Reserved banker
The chairman of the Committee of European Banking Supervisors has been thrust into the limelight by the banking stress tests.
Giovanni Carosio is a no-nonsense kind of fellow, a characteristic polished by decades in central banking. He has worked on international financial regulation for more than 20 years, latterly – since September 2009 – as chairman of the London-based Committee of European Banking Supervisors (CEBS).
From that position, he became the face of the EU’s first-ever public bank stress tests, unveiled on 23 July in the wake of the Greek debt crisis. In an eagerly awaited press conference, Carosio showed off a near-native British accent while calmly batting off criticism that the parameters chosen had been too soft, as only seven out of 91 banks assessed failed to make the grade.
“Not only are the stress tests that we applied very severe ones, but they also imply very severe losses,” Carosio told reporters. The markets appeared convinced, albeit temporarily. “August was the calmest month we have had in the past four years, thanks to the combined effect of the stress tests and the deal on Basel III,” an EU official says, referring to a package of reforms to international banking laws and regulations announced on 26 July, reforms that Carosio helped to draft.
The situation is very different now, as the Irish banking crisis raised its head again. But do not blame CEBS for that, the same EU official protests: “Stress tests can only photograph the existing situation, and at that time Irish banks had sufficient capital. This is why it is useful to do them often.”
After the stress-test experience, which uncharacteristically threw him into the limelight, Carosio went back to the quiet business of the central banker: “reserved” is the word most frequently used to describe his attitude. Nevertheless, journalists who have come across him say he is warm and always helpful.
Colleagues, for their part, are full of praise. “He does not talk much but, when he does, he is very competent. He is doing a great job at CEBS,” says a high-ranking colleague at Banca d’Italia, Italy’s central bank. “On every topic, when Giovanni speaks other people listen – and there is this feeling that people have to take a stance on what he says, as he is an opinion-maker,” says an official who has seen him at work in the closed-door meetings on the Basel package. At CEBS, another associate says, his chairmanship style is “to advance decisions, but never to push people into a corner – he is a very smooth operator, a real consensus-builder”.
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He is also described as someone who likes to keep his private life very much to himself. News that he has four children came as a surprise to another acquaintance, a European Commission fonctionnaire who has regularly rubbed shoulders with him in recent years. “He speaks little about his personal life, and I do not even know which football team he supports, if any,” he says.
Born in 1945 in Galatina, in southern Italy, from a Neapolitan family, Carosio moved to Rome, where, in 1967, he graduated with top marks in economics. That achievement opened the doors to Banca d’Italia (or ‘Bankitalia’, as it is often known), which arguably remains Italy’s most respected institution, despite the damage inflicted on its reputation by the controversial management of Antonio Fazio, who resigned as governor in 2005.
Fact File
Curriculum Vitae
1945: Born, Galatina1967: Graduated from La Sapienza University, Rome
1969-70: Postgraduate studies at King’s College, Cambridge
1970-85: Economic research department, Banca d’Italia
1985-95: Banking supervision department, Banca d’Italia
1987-: Member, Basel Committee on Banking Supervision
1993-2004: Head of banking supervision department, Banca d’Italia
2004-06: Managing director for central banking and markets, Banca d’Italia
2006-07: Managing director for banking and financial supervision, Banca d’Italia
2007-: Deputy director-general, Banca d’Italia
2009-: Chairman, Committee of European Banking Supervisors
2009-: Member of the Financial Stability Board established by the G20
Over 65 years of republican government, two Italian presidents and two prime ministers have issued from Palazzo Koch, Bankitalia’s imposing 19th century headquarters in central Rome.
It may soon produce another, if the sitting governor Mario Draghi – who has done much to restore the institution’s standing to pre-Fazio levels – can ever be persuaded to fill the void that would be left if Silvio Berlusconi were to fall.
“Carosio belongs to the class of civil servants that has kept up Italy’s credibility through decades of upheavals,” a diplomat remarks.
His career started in 1970, after an 18-month hiatus in military service and a postgraduate stint at King’s College, Cambridge, supported by a scholarship from Bankitalia. Starting at Bankitalia’s research department, he moved to banking supervision in 1985 and gradually worked his way up the ranks, becoming deputy director-general in 2007 and Italy’s point-man in international financial organisations. As well as being a senior member of CEBS and of the Basel committee, Carosio sits on the Financial Stability Board, the financial-reform task-force set up by the G20 in the wake of the 2008 crisis, which is chaired by his boss, Draghi.
Their relationship is described as being based on “mutual respect and close co-operation” by Bankitalia sources, who stress that Carosio’s influence bears heavily on the Considerazioni Finali, the Bankitalia annual report released every 31 May, a key event in the Italian political calendar.
“Carosio is particularly competent on supervisory issues and his voice is strong on international dossiers,” officials explain. He has also participated in the austerity drive that Draghi introduced in 2009, when all salaries of the bank’s governing council were cut by 10%. Carosio is now concentrating on the transition that will see the CEBS become the European Banking Authority (EBA), the watchdog set up by new European financial-supervision framework that is due to start work on 1 January, as well as on laying the groundwork for the implementation of the Basel rules and the transformation of the stress-tests into a regular exercise, as mandated by EU finance ministers.
But he will not be there to reap the fruit of his work because – at 65 – he is too old to run for the EBA chair, forcing him to return to Bankitalia at the end of the year. His age brings more surprised reactions from people who have worked with him: “I would have easily said he was seven or eight years younger,” an EU official remarks. Colleagues in Rome say they will be happy to have him back, as “he is one of our best and we want to keep him here”.
The impasse on the EU’s 2011 budget may, however, prove to be a fly in the ointment. José Manuel García-Margallo, the Spanish conservative MEP who has overseen legislation on the EBA, says everything is “ready to start from day one”. But if funding is not agreed, the transition to the new regulatory framework risks being arrested, leaving Carosio’s CEBS legacy in limbo.