Bank of Italy chief defends regulator's role in Bari bank crisis

The head ofItaly's centralbankrebuffed criticism of itsrolein supervising struggling lender Banca Popolare diBariand said in an interview published on Monday that it was ready to account for its actions.

Prosecutors in the southern Italian city ofBariare investigating the former cooperativebank's chairman for alleged corruption in relation to the centralbank's supervisory activity, a judicial source said on Sunday.

TheBankofItalyput Popolare diBari, the biggest lender in the poorer south of the country, under special administration this month and Rome has agreed on measures worth up to 900 million euros ($997 million) to prop up the unlistedbank.

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"Banking supervision has accomplished its duties with the highest effort and, in my opinion, positively,"BankofItalyGovernor Ignazio Visco told Il Corriere Della Sera newspaper in an interview published on Monday.

"We are ready to account for our actions, as we have always done, at an institutional level," he said.

The country'sbankingcrisishas shone a spotlight on theBankofItaly's supervisoryroleand the ruling 5-Star Movement has called for a reform of how the centralbank's top managers are appointed.

Visco said the centralbankwould, however, assess whether it had made mistakes when asked about Popolare diBari's takeover of struggling rival Tercas in 2014.

Critics say the deal accelerated Popolare deBari's problems by increasing its portfolio of bad loans.

Popolare diBari's rescue is the latest episode in a string ofbanking crises to hitItalysince 2015, costing the state and other Italianbanks some 23 billion euros.

Visco said some smallbanks inItalywere still "weak" and theBankofItalywas closely monitoring them.

"The problem is that we have an insufficientcrisismanagement system. To manage acrisisyou don't just need to be able to forecast it, you need tools," he said, without specifying what tools he was referring to.

"I've been asking for a long time for new rules to be established at the European level," he said.

TheBankofItalywas not immediately available for comment.

Visco said the rescue plan for Popolare diBariwhich involves a depositor guarantee fund financed by Italianbanks and state-owned Banca del Mezzogiorno-Mediocredito Centrale aims to prevent depositors and bondholders losing money.

But he suggested the cooperativebank's 69,000 shareholders, who are mostly retail investors, could book losses.

"The industrial plan will define the amount needed for new capital, the way to carry it out and the involvement of current shareholders," Visco said.

He said the plan would be open to otherbanks willing to join a larger financial entity with adequate size for the "new technological and competitive environment".