Embattled Bank of Italy governor Antonio Fazio was last night resisting widespread pressure for him to resign, including calls from prime minister Silvio Berlusconi and economy minister Giulio Tremonti.
In the latest development in a six-month long saga, it was confirmed yesterday that Mr Fazio is now under criminal investigation in Milan for insider trading in relation to the failed takeover attempt this summer of the Banca Antoniana Popolare Veneta (Antonveneta) by Banca Popolare Italiana.
Speaking on the margin of the EU summit in Brussels, Mr Berlusconi said he would call a special cabinet meeting next Tuesday with a view to amending a bill going through parliament that would consider new procedures for nominating the Bank of Italy's governor and which would also limit his term of office.
Mr Tremonti also indicated the government intends to get tough: "Either the governor takes a step a back or parliament needs to take a step forward," he said.
Until now, Mr Berlusconi has claimed that his government was powerless to remove Mr Fazio since the governor takes his open-ended mandate from the Bank of Italy's superior council, which only last September gave him a vote of confidence.
It remains to be seen if the government's proposed amendments will force Mr Fazio's resignation.
Mr Fazio yesterday claimed he had "always acted in full respect of the law", and that his conscience "was absolutely clear".
This is the second time in four months that Mr Fazio has been placed under investigation. In September, Rome magistrates also questioned him in relation to "abuse of office" with regard to the Antonveneta takeover.
Confirmation that Mr Fazio is under investigation comes at the end of a bad week for Italian banking.
On Tuesday, the former chief executive of Banca Popolare Italiana, Gianpiero Fiorani, was arrested on charges of embezzlement, market-rigging and other financial crimes.
Mr Fioriani, who ran the mid-sized bank based in Lodi, northern Italy, resigned in September following criminal enquiries into events surrounding the bank's unsuccessful takeover attempt of Antoveneta.
Investigators are concerned by the friendship between Mr Fazio and Mr Fiorani.
Transcripts of a wiretap published in July record a late night phone call between the men in which Mr Fazio tells Mr Fiorani he had approved the bid for Antoveneta. In response, Mr Fiorani, calling Mr Fazio by the familiar name of "Tonino", told him he would like to thank him with a kiss on the forehead.
Investigators believe the friendship may have induced Mr Fazio to break the law on abuse of privileged information and market manipulation.
