BANK OF ITALY PUTS BANK SEPAH ROME UNDER "SPECIAL

S E C R E T ROME 001281 SIPDIS SIPDIS NOFORN STATE FOR EB/ESC/TFS, DAVID NELSON; EUR/WE, KATHLEEN ALLEGRONE, ANDREW YOUNG; NEA/IR TREASURY FOR U/S LEVEY E.O. 12958: DECL: 06/11/2017 TAGS: KNNP PARM PREL EFIN KTFN ETTC ECON UN IR IT SUBJECT: BANK OF ITALY PUTS BANK SEPAH ROME UNDER "SPECIAL ADMINISTRATION" STATUS REF: A. ROME 628 ¶B. ROME 600 Classified By: Economic Minister Counselor Tom Delare for reasons 1.4 (b) and (d). ¶1. (S/NF) The Bank of Italy (BOI) regulator overseeing BOI administration of Bank Sepah Rome since passage of UNSCR 1747 informed Econoff June 8 that BOI "special administration" of the branch is now in place. The Ministry of Finance approved BOI's request to move to a special administration of Bank Sepah Rome after BOI's 60-day "provisional administration" expired (ref A). The special administration period will last 60 days and can be renewed indefinitely. In practical terms, there is no real difference between provisional and special administration, as two BOI administrators will continue to monitor Bank Sepah Rome's day-to-day activities. ¶2. (S/NF) Special administration does not require BOI to shut down Bank Sepah Rome. However, BOI can liquidate Bank Sepah Rome's assets at any time, as BOI has final authority to carry out Italian banking law when a bank is in special administration status. To do so, BOI must show "extraordinary irregularities and losses" (ref B). BOI officials have hinted to us that UNSCR 1747 could be characterized as an "extraordinary irregularity." ¶3. (S/NF) COMMENT: Historically, BOI has used special administration only in extreme cases -- e.g., when a bank has come under mafia control or, in Bank Sepah's case, is in defiance of international law. BOI officials have previously confided to us their desire to see Bank Sepah Rome closed -- but in accordance with Italian banking law. While BOI has a long record of independence and BOI Governor Draghi -- a consummate professional -- has said the branch should close, the GOI could pressure BOI to continue its special administration indefinitely to protect Italy's trade and investment ties with Iran. End comment. Spogli