Italian central banker Antonio Fazio has long been one of the most powerful and controversial public figures in Europe. Now, a brouhaha over his role in an international takeover battle threatens his grip on banking in the world's sixth-largest economy.

Fazio, 68, governor of the Bank of Italy since 1993, has surfaced in wiretaps and documentation obtained by prosecutors who are investigating possible securities-law violations at an Italian bank. The material appears to demonstrate that he played an active role in trying to beat back a takeover bid by ABN Amro Holding NV of the Netherlands for an Italian lender, Banca Antonveneta SpA.

ABN Amro bid in the spring for Antonveneta but a counterbid quickly emerged from a rival, Banca Popolare Italiana Scarl, formerly known as Banca Popolare di Lodi. BPI's bid raised eyebrows because BPI has a market capitalization just one-third of Antonveneta's. On Monday, ABN Amro said its bid had failed.

In the transcripts of one phone call, BPI chief executive Gianpiero Fiorani complains to Fazio that Italian stock-market regulator Consob was being "hostile" toward his bid, according to a copy seen by the Wall Street Journal.

In another conversation, according to the transcript, Fazio asks Fiorani to visit him at the Bank of Italy headquarters to discuss certain matters and tells him to use a side entrance. In a transcript from a late-night conversation, Fazio tells Fiorani that he has just given his personal approval to the takeover bid. Fiorani replies that he feels like kissing the central banker on the forehead.

As governor of the Bank of Italy, Fazio is the chief regulator of the nation's banking and credit system. He hasn't been accused of wrongdoing nor has he been named a subject of the investigation, according to people familiar with the probe, though one of his top lieutenants has been named as a subject of the probe. But the evidence prosecutors have amassed of his close ties with a major bank's chief executive is breeding unease throughout the Italian banking sector.

Calls for him to step down have come from politicians, a consumer association and the Bank of Italy's major employee union. Fazio, who holds a lifetime appointment, so far has given no indication that he would resign as a result of the controversy.

Representatives for Fazio did not respond to requests for comment for this article. The Bank of Italy, in a statement, maintained that it has acted properly and impartially in the Antonveneta deal. A spokesman for Fiorani declined to comment.

Fazio's fate could have big implications for the European banking industry. He is widely perceived as a main opponent of allowing foreign banks to buy lenders in Italy, the euro zone's third-largest economy, and thus an impediment to the emergence of a truly unified financial market in Europe. If he were to leave, it could lead to a crack in the walls that have protected Italian banking. That could prompt foreign banks to attempt a new wave of takeovers in Italy, says Armin Polster, a banking analyst with Deutsche Bank.

In interviews, several people who have worked with him say that Fazio is convinced that Italian banks must remain in local hands for them to be truly responsive to the needs of the Italian economy. When ABN Amro last spring announced its intentions to bid for Antonveneta, it was seen as a direct assault on Fazio's power.

Prosecutors have compiled some materials that indicate Fazio personally intervened to make sure that BPI's rival bid for Antonveneta, valued at as much as $10.3 billion, was approved. BPI, in order to finance its takeover plans for Antonveneta, had to raise billions in new capital. Even then, BPI risked dipping below the minimum levels of core capital -- the amount of capital a bank holds to support its lending -- required by the Bank of Italy.

The Bank of Italy's own oversight body began to examine whether BPI had the wherewithal to take over Antonveneta. Two Bank of Italy regulators declared that BPI's bid was inadequately financed, and they refused to approve it, according to people familiar with the investigation. Testimony from witnesses and documentation obtained by prosecutors, according to the people familiar with the investigation, indicate that Fazio then personally overrode that decision. He appointed three outside experts to evaluate the offer, all of whom gave their assent, said the people familiar with the probe. After that, Fazio personally signed the document that gave the go-ahead to the BPI offer.

Shortly thereafter, according to transcripts of the wiretaps seen by the Journal, he called Fiorani on his cell phone to tell him the news.

"Ah, Tonino, I'm moved," says Fiorani in response, using a nickname for Antonio, Fazio's first name. He adds that he has "goose bumps," according to the transcripts. "I'd give you a kiss right now, on the forehead, but I can't . . . I know how much you have suffered, believe me, I've suffered too."

Later in the conversation, according to the transcripts, Fazio passes the phone to a colleague, who tells Fiorani when the Bank of Italy will announce the news to the market and indicates that Fiorani must not disclose that he has learned the news ahead of time.

Some colleagues of Fazio at the Bank of Italy complain that the Antonveneta affair indicates how the institution's role as independent regulator has been tarnished by the governor's management style. "He runs this place in a monarchic, autocratic fashion, as if it were his family business," says Angelo Maranesi, a 32-year Bank of Italy veteran and the head of one of its employee unions. "The governor's behavior shows that, in some cases, he has become personally involved in these affairs. This has damaged the image and the name of the Bank of Italy, and this is his fault."

Italy's Central Bank Governor Antonio Fazio has been linked to possible securities-law violations at an Italian bank.