SIENA/ROME Jan 29 European Central Bank head Mario Draghi, head of Italy's central bank until 2011, met Economy Minister Vittorio Grilli to discuss the widening scandal at Monte dei Paschi bank a day before Grilli was due to address parliament on the issue on Tuesday.
An ECB spokesman in Frankfurt confirmed the meeting, declining to give any details, but a source with knowledge of the encounter said earlier it was likely they talked about Grilli's address to a parliamentary committee later on Tuesday.
As governor of the Bank of Italy from 2005 until late 2011, Draghi was responsible for supervision of the banking sector when Monte Paschi got into trouble following its 9-billion-euro cash acquisition of rival Banca Antonveneta in 2007, just before the global financial crisis broke out.
A series of complex derivatives trades, apparently aimed at massaging accounts to lessen the impact of past losses, are also in focus in the scandal, after the bank revealed last week that they had led to losses of as much as 720 million euros ($969.19 million).
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 state support to continue, and to the wider issue of links between politicians and Italian banks.
Grilli is expected to outline the actions of the government and the Bank of Italy in overseeing the Antonveneta acquisition, as well as the derivatives and structured finance transactions which a central bank report had already identified as problematic as long ago as 2010.
He is due to address a finance committee hearing in parliament at 1400 GMT and prepared for the session at his meeting with Draghi in Milan on Monday.
"Draghi was already in Milan. There was a meeting with Grilli at the office of the Economy Ministry in Milan," the source with knowledge of the meeting said.
Prosecutors in Siena are investigating allegations of massive bribery connected with the Antonveneta acquisition, judicial sources say, and newspapers on Tuesday identified several senior former managers of Monte Paschi as under investigation.
The Bank of Italy has said that Monte Paschi management concealed vital information connected with the loss-making derivatives trades.
Monte Paschi 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.
Giuseppe Mussari, former chairman of the bank until he was replaced last year, resigned from his position as head of the Italian banking association last week after Monte Paschi revealed the problems with its derivatives trades.