The European Commission has begun legal action against Italy over its central bank's handling of recent bank mergers.
There have been calls for Antonio Fazio to resign
It comes after Dutch bank ABN Amro said the Bank of Italy tried to block its bid for Italian lender Antonveneta.
Central bank chief Antonio Fazio Bank of Italy was said to have wanted an all-Italian merger instead.
Mr Fazio, has been accused of abusing his position over the matter, but has thus far faced down calls in Italy for him to resign.
"The Commission has taken the decision to launch an infringement case against Italy," said EU spokesman Mikolaj Dowgielewicz.
Mr Fazio is alleged to have used his power to promote a merger between Antonveneta and Banca Popolare Italiana (BPI), in order to block ABN Amro's takeover attempt.
He has denied the charges.
The bank chief is also under investigation in Italy over the scandal, and was last month questioned for five hours by magistrates in Rome.
The story first broke in August when secret recordings allegedly showing Mr Fazio advising the former head of BPI, Gianpiero Fiorani, on how to best proceed with an approach for Antonveneta were leaked to Italian newspapers.
Mr Fiorani has since resigned, and on Monday all but one of the remaining BPI board followed suit as Italian magistrates continue their probe into the company's role in the scandal.
It is not yet known what affect the board's resignation will have on BPI's ongoing minority stake in Antonveneta.
ABN Amro acquired a 69% share in Antonveneta on 26 September, after BPI's approach was blocked by the