* Governor Visco says BOI not to blame
* ECB chief Draghi was governor when trades done
* Consumer group announces legal action against central bank
* Economy Minister Grilli to address parliament
By Gavin Jones
ROME, Jan 25 (Reuters) - The Bank of Italy scrambled on Friday to deflect charges that it failed to prevent risky derivatives trades by the country's third-largest lender, which took place when ECB chief Mario Draghi headed Italy's central bank.
The escalating scandal over Monte dei Paschi di Siena, the world's oldest bank, has rocketed to the centre of the campaign for next month's Italian election with concerns that the ailing bank may need to be nationalised.
Politicians rushed to make capital out of the affair, alleging lack of control by the Bank of Italy.
Former Economy Minister Giulio Tremonti, an election candidate for the federalist Northern League, said the central bank was clearly to blame and had kept the matter hidden.
"I want to understand why their supervisors learn what has happened from the newspapers, I think they have known everything since the acquisition of Antonveneta," he said in a television interview.
Monte dei Paschi was under judicial investigation before this week's derivatives scandal over the 2007 acquisition of smaller rival Antonveneta for a massive 9 billion euros in cash.
Bank of Italy (BOI) Governor Ignazio Visco said responsibility for the derivatives trades, which could cost Monte dei Paschi some $1 billion, lay squarely with the bank's former management and there had been no failings in the central bank's oversight.
However, Corriere della Sera newspaper said a Bank of Italy document showed that its inspectors expressed concerns over the two main trades under scrutiny as long ago as 2010, when Draghi was governor. The paper published large excerpts from the document.
That appeared to contradict a BOI statement on Wednesday that the nature of the trades, conducted between 2006 and 2009, had been "kept hidden" from it and was only recently divulged by new management appointed last year to turn the bank around.
Draghi was Bank of Italy chief between 2006 and 2011, before leaving to head the European Central Bank where he has won glowing plaudits for his role in battling the euro zone crisis.
Visco, appearing at the World Economic Conference in Davos, gave a spate of interviews to try to play down the bank's role in the crisis which is now at the centre of the campaign for the Feb. 24-25 election.
"It is wrong to insinuate that there was a lack of supervision by the Bank of Italy," he told CNBC television, adding that his institution had nothing to hide and would cooperate with prosecutors probing the Tuscan lender.
He sidestepped questions on whether Draghi had been aware of the derivative operations and drew a distinction between the individual derivative trades, which he said the bank was aware of, and the damaging link between them which he said was not known until recently.
"One thing is the two operations that are under investigation and the other is the connection between the two which only came to be known in the late months of last year," he said.
An ECB spokeswoman contacted on Thursday declined to comment on the matter, saying that it was "the responsibility of national authorities."
However, as Economy Minister Vittorio Grilli promised to address parliament on the scandal and a consumers' body announced legal action against the central bank, many bankers, politicians and enraged Monte Paschi shareholders kept up the pressure.
"The one that really comes out badly is the Bank of Italy," said a Milan-based banking analyst who asked not to be named. "The central bank knew about bits of these trades but it didn't put it all together. It's ridiculous and it's a bad blow to their reputation."
An investor with long experience of the Italian market, who also requested anonymity, said the structured deals undertaken by Monte Paschi went through the BOI's Treasury office and so the bank would have seen them "and should have asked more questions."
If the central bank is shown to have been negligent, the case could have uncomfortable echoes with Ireland, where the financial regulator was forced to resign in 2009 when it emerged his staff had known about a loan scandal at Anglo Irish Bank, the lender at the heart of Ireland's banking crisis.
One of the roots of Monte Paschi's problems - the 2007 Antonveneta deal - also took place under Draghi's watch.
Prosecutors are investigating why the bank paid such a high price for Antonveneta, stretching its finances to the limit, just months before the global financial crisis hit.
Tremonti on Thursday directly pointed the finger at Draghi over the scandal but most politicians have avoided making any link with the man who headed the Bank of Italy at the time.
This may be because there is far more political capital to be gained by blaming rival parties than by trying to draw in a national hero who, as ECB president has bought Italian government bonds and helped to save Italy from financial meltdown.
Grilli, who on Thursday had stressed that banking oversight lay firmly with the Bank of Italy rather than the government, on Friday tried to distance both Visco and Draghi from blame.
"I have absolute confidence in the Bank of Italy of yesterday and today," he said in Davos.