Bank of Italy asks BPM for top ranks renewal

MILAN (Reuters) - The Bank of Italy has asked for a complete renewal of top ranks at Banca Popolare di Milano, the Italian mutual lender said on Friday, ahead of the appointment of new management and supervisory boards.

BPM's shareholders are fighting over board nominees after the lender revolutionized its governance structure to boost management independence, as requested by the central bank.

The Bank of Italy has taken aim at the grip that a group of employee-shareholders -- represented by the 'Friends of Bipiemme' association -- held on corporate strategies.

With the latest request, Italy's central bank appeared determined to ensure the makeover was not just cosmetic, after a source told Reuters on Wednesday that the BoI was disappointed by the wrangling among employee-shareholders over the slates of candidates.

BPM said that a letter received from the Bank of Italy on Friday asked for "a complete renewal of corporate structures, with high profile choices in a clear break with the past, as a pre-requisite of an effective change in the group's management."

Earlier on Friday, the powerful 'Friends' association had named Filippo Annunziata as its candidate to head the new supervisory board.

A tax accountant, Annunziata was appointed in 1990s by the central bank as special administrator of a failed financial broker. He is also an economics professor at Milan's Bocconi University.

BPM's Chairman Massimo Ponzellini was not included in the slate of names filed by the association, after the employee-shareholders' backing brought him to his current role three years ago.

The 'Friends of Bipiemme' association owns less than 4 percent of the mid-tier lender but controls shareholder meetings because of a one-head-one-vote rule in BPM's bylaws.

A shareholder meeting on October 22 is due to approve the new, dual-board governance system and critics say the 'Friends of Bipiemme' may still be pulling the strings.

The governance overhaul may improve cost-control at the bank and make it a more attractive investment as the lender seeks to fund a 800 million euro capital increase.

The Bank of Italy has requested the shake-up at BPM after an audit earlier this year, criticizing an opaque governance structure, the disproportionate influence of the employee-shareholders and the bank's loan exposure.

Italian private equity firm Investindustrial has bought 2.7 percent of BPM, and a source said it was considering raising its stake to 9.9 percent, with the backing of the 'Friends of Bipiemme' association.

(Reporting By Andrea Mandala and Valentina Za; Editing by Will Waterman, Gary Hill)