Wanted: central bank boss to fix 1,700-year-old European tax haven
MILAN (Reuters) – San Marino is looking for a new central bank governor to clean up its banks – traditional havens for tax dodgers – and fix their badly damaged balance sheets.
Big problems for the micro-state began in 2009 when Italy, hit hard by the global financial crisis, added it to a tax black list. Since then, national output has dropped by a third to 1.4 billion euros ($1.5 billion) and its five banking groups have been forced to radically change their business model.
A government source from the 1,700-year-old independent state, surrounded by Italy, said the successful candidate would have worked in international institutions and organizations.
“We want the new central banker to support San Marino’s change and willingness to open to the world”, the source said.
The new central bank governor will take over from Renato Clarizia, an Italian, who quit in August, four months before his mandate expired.
His successor would be named by the end of the year, the source said, and local authorities have already received several applications from bankers in Europe and the United States.
The government will make the final choice and parliament would need to approve its decision.
Last year the enclave joined a group of countries that will automatically share data on bank accounts with European Union countries and those in the Organisation for Economic Co-operation and Development (OECD). That scheme starts in 2017. The country is also negotiating a dedicated agreement with the EU that would allow freedom of capital movement.
Italy has now dropped San Marino from its black list and the economy is recovering. The International Monetary Fund (IMF) estimates growth of 1 percent this year.
But the banking sector still faces major challenges. Assets in San Marino’s banking system total 6.2 billion euros, or 470 percent of gross domestic product (GDP) according to IMF data. That compares with, for example, Cyprus, where they are 575 percent of GDP, and Italy’s roughly 230 percent.
Two out of five loans are non-performing, and the largest Sammarinese bank needed an injection of public money equal to 13 percent of GDP. That bank may need more help, the IMF has said.
Daniele Guidi, chairman of the local lenders association, is optimistic. “We survived the worst, we are now crossing a transition phase”, he said.
The government plans to diversify the economy, boost tourism and manufacturing, cut bureaucracy and taxes and open San Marino to foreign investments.
But Martino Vincenti, an Italian tax expert who has recently advised San Marino’s authorities, said that the process will be gradual and the outcome is not a given.
“They are aware that old times cannot come back and they are actively moving forward to reshape their economy and open their system to the market. This is the right direction but in global competition there are losers and winners”, he said.