God's Banker (33 page)

Such was the human dimension of disaster. More important by far, however, were the international implications of that first decision of July 5. Deprived of the support of the Milan parent, the foreign affiliates of Ambrosiano were forced to default on their own repay­ments to the international banks which had lent them money. The Bank of Italy's arguments for withdrawing support were two: first, that only by adopting an uncompromising policy could it exert pressure on the IOR; and second, that the Rome authorities could not be responsible for debts contracted by offshore subsidiaries of Ambrosiano, beyond all control. For the ambiguous "Basle Concor­dat" of 1975, agreed by leading central banks at their "club", the Bank for International Settlements in Basle, to deal with such circumstances, obliged a central bank to come to the aid of a bank on its own territory. It was not necessarily obliged to act as "lender of last resort" for subsidiary holding companies like Ambrosiano Luxem­bourg, and their further appendages. From a legal viewpoint, the Bank of Italy may have been correct, but the decision was to draw a venomous response.

The second decision of that week would also not be without con­troversy. Discreetly the Bank of Italy had started to sound out leading Italian banks about taking part in a "lifeboat" arrangement to prevent Ambrosiano going under. On July 6, the three commission­ers warned Ciampi that Ambrosiano could no longer manage on its own. The choice, they said, lay between a huge injection of new capital, or immediate liquidation. Rapidly, it became clear that the price of the first was the second. Other Italian banks were not prepared to commit unspecified sums without certainty of compensa­tion. And the most obvious compensation was the two highly attrac­tive banks controlled by Ambrosiano; Credito Varesino and above all Banca Cattolica del Veneto, the most profitable single bank in the country.

On July 9 representatives of more than 50 banks belonging to the Italian Banking Association (ABI) met in Milan, but could not agree. In the meantime, however, a select group of major banks had drawn up their own rescue-cum-takeover scheme for Banco Ambrosiano, with the tacit prior endorsement of the Bank of Italy. On that same evening of July 9, after the Milan meeting produced no solution, the plan was launched.

That evening the chairmen and general managers of the six (later to become seven) banks in this secret second group were summoned by Ciampi to the Bank of Italy. The banks involved were a carefully balanced assortment. From the public sector there was the Banca Nazionale del Lavoro (BNL), the largest commercial bank in Italy, the Istituto Bancario San Paolo di Torino, and Istituto Mobiliare Italiano (IMI). The much smaller private sector was represented by Credito Bergamasco of Bergamo, Banca Popolare di Milano and— most fitting of all—Banca San Paolo from Brescia.

History had come full circle, for the Brescia bank was founded in 1889 by that same Monsignor Giuseppe Tovini, who later set up Banco Ambrosiano. Like Ambrosiano, San Paolo di Brescia was profoundly Lombard and "Catholic". Its deputy chairman, Giovanni Bazoli, shared a law practice with Lodovico Montini, the younger brother of the former Pope Paul VI. Tradition, even in this grim hour, had to be respected.

A sombre reception committee awaited the group at the Bank of Italy. It consisted of Andreatta, Ciampi, his deputy Dini, and the commissioners and special auditors down from Milan. The Treasury Minister led off with a stark warning. Without immediate help, Ambrosiano could collapse. But even such aid might not be enough. Ambrosiano could well have to be placed into liquidation—in which case it was essential that a new bank be ready to take its place at once, to avoid the disruption that complete closure would cause for deposi­tors, borrowers and staff of the old Ambrosiano.

For six hours the discussions dragged on, interrupted only by a break for sandwiches. To make matters worse the heat was stifling, as for some reason of "austerity" the central bank's air conditioning had been turned off. The two commissioners Occhiuto and Arduino did not hide their opinion that Ambrosiano was doomed. Bertoni, ever the optimist, argued, however, that conceivably the bank might be salvaged. Some were inclined to believe him, most were more than doubtful.

At last, close to midnight, agreement was reached, and the "pool" was born. The Bank of Italy issued next day a laconic communique, recording the guarantee given by the "pool" banks to make available resources to meet the "possible" short-term needs of Banco Ambro­siano. The statement also noted their readiness to "safeguard the continuity of the bank's activities."

