ROME Feb 1 Italy's head of state defended its central bank against charges it had failed in its oversight of Monte dei Paschi di Siena, warning that national interests were at stake in the debate over the troubled lender.
In an interview in Friday's edition of business daily Il Sole 24 Ore, President Giorgio Napolitano noted the Bank of Italy had provided parliament with details of the steps it had taken to warn Monte Paschi of the problems it faced.
"It scrupulously documented how, from the very beginning and with its traditional rigour, the Bank of Italy exercised its supervisory functions within the limits of the powers given to it by the law," he told the newspaper.
He said that it was necessary to bring clarity to the affair, which has shaken Italy's third-largest bank and raised questions over the oversight of the country's banking system but said all sides "should be aware of the national interest".
The Bank of Italy faces criticism of its supervision of the 540-year-old institution from Siena and of its role in approving a government bailout last week, despite repeated warnings dating back to at least 2009 that the bank's financial position risked sliding out of control.
It was led at the time by Mario Draghi who has gone on to head the European Central Bank.
The scandal over opaque derivatives contracts which have left the world's oldest bank facing losses of 720 million euros and dependent on state aid has jumped to the top of the political agenda, only weeks before Italians go to the polls in a general election on Feb. 24-25.
The interview in Il Sole 24 Ore, the traditional house journal of Italy's business establishment, underlines the growing alarm over the damage which the Monte Paschi case could cause to the country's image with international investors.
The Bank of Italy has said it did everything it legally possible to warn of problems which began piling up in the wake of Monte Paschi's 9-billion-euro cash acquisition of smaller rival Antonveneta just before the 2008 global financial crisis.
The management at the time has been replaced and prosecutors are investigating accusations ranging from bribery linked to the Antonveneta acquisition to accounting malpractice over the derivatives contracts.
But questions remain over how problems, which were already known at least in part to both Bank of Italy regulators and the bank's own internal auditors as early as 2009, were made public only last week.
Prosecutors are already considering complaints from consumer organisations that the central bank failed in its regulatory duties and there has been mounting scrutiny over Draghi's role.
The tight links between the bank and the regional politicians who dominate the shareholder foundation which controls it have also been widely highlighted and led to bitter exchanges between the main parties.
The centre-left Democratic Party (PD), which has seen its longstanding opinion poll lead eaten away by the scandal, has been most under fire because of its dominance of the local governments in Siena.
But the PD has shot back with accusations that other parties are using the scandal for political ends and saying the party as a whole has nothing to do with the bank.
(Reporting By James Mackenzie; Editing by John Stonestreet)