The Parmalat collapse has shocked Italy

Speaking at a parliamentary hearing, Giulio Tremonti said the bank might have done more to protect investors.

Mr Tremonti called for wide-ranging reforms to the way Italian financial markets are regulated, and laid out plans for a new oversight system.

The move would significantly weaken the Bank of Italy's power, analysts said.

Jail

The crisis at Parmalat was triggered by the revelation last month that bank documents relating to assets worth 3.9bn euros (�2.7bn; $4.9bn) were false.

Nine people have been arrested so far, although no-one has been charged. Parmalat's founder, Calisto Tanzi, is currently in jail, accused of fraud.

The Italian government has launched an investigation and has said it will put into place measures to ensure a similar case cannot arise again.

According to Mr Tremonti, "the crisis is not industrial but financial, the only solution is organic reform".

Under the proposals, the minister said that the government's anti-trust office would take over the Bank of Italy's role of overseeing competition between banks.

Extra powers

The government, meanwhile, would create a new financial-markets authority to replace the current watchdog Consob, giving it extra powers to supervise insurance companies and pension funds.

The third cog in the new machine would be the Bank of Italy, which would focus on ensuring the stability of the country's banking industry.

The government's proposals are expected to go before parliament in the coming weeks.

Separately, Bank of America has said it stands to lose as much as $274m following the collapse of Parmalat.

Chief Financial Officer James Hance said on Thursday that "we have launched, if you will, a very extensive and exhaustive investigation on our own to find out where the money went".

'Long time'

"Unfortunately this bankruptcy will probably take a long time to be resolved, but we believe we are sufficiently positioned to deal with any material credit impact further down the road," he said.

Bank of America offices were searched by Italian authorities last week and a former employee under investigation for his role in the Parmalat affair said over the weekend that he was "tricked" by the food group.