By Stefano Bernabei and James Mackenzie
SIENA/ROME, Jan 29 (Reuters) - Italian Economy Minister Vittorio Grilli defended the central bank on Tuesday against accusations it had been lax in overseeing the troubled lender Monte dei Paschi, telling parliament its supervision had been 'attentive and appropriate'.
The widening scandal at Monte dei Paschi, which faces losses of as much as 720 million euros ($969 million) over an opaque series of derivatives and structured finance transactions, has shaken Italy's financial and political establishment.
Speaking before the parliamentary finance committee, Grilli went through a series of steps undertaken by the Bank of Italy, which is responsible for supervising the banking sector.
'The supervision of the Bank of Italy was appropriate, sustained and attentive and it intensified over time,' Grilli told the committee.
He said inspectors had drawn attention to financing problems faced by Monte dei Paschi in the wake of its 9 billion euro ($12 billion) acquisition of rival Banca Antonveneta in 2007, just before the outbreak of the global financial crisis.
It also highlighted the Siena-based bank's vulnerability to financing problems created by the euro zone debt crisis, pointed out risky derivatives transactions and imposed sanctions on the bank's senior management, which was cleaned out last year with the resignation of chairman Giuseppe Mussari.
The case, involving allegations of bribery and corruption connected with the Antonveneta acquisition, has raised questions over the future of Italy's third-largest bank, which depends on a 3.9-billion-euro state support package, and to the wider issue of links between politicians and Italian banks.
The acquisition, at a price widely considered as excessive, appears to have been at the heart of the problems facing the bank, which was left badly weakened as the financial crisis broke and which appears to have resorted to complex derivatives trades to massage its accounts.
On Monday, before giving his testimony, Grilli met European Central Bank President Mario Draghi, who was governor of the Bank of Italy from the end of 2005 to 2011.
'Draghi was already in Milan. There was a meeting with Grilli at the office of the Economy Ministry in Milan,' a source with knowledge of the meeting said.
Prosecutors in Siena are investigating allegations of bribery connected with the Antonveneta acquisition, judicial sources say, and newspapers on Tuesday identified several senior former managers of Monte dei Paschi as under investigation.
The Bank of Italy has said that Monte dei Paschi's management concealed vital information connected with the loss-making derivatives trades. One derivatives contract was hidden in a safe and discovered by current management only in October.
Monte dei Paschi's chief executive Fabrizio Viola, appointed last year after a clear-out of the bank's former management, has acknowledged accounting irregularities by his predecessors but said he had seen no evidence of bribery.
Together with new chairman Alessandro Profumo, Viola is pushing through a tough turnaround and has tried to make a break with the past by firing over one hundred Monte dei Paschi managers since he took office.
Mussari, who was replaced as chairman of the bank last year, resigned from his position as head of the Italian banking association last week after Monte die Paschi revealed the problems with its derivatives trades. ($1 = 0.7429 euros)
(Additional reporting by Paul Carrel in Frankfurt and Francesca Landini in Milan; editing by Barry Moody and David Stamp) Keywords: MONTEPASCHI DERIVATIVES/
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