Everyone, with the possible exception of the cheerful Bertoni, knew in fact that liquidation was well-nigh inevitable, and attention shifted to the shape of its successor, to be called Nuovo Banco Ambrosiano. No more than 50 per cent of the new bank's capital would be held by the three state banks, to preserve as much as possible Ambrosiano's tradition of private ownership. The number of the private banks involved meanwhile rose from three to four. Banca Popolare di Milano would hold twenty per cent of the new Ambro­siano, and the other three (including San Paolo of Brescia) ten per cent apiece. The blend was as subtle as the forces which previously played upon both Ambrosiano and the
Corriere,
in the eyes of the politicians its most important asset. The Christian Democrats' say was assured primarily through the private banks, above all Banca Popolare di Milano and its chairman, a formidable lawyer called Piero Schlesinger. The other parties had a voice through the state banks. The Social Democrats were represented through San Paolo di Torino, by its deft chairman Luigi Coccioli; the Socialists in the person of Nerio Nesi, admired for both his political and banking judgement as chairman of Banca Nazionale del Lavoro.

But the agreement did little to lift spirits at Calvi's dying Ambro­siano. The mood was of bleak bewilderment. Ordinary staff were fearful for their jobs; middle and senior management, who had always believed they were employed by the soundest of banks, now found that that remote, rarely glimpsed figure deferentially referred to as
Signor Presidente
had tricked them, like a husband who cheats on his wife. Even those who knew, like Leoni, Botta, and in the last stages Rosone, had probably deluded themselves—as maybe Calvi had—that with "the priests' guarantee", everything would be all right. But what God giveth, he can also take away.

For the priests were becoming if anything still more uncompromis­ing. In the early stages there were signs that the Vatican might at least accept responsibility for the $200 million apparently lent by Calvi's banks in Nassau and Lima directly to the IOR. But on July 23, when the commissioners met for the last time with de Week, Brennan and Cerutti, even that small comfort was removed.

The three investigators appointed by Cardinal Casaroli made clear that the IOR disowned not just the indirect borrowings through Panama, "covered" by the letters of comfort, but the apparently direct ones as well. More letters had been discovered from Calvi, dating from 1976, confirming that the IOR would act merely as a nominee for such deposits from Calvi's banks. The Vatican bank would lend on an equivalent sum to that other Panama shell com­pany, the United Trading Corporation, established back in Novem­ber 1974. Once again, the Vatican was maintaining it had been duped.

All of this only added to the difficulties facing Arduino, the commissioner who was dealing with the foreign creditor banks. Severance of the financial life support system for Ambrosiano's offshore subsidiaries had its first international effect on July 12, when the Midland Bank in London called Ambrosiano Luxembourg into default on its $40 million loan of 1980, after the first repayment of principal was not met. Under the standard "cross-default" clauses contained in such loans, Banco Ambrosiano Holding was automati­cally held to have defaulted on the $75 million financing arranged by National Westminster in 1981, and other borrowings as well.

On July 29, Arduino went to London to tell representatives of more than 200 creditors gathered in the Tower Hotel just how $1,287 million had vanished through a trapdoor in Panama. The fortunate banks who had lent to the Milan parent were clearly protected under the 1975 Basle agreement. But he could offer no assurance that the Bank of Italy would cover the debts of Ambrosiano's foreign affili­ates—still less that the IOR would.

His audience was not pleased. They reminded Arduino they had always dealt through Milan, and that the same people ran Banco Ambrosiano, Banco Ambrosiano Luxembourg and Banco Andino. The Luxembourg company even had the word "bank" in its name. How could the Italian authorities pretend it was a mere holding company, outside its jurisdiction? The central bank's attitude, some­one from a leading Swiss bank warned, could damage Italy's financial reputation. The threat, given the country's need to borrow abroad to help cover a current payments deficit which would reach $5,500 million in 1982, was not to be entirely dismissed.

