Italy backs central bank chief in corruption investigation

By Giuseppe Fonte

ROME, Oct 28 (Reuters) - Italian Economy Minister Pier Carlo Padoan gave strong support on Wednesday to the country's central bank governor who is involved in a corruption investigation.

Padoan told parliament the government had no intention of asking Bank of Italy chief Ignazio Visco to resign because the affair was not sufficiently serious.

Prosecutors in the central Italian city of Spoleto said this month they had opened an investigation into Visco and seven other officials in connection with the collapse and subsequent sale of Banca Popolare di Spoleto (BPS).

The prosecutors, who are looking into possible fraud and corruption, opened the investigation after small shareholders complained of the toll the central bank's action had taken.

"The removal of the governor would only be possible in the case of grave shortcomings, and the affair in question doesn't show signs of that," Padoan told the Chamber of Deputies.

"The Bank of Italy's actions were absolutely correct in both form and substance," he said.

Being placed under investigation in Italy does not imply guilt and does not mean formal charges will follow.

Earlier on Wednesday Visco defended his and the bank's conduct, in his first comments on the probe.

"I only want to say that I have no hesitation in defining the supervision of the Bank of Italy as legitimate, correct and attentive," he told reporters on the fringes of an event in Rome.

The Bank of Italy had requested that BPS be put under special administration in February 2013 after an inspection the previous year found serious irregularities and large capital losses at the small, local lender.

The central bank then picked another small Italian bank, Banco di Desio e della Brianza, to take over BPS.

In a letter sent to staff last week, Visco's No. 2 at the central bank suggested that the institution was being targeted for political reasons. He gave no further details.

"The episode has occurred in a climate of intense political conflict which occasionally targets the banking system and the Bank of Italy," Director General Salvatore Rossi wrote in the letter, seen by Reuters.

In 2005, former Bank of Italy Governor Antonio Fazio was forced to resign over alleged wrongdoing in connection with a bank takeover, for which he was later convicted.