The last thing the ailing Italian economy needed was another big banking scandal that calls into question dubious practices at the heart of the country's financial system, and exposes the weakness of its regulators. That is precisely what the arrest of Gianpiero Fiorani, former chief executive of Banca Popolare Italiana, and other associates accused of involvement in "huge amounts of illicit business" by Italian prosecutors, has done. It will be a severe blow to the international image of Italian business, already shaken by the scandals at food manufacturers Parmalat and Cirio in recent years. Yet in the long run, the move should be a healthy shock to a system that has far to go in rooting out corruption and ensuring international standards of transparency and good governance.

That it has taken action by criminal magistrates, rather than the Bank of Italy, as the country's principal bank regulator, to put the spotlight on BPI, is a serious indictment of the central bank. Yet the Bank of Italy's independence has been weakened by revelations of the close personal ties between Mr Fiorani and Antonio Fazio, the central bank governor. Mr Fazio has been accused of favouring the takeover bid by BPI for Banca Antonveneta earlier in the year, against a rival bid by ABN Amro, the Dutch bank. The European Commission is threatening legal action for improperly protecting Italian banks from foreign takeovers in the affair.