The Italian government is preparing to draw up some moderate reforms to the Bank of Italy after central bank governor Antonio Fazio failed to fend off criticisms of his handling of a cross-border takeover battle.

A fixed eight-year mandate and the introduction of collegial decision-making stripping the governor of his absolute power are expected to be among measures put to parliament in the autumn.

Prime Minister Silvio Berlusconi has accepted that parliament, and not the Bank of Italy, will have to draft the changes, but is against pressuring for Mr Fazio's swift resignation, according to newspaper reports.

"Of course the Bank of Italy will be reformed," Renato Brunetta, economic advisor to Prime Minister Silvio Berlusconi said in an interview published in La Stampa yesterday.

Facing widespread calls for his resignation, Mr Fazio told a government committee on Friday that he had not favoured Banca Popolare Italiana in its bid to buy local lender Banca Antonveneta, at the expense of a bid by a foreign bank.

He did not, as some had hoped, discuss the possibility of introducing reforms at the Bank of Italy.