION
LEGISLATION. JUKKE VESALA, THE ECB'S SENIOR EXPERT ON
PRUDENTIAL SUPERVISION, TOLD US THAT THE COMMITTEE CAN
REVIEW ANY PROJECT OF REFORM OF NATIONAL BANK
SUPERVISION LEGISLATION AT AN EARLY STAGE.
14. (SBU) NCBS STILL CONDUCT THE TRADITIONAL CENTRAL
BANK FUNCTIONS OF STATISTICAL SERVICES AND ECONOMIC
RESEARCH. THE BANK OF ITALY'S RESEARCH AND STATISTICAL
UNCLASSIFIED
PAGE 03 ROME 03652 03 OF 05 240942Z
SERVICE IS ESSENTIAL, AS IT PROVIDES AN AUTHORITATIVE,
YET INDEPENDENT, TOP-LEVEL ADVISORY SERVICE FOR THE
CONSTITUTIONAL BODIES (GOVERNMENT AND PARLIAMENT) IN
THE FIELD OF ECONOMIC POLICY AND BUDGET AND FINANCIAL
ISSUES.
LEGAL STATUS OF THE BOI AND NATIONAL CENTRAL BANKS
-------------- --------------
15. (U) THE BANK OF ITALY, LIKE EACH OF THE NCBS, IS A
SEPARATE LEGAL ENTITY ACCORDING TO ITALIAN LAW. A
LEGISLATIVE DECREE OF THE ITALIAN PARLIAMENT STATES:
"THE BANK OF ITALY, THE CENTRAL BANK OF THE ITALIAN
REPUBLIC, IS AN INTEGRAL PART OF THE ESCB. IT SHALL
PERFORM THE TASKS AND FUNCTIONS ATTRIBUTED TO IT IN
THAT CAPACITY IN COMPLIANCE WITH THE STATUTE OF THE
ESCB. IT SHALL PURSUE THE OBJECTIVES ASSIGNED TO THE
ESCB IN CONFORMITY WITH ARTICLE 105 OF THE TREATY AND
ACT IN ACCORDANCE WITH THE GUIDELINES AND THE
INSTITUTIONS OF THE ECB".
16. (U) DESPITE BEING SEPARATE LEGAL ENTITIES, THE NCBS
FORM AN INTEGRAL PART OF THE EUROSYSTEM. AS SUCH, THE
BANK OF ITALY AND THE OTHER NCBS CARRY OUT THE TASKS
ASSIGNED TO THE EUROSYSTEM IN ACCORD WITH ECB RULES.
THROUGH THE PARTICIPATION OF THEIR RESPECTIVE
REPRESENTATIVES IN THE VARIOUS ESCB COMMITTEES, THE
BANK OF ITALY AND THE OTHER NCBS ALSO CONTRIBUTE TO THE
WORK OF THE ESCB. THE BANK OF ITALY MAY PERFORM
FUNCTIONS DEEMED APPROPRIATE BY THE ITALIAN GOVERNMENT,
AS LONG AS THE ECB GOVERNING COUNCIL FINDS THAT SUCH
UNCLASSIFIED
PAGE 04 ROME 03652 03 OF 05 240942Z
FUNCTIONS DO NOT INTERFERE WITH THE OBJECTIVES AND
TASKS OF THE EUROSYSTEM.
ESCB COMMITTEES
--------------
17. (U) ESCB COMMITTEES PLAY AN IMPORTANT ROLE IN THE
EUROSYSTEM/ESCB. AT THE REQUEST OF BOTH THE GOVERNING
COUNCIL AND THE EXECUTIVE BOARD, THEY PROVIDE EXPERTISE
IN THEIR FIELDS OF COMPETENCE AND FACILITATE THE
DECISION MAKING PROCESS. ESCB COMMITTEES ARE COMPOSED
OF REPRESENTATIVES OF THE NCBS, INCLUDING THE BANK OF
ITALY AND, WHERE APPROPRIATE, OTHER COMPETENT BODIES,
INCLUDING NATIONAL SUPERVISORY AUTHORITIES IN THE CASE
OF THE BANKING SUPERVISION COMMITTEE. THERE ARE
THIRTEEN ESCB COMMITTEES: ACCOUNTING AND MONETARY
INCOME (AMICO),BANKING SUPERVISION (SBC),BANKNOTE
COMMITTEE (BANCO),EXTERNAL COMMUNICATIONS (ECCO),
INFORMATION TECHNOLOGY (ITC),INTERNAL AUDITORS (IAC),
INTERNATIONAL RELATIONS (IRC),LEGAL (LEGCO),MARKET
OPERATIONS (MOC),MONETARY POLICY (MPC),PAYMENT AND
SETTLEMENT SYSTEM (PSSC) AND STATISTICAL COMMITTEE
(STC). TWO REPRESENTATIVES OF THE BANK OF ITALY
PARTICIPATE IN EACH OF THESE COMMITTEES.
