Mr Fazio is under pressure from government ministers to step down

"Times are changing and even the Bank of Italy has to change," Domenico Siniscalco told the Senate.

Mr Siniscalco has led a chorus of Italian politicians calling on bank governor Antonio Fazio to resign.

Mr Fazio is accused of favouring an Italian bid for Banco Antonveneta over a Dutch rival. He denies wrongdoing.

The bid by Banca Popolare Italiana - which faced a rival offer from ABN Amro - was approved by Mr Fazio after he reportedly overruled a number of senior regulators who expressed concerns about its viability.

'Consensus'

Mr Siniscalco was addressing the Senate in an effort to win support for a package of reforms, approved by the cabinet earlier this month as part a drive to improve the central bank's image.

"The reform of the Bank of Italy must be approved as soon as possible, with the biggest possible consensus," he said.

"The criticism that our country gets from the European Commission, the international financial community and more recently from the European Central Bank come from the suspicion that there's been a more or less explicit attempt to defend our banks' Italian nationality."

Under the proposed measures, the tenure of the Bank of Italy's governor will be reduced to seven years - in line with other European central banks.

However, the new rule will not apply to Mr Fazio who, under the current system, has his job for life.

Mr Fazio has let it be known that he has "no intention of resigning", despite pressure from Mr Siniscalco, who has said he expects Mr Fazio to "do the sensible thing" and step down after reform of the central bank is agreed.

Mr Siniscalco's comments followed a similar call from Italy's deputy prime minister.