Arduino listened, and then politely suggested, with appropriate metaphor so soon after the Falklands, that the creditor banks form a task force to handle talks with the Italian authorities. The task force was duly formed, and was to pack no little fire-power. On the other hand, his own wearying stint at Ambrosiano was about to be ended. The very same day, the new auditors reported from Milan that the bank's plight was hopeless; and on August 4 the three commissioners transmitted their formal request that Ambrosiano be liquidated at once. Even Bertoni the optimist had had to give best. The "pool" banks had provided 457 billion lire, but there was nothing to be done. The only question remaining for students of such matters was: which would be liquidated first, Banco Ambrosiano or the Government of Giovanni Spadolini?

In the event, the bank won the race, but narrowly. The torrid Friday of August 6, 1982 was a remarkable day. For the unusually long period of thirteen months, Spadolini's five-party coalition had survived intact. Now, however, at the start of the holiday month, when Italian Governments traditionally are made, not unmade, the Socialists withdrew from the Government, after a Parliamentary defeat. Spadolini had no choice other than to resign. But he delayed his going until Saturday—long enough for Andreatta to summon the meeting of the Interministerial Credit and Savings Committee, which had to take the momentous decision on Calvi's Ambrosiano, for early on the Friday afternoon.

It was for the Treasury Minister to pronounce the death sentence. But first the Governor of the Bank of Italy read out the prosecution's unanswerable case.

Banks may suffer from two fatal diseases: a crisis of solvency, when liabilities exceed assets, or a crisis of liquidity—in other words a run on deposits—when the demands for customers for their money back cannot any longer be met. Sometimes insolvency can be masked (as it long was in the case of Ambrosiano) if the confidence of depositors and lenders is maintained; sometimes, too, a liquidity crisis can be overcome, if a bank can realize enough of its readiest assets to cover withdrawals and convince other depositors that it is sound. But Ambrosiano was terminally ill on both counts.

The bank on its own could meet neither the demands of its foreign creditors, thanks to an unrecoverable $744 million lent to its sub­sidiaries abroad, nor those of depositors at home. In just two months since May 31, deposits had fallen by 25 per cent, and the pace of withdrawals was quickening. The liquidity crisis, Ciampi declared, was irreversible. Simultaneously the bank's balance sheet showed an overall deficit of 480 billion lire, even after taking into account the reserves of over 500 billion lire accumulated by the old Ambrosiano.

Nor was $744 million the end of the problem. Ambrosiano's shareholding in its Luxembourg holding company was now without value, while its provisions against bad debts were insufficient. Also to be written off was the total of 70 billion lire spent on buying shares in itself to prop up the price before the stock market listing. These too were now plainly worthless. Almost superfluously, the Governor of the Bank of Italy recorded two criminal offences committed by the old management: concealment of the fact that $1,287 million had been lent to a single group of overseas borrowers, and the unautho­rized purchase of Ambrosiano shares. Truly they were operations, in Ciampi's words, "beyond every bound of banking logic".

There was little left to be said. That hot Friday afternoon, near the end of the 86th year of its life, the old Banco Ambrosiano died. The declaration of insolvency by a Milan bankruptcy court on August 26 was the merest formality. The scale of the world's most spectacular postwar banking failure was underlined by the final accounts of the Luxembourg holding company for the year to June 30 1982, showing a loss of almost $1,000 million. But the controversy over the disposal of Roberto Calvi's unhandsome legacy still lay ahead.

The complexity of
Italy, and the division of power between a myriad competing interest groups, can so often make procrastination seem a way of life. But when the eleventh hour is about to expire, and real emergency beckons, then decisions can be improvised and taken with conjuror's speed. So it was with the birth of Nuovo Banco Ambrosiano.

As the old Ambrosiano of Roberto Calvi slowly perished, its successor was being readied at hectic pace. The seven pool banks agreed to put up an initial capital of 600 billion lire for the new bank, a colossal figure given that Ambrosiano's deposits had dwindled to little more than 2,000 billion lire. A new statute was drawn up, and a board chosen, while lawyers finalized the terms of the transfer of activities from Banco Ambrosiano to Nuovo Banco Ambrosiano. Not least important, a chairman was found, in the appropriate person of Giovanni Bazoli, a devout Catholic, and vice-chairman of Banca San Paolo di Brescia, the pool bank which had the closest historical links with Calvi's Ambrosiano.