(Adds shareholder comment, background)
MILAN Dec 7 The Bank of Italy is considering selling its 4.5 percent stake in insurer Assicurazioni Generali to the state-controlled Fondo Strategico Italiano (FSI), people familiar with the situation said on Friday.
"The Bank of Italy is looking at various options, and is leaning towards selling to FSI, but the matter is still under consideration," said one of the people.
FSI is controlled by Cassa dei Depositi e Prestiti (CDP), a government-owned investment fund run by the Economy Ministry.
The Bank of Italy is considering the sale of its stake, worth 920 million euros at Thursday's closing price, to avoid a possible conflict of interest when it becomes Italy's insurance regulator as planned by Prime Minister Mario Monti's government.
The central bank is already in charge of banking oversight. It intends to make a decision on the stake sale by the end of the year or early next year.
Bank of Italy and CDP declined to comment.
The matter is still under consideration because a few critical points must be resolved, said one of the people familiar with the situation. Financial markets could react badly to the idea that the Italian state becomes a shareholder in Generali.
"In essence there would be a political shareholder, and that could create a negative market reaction," said the person.
A spokesman for the De Agostini group, which holds 2.43 percent through an investment vehicle, underlined a potential risk to Generali's independence.
There is concern "about potential damage to the company's image of independence above all on international markets, which would have a hard time understanding this sort of solution," said the spokesman. "A sale on the market would be more appreciated."
The Bank of Italy is the insurer's second-largest shareholder after investment bank Mediobanca, which has 13.24 percent. Luxottica founder Leonardo del Vecchio has 3 percent. (Reporting by Gianluca Semeraro and Stefano Bernabei; Writing by Jennifer Clark; Editing by Helen Massy-Beresford)