ECB takes over ailing Italian bank

Turmoil within Italy's populist coalition government appears to have only further exposed those risks as the Frankfurt-based ECB made the unprecedented decision to appoint three temporary administrators to replace Carige's board of directors.

"Temporary administrators are tasked with safeguarding the stability of a bank by closely monitoring its situation," said the ECB, in a statement.

It also noted that the administrators, a team that includes a surveillance committee, are empowered to take action to ensure the bank restores compliance with capital requirements.

Placing the team at the helm of a commercial bank represents a first for the ECB since it was granted expanded powers in 2014 to supervise lenders.

Carige bank is based in Genoa, and is Italy's tenth-largest.

The bank has lost the backing of the Malacalza family of steel entrepreneurs, who in December refused to back a €400m share issue, according to Reuters.

The Malacalza family holds 27.6 percent of Carige. They say they blocked the capital increase because they first wanted more clarity on the bank's future business plan and possible merger options.

The ECB wants Carige to merge with a stronger partner, possibly creating tensions with Italy's coalition government given that European rules require shareholders to shoulder some of the losses if problems worsen.

German Green MEP Sven Giegold, who oversees the financial and economic policy of the political group, has called for a European investigation into the matter.

He suggested earlier attempts to rescue the ailing bank may have violated European Union rules on state aid and now wants Margrethe Vestager, the EU's antitrust chief, to launch a probe.

"We may not allow that member states invent new aid programmes for banks in order to avoid EU rules to protect tax payers," Giegold said, in an emailed statement.

Vestager last month, in a letter addressed to Giegold, suggested no state aid rules had been broken.