Italy Names New Bank Aides in Iraq Credits Case

In a quick gesture of damage control, the embarrassed Italian government Friday named new leadership for the country’s largest bank amid a scandal over $2.6 billion in unauthorized export credits to Iraq made by a branch in the United States.

Giampiero Cantoni, a well-known socialist who had been heading a bank in Milan, was named to replace Nerio Nesi as chairman of the troubled state-owned Banca Nazionale del Lavoro, known in the financial world by its initials as BNL.

Treasury Minister Guido Carli also named Paolo Savona, a Rome economics professor who had long been one of his advisers, to replace Giacomo Pede as director general of the bank.

Nesi and Pede resigned Thursday night after a tumultuous six-hour emergency meeting of the bank’s board of directors.

The BNL, which had assets of $8 billion at the end of 1988, is one of the world’s 50 largest banks.

After Thursday’s meeting, the Treasury, which owns 76% of BNL, said in a statement that “on the basis of available data” the bank had not suffered any losses as a result of the unauthorized loans made over the past three years by Christopher Drogoul, head of its branch in Atlanta. The bank warned, however, that the loans have meant “an increase in the credit risk because of the concentration of operations toward one particular country.”

As Italian politicians demanded how the loans could have been made without knowledge of officials at BNL’s headquarters in Rome, the bank said it had dismissed Drogoul and asked a magistrate to open a criminal investigation of the 36-year-old American.

According to figures released by BNL, the Atlanta branch authorized loans totaling $2.6 billion in about 2,500 transactions to Iraq without either the authorization or knowledge of BNL officials at North American headquarters in New York, or in Rome. The loans averaged more than $1 million each even though BNL in New York has an individual client lending limit of $500,000.

Of the total, the Atlanta branch had disbursed $1.72 billion to cover agricultural and industrial exports to Iraq by U.S. and European companies, BNL said. The remaining $920 million had been pledged but not yet given out.

There were reports from London on Friday that a small portion of the loans may have been used to finance the export of military technology to Iraq in defiance of an arms sales ban maintained by the United States, Britain and Italy.

From the Italian perspective, the scandal presents less of an economic crisis than a blow to the credibility of the country’s banking system. The last major bank scandal here brought about the collapse of the Banco Ambrosiano in 1982.

Since then, there has been lively debate in Italy over whether there should be greater privatization of a banking system largely state-owned and managed by political appointees.