UNCLASSIFIED
UNCLASSIFIED PTQ6483
PAGE 01 ROME 03652 04 OF 05 240943Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF817D 240943Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5069
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2760
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 04 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 04 OF 05 240943Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
ECB EMPLOYMENT
--------------
18. (U) THE BANK OF ITALY AND THE OTHER ELEVEN MEMBER
COUNTRIES HAVE REPRESENTATIVES WITHIN THE ECB. THE
GOVERNOR OF THE BANK OF ITALY IS A MEMBER OF THE ECB
BOARD. OTHER BANK OF ITALY EMPLOYEES ARE TEMPORARILY
TRANSFERRED TO FRANKFURT FOR A THREE-YEAR TERM. THESE
PEOPLE REPRESENT THE ECB AS AN INSTITUTION AND NOT THE
INTEREST OF THEIR COUNTRY OR THEIR NATIONAL BANK.
CERTAIN BANK OF ITALY REPRESENTATIVES PARTICIPATE IN
MONTHLY ECB MEETINGS. OTHERS PARTICIPATE IN WORKING
GROUPS AS REPRESENTATIVES OF THE BANK OF ITALY.
19. (SBU) ACCORDING TO MANFRED KOLBER, ECB
COMMUNICATIONS DIRECTOR, THE ECB EMPLOYS ABOUT 1,100
PEOPLE. THE DISTRIBUTION OF ECB EMPLOYMENT BY
NATIONALITY IS NOT FULLY IN LINE WITH THE NCB'S
CONTRIBUTION TO ECB CAPITAL. KOLBER SAID THAT IN HIS
DEPARTMENT, THE CRITERIA FOR RECRUITMENT ARE
CANDIDATE'S PROFESSIONAL AND LANGUAGE SKILLS. ONLY IN
A CASE OF EQUALLY QUALIFIED CANDIDATES MIGHT
NATIONALITY BECOME A CRITERION, TO COMPENSATE UNDER-
UNCLASSIFIED
PAGE 03 ROME 03652 04 OF 05 240943Z
REPRESENTED MEMBER STATES. ACCORDING TO OTHER SOURCES,
ECB MANAGEMENT IS SENSITIVE TO AVOIDING A BLOATED
BUREAUCRACY, AND IS ATTEMPTING TO KEEP PERSONNEL
NUMBERS DOWN.
20. (SBU) AS ECB RANKS HAVE GROWN, EMPLOYMENT AT NCBS
HAVE FALLEN. THE NUMBER OF JOBS IN THE BOI DECLINED
FROM MID-1998 TO MID-2001 BY ABOUT 400 POSITIONS. AT
ITS PEAK IN 1995, THE BOI EMPLOYED 9,423 PEOPLE. THE
BOI IS PLANNING TO REDUCE EMPLOYMENT BY ANOTHER 20
PERCENT, AROUND 1,500 POSITIONS, PRIMARILY THROUGH
ATTRITION. THE REMAINING BOI STAFF WILL, THUS, NUMBER
AROUND 7,500 PEOPLE. AMONG NCBS, EMPLOYMENT RANGES
FROM THE 16,800 PEOPLE EMPLOYED BY THE BANK OF FRANCE,
AND 15,900 EMPLOYED BY THE BUNDESBANK, TO THE 172
EMPLOYEES OF THE CENTRAL BANK OF LUXEMBOURG. ECB
SOURCES TELL US THAT THE BANK OF FRANCE HAS CUT AROUND
1,500 POSITIONS, BUT THAT OTHERS -- GERMANY AND
PORTUGAL, FOR EXAMPLE -- HAVE KEPT NUMBERS RELATIVELY
STABLE, ALTHOUGH THE GERMAN BUNDESBANK RECENTLY
ANNOUNCED STAFF REDUCTIONS IN CONJUNCTION WITH ITS
REORGANIZATION.
NCB CONTRIBUTIONS TO ECB CAPITAL
--------------
21. (U) THE ECB HAS A TOTAL CAPITAL OF FOUR BILLION
EURO, WHICH IS EXPECTED TO INCREASE TO FIVE BILLION
EURO OVER THE NEXT FEW YEARS. THE PRINCIPAL PURPOSE OF
ECB CAPITAL IS TO ACT AS A RESERVE FUND, PROVIDING THE
BANK WITH SUFFICIENT INCOME WHILE MAINTAINING AN
UNCLASSIFIED
PAGE 04 ROME 03652 04 OF 05 240943Z
APPROPRIATE LEVEL OF FINANCIAL SECURITY. IN ACCORDANCE
WITH ARTICLE 29 OF THE STATUTES OF THE ESCB AND THE
ECB, EACH NCB CONTRIBUTES TO THE ECB'S CAPITAL
ACCORDING TO A WEIGHTING SCHEME. THIS SCHEME IS BASED
ON EACH MEMBER STATE'S SHARE OF EU POPULATION AND
NOMINAL EU GDP. THE ASSIGNED WEIGHTS ARE TO BE
ADJUSTED EVERY FIVE YEARS AND UPON ACCESSION OF ANY NEW
EU MEMBER.
22. (U) THE GOVERNING COUNCIL OF THE ECB IS AUTHORIZED
TO INCREASE THE CAPITAL UP TO A FURTHER E5BN. ON THE
BASIS OF ALL FIFTEEN EU MEMBER STATES, THE BUNDESBANK,
BANK OF FRANCE AND BANK OF ITALY ARE THE THREE LARGEST
CONTRIBUTORS OF ECB'S CAPITAL. HOWEVER, ONLY TWELVE
COUNTRIES CURRENTLY PARTICIPATE IN THE EUROSYSTEM, AND
ONLY THESE COUNTRIES HAVE FULLY PAID THEIR
CORRESPONDING CAPITAL SHARES (81 PERCENT OF FIVE
BILLION EURO). THUS, THE GERMAN SHARE IS 30 PERCENT,
THE FRENCH SHARE IS 20.8 PERCENT AND THE ITALIAN SHARE
IS 18.4 PERCENT. THESE THREE MAKE UP 69.2 PERCENT OF
THE ECB'S AGREED FIVE BILLION EURO CAPITAL. THE
CENTRAL BANKS OF DENMARK, SWEDEN AND THE UNITED KINGDOM
HAVE AGREED TO PAY THE REMAINING NINETEEN PERCENT (950
MILLION EURO) BUT HAVE TO DATE PAID ONLY FIVE PERCENT.
ECB SOURCES TELL US THAT THIS FIVE PERCENT IS DESIGNED
UNCLASSIFIED
UNCLASSIFIED PTQ6484
PAGE 01 ROME 03652 05 OF 05 240943Z
ACTION EUR-00
INFO LOG-00 NP-00 AGRE-00 AID-00 CEA-01 CIAE-00 COME-00
CTME-00 DODE-00 ITCE-00 DOTE-00 SRPP-00 DS-00 EB-00
EXME-00 E-00 FAAE-00 UTED-00 VC-00 FRB-00 H-01
TEDE-00 INR-00 ITC-01 LAB-01 L-00 VCE-00 AC-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 PA-00 PM-00 PRS-00
ACE-00 P-00 SCT-00 SP-00 SSO-00 STR-00 TEST-00
USIE-00 FMP-00 EPAE-00 PMB-00 DSCC-00 DRL-02 G-00
NFAT-00 SAS-00 /009W
-------------- CF8182 240943Z /38
R 240939Z JUL 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 5070
INFO DEPT OF TREASURY WASHDC
EU MEMBER STATES COLLECTIVE
USEU BRUSSELS 2761
AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
AMCONSUL FRANKFURT
UNCLAS SECTION 05 OF 05 ROME 003652
SIPDIS
DEPT FOR EUR/WE, EUR/ERA, EB/IFB/OMA
STATE PASS CEA
STATE PASS FRB FOR GUST
TREAS FOR OASIA HARLOW, JONES
FRANKFURT FOR WALLAR
UNCLASSIFIED
PAGE 02 ROME 03652 05 OF 05 240943Z
SENSITIVE
E.O. 12958: N/A
TAGS: EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EFIN PGOV ECON IT EUN
SUBJECT: THE ECB, NATIONAL CENTRAL BANKS AND THE BANK
OF ITALY
TO PRODUCE AN INCOME COVERING COSTS RELATED TO THE
THREE NCBS OUTSIDE THE EUROSYSTEM.
COMMENT
--------------
23. (SBU) DESPITE THE STRENGTH OF THE ECB, THE
EUROSYSTEM IS STILL BASED ON THE BASIC PRINCIPLE OF
"CENTRALIZED DECISION-MAKING, DECENTRALIZED
OPERATIONS". NATIONAL CENTRAL BANKS, INCLUDING THE
BANK OF ITALY, CONTINUE TO PLAY A KEY ROLE. AS THE
EUROSYSTEM EXPANDS THROUGH EU ENLARGEMENT, THE
INEFFICIENCIES AND COSTS OF DECENTRALIZED OPERATIONS
ARE LIKELY TO INCREASE. THIS WILL BE A CHALLENGE FOR
THE EUROSYSTEM. THE LARGEST AND MORE EFFICIENT -- SUCH
AS THE BANK OF ITALY -- ARE EXPECTED TO HOLD THE SYSTEM
TOGETHER. THE EUROSYSTEM MAY ONLY BE AS STRONG AS
THESE KEY NATIONAL CENTRAL BANKS.
25. THIS MESSAGE WAS COORDINATED WITH TREASURY ATTACHE
AT CONGEN FRANKFURT.
SEMBLER
UNCLASSIFIED
PAGE 03 ROME 03652 05 OF 05 240943Z
UNCLASSIFIED
>
2002ROME03652 - Classification: UNCLASSIFIED