Antonio Fazio is set to defend vigorously his actions in banking takeovers

Antonio Fazio, the Bank of Italy governor, is expected to give a vigorous defence today of his actions in a banking takeover affair that has fuelled demands for his resignation.

Mr Fazio will present his case to a government committee for financial matters chaired by Domenico Siniscalco, finance minister, and including four other ministers.

"We'll listen to what he tells us at the meeting. Then the government will decide," Gianni Alemanno, agriculture minister, said.

The affair has plunged the Bank of Italy, one of the nation's most respected institutions, into its worst crisis in 25 years.

It has prompted politicians, businessmen, economists, trade unionists and consumer groups to call for far-reaching changes at the central bank.

At the heart of the affair lies a battle for control of Banca Antonveneta, a northern Italian bank for which ABN Amro of the Netherlands and Banca Popolare Italiana (BPI) have both made competing bids.

Mr Fazio's critics say he favoured the BPI bid, a serious accusation, given that he regulates Italy's banking sector and must be seen as impartial when handling rival takeover offers.

Mr Fazio denies any wrongdoing, but the criticisms of his actions intensified after court documents were leaked to the media containing transcripts of wire-tapped telephone conversations between him, his wife and Gianpiero Fiorani, BPI's chief executive.

These showed that, in a midnight phone call in July, Mr Fazio had given advance notice to Mr Fiorani of his intention to approve BPI's bid for Antonveneta.

Mr Fazio is also under pressure to explain why he overruled the advice of two senior Bank of Italy officials, who had recommended that BPI's bid should not go ahead because of doubts over its financial strength.

Mr Siniscalco says the affair risks damaging the international reputation of Italy's financial system, already battered by a multibillion euro fraud that was discovered in December 2003 at the Parmalat food group.

The government does not have the power to dismiss Mr Fazio, who has served since 1993, has an open-ended term of office and has never approved a foreign takeover of an Italian bank.

But if Mr Fazio does not propose reforms to the Bank of Italy's governance, ministers say they may impose change by inserting new measures into a financial regulation bill that is under scrutiny in the Italian parliament.

BPI said yesterday major banks were interested in its holding in Banca Antonveneta, after reports that it had offered the stake to rival bidder ABN Amro.

BPI, which is under investigation by regulators over its bid, said the potential buyers for its near 30 per cent stake, worth about €2 billion, were local and international banks. It did not name them.

Sources close to the situation said ABN Amro had been in contact with BPI. Italian media have said Banca Intesa may also be interested in Antonveneta.

Dutch business daily Het Financieele Dagblad reported yesterday that BPI had offered to sell ABN the stake, after regulators blocked its takeover offers amid doubts about its financial guarantees.

ABN's bid for Antonveneta, worth €7.6 billion, foundered last month after opposition from BPI and its allies.