Governor Ciampi and the “Ambrosiano Case”: International Banking Supervision and Monetary Policy
17 Pages Posted: 19 Apr 2021
Date Written: April 14, 2021
Following bank failures in 1974, notably in Germany (Bankhaus Herstatt of Cologne on June 16) and the US (Franklin National Bank of New York on October 8), the Central Bank Governors of the G10 countries decided to set up a Committee at the BIS in Basel to improve quality and enhance the effectiveness of banking supervision. The Eurodollar market and the rise of offshore financial centers had concurred to create an increasingly interlinked web of international banking transactions. The system of national supervision of domestic banking system had to be completed by incisive and coordinated action at international level, also to cope with the vulnerability to frauds and interactions with organized crime. The Basel Committee issued in December 1975 the Concordat, which provided a framework for international banking supervision and made a distinction between solvency and liquidity.
It was within this emerging frame of reference that the Bank of Italy and the G10 Governors dealt with the crisis of the Banco Ambrosiano Group: the crisis had started in 1977 and was concluded with the formal liquidation on August 6 1982. The measures taken by Governor Ciampi and Treasury Minister Andreatta, the dialectical interactions with the Basel Committee, the G10 Governors (banking supervision and monetary policy) and the IOR in the Vatican City are analized and discussed in this article. In preparing the paper the author could benefit from the extremely competent support of the Historical Archives of the Bank of Italy and the access to documents only recently accessible for public consultation. As is shown, the action undertaken by Governor Ciampi and by the Bank of Italy in the Ambrosiano case contributed to the evolution of banking supervision as regards both the revision of the Concordat and, thereafter, the development of a system of mandatory risk-weighted capital ratios. A parallel lasting lesson is that capital adequacy requirements must be complemented by targeted effective supervisory guidance and oversight of corporate governance for banking firms to prevent, insofar as possible, inappropriate and illegal practices, while ensuring accountability of shareholders and top managers for their wrongdoings.
Keywords: Banking Supervision, Banking Regulation, Bank Failure, G10 Governors, Basel Committee on Banking Supervision, Bank of Italy, Governor C. A. Ciampi
JEL Classification: G18, G21, G33, E31 E32
Suggested Citation: Suggested Citation