Milano board member to quit over governance row

MILAN: A board member of Banca Popolare di Milano said he would quit on Monday in protest against shareholders' rebuff of a reform sought by the Bank of Italy to enlarge decision-making power at the cooperative bank.

On Saturday shareholders at the mid-tier bank approved a planned capital increase of up to 1.2 billion euros ($1.7 billion), but rejected a proposal by the central bank to raise the number of delegates for non-employee shareholders to five from three.

The move would have loosened the hold on the board of employee shareholders, who have resisted moves to cut costs and streamline the bank's structure.

"Tomorrow morning I will hand my resignation to Chairman Massimo Ponzellini," board member Franco Debenedetti said in a letter published in Italy's newspaper Il Sole 24 Ore on Sunday.

"We are back to the key problem of all cooperative banks: the governance, the one-man-one-vote rule," Debenedetti said.

Cooperative banks allow one shareholder, one vote, independently from the number of shares held.

Concerns over governance and the bank's capital increase have contributed to a more than 40 percent share price fall at Pop Milano since the start of the year.

Ponzellini played down the impact of Saturday's vote on the bank, saying he hoped to have a new governance plan ready by the end of the year and would meet the Bank of Italy soon over the issue.

The vote on Saturday came a day after Italian banking shares were hit hard by worries about the deepening euro zone debt crisis and a downgrade threat by ratings agency Moody's on Italian banks.

Copyright Reuters, 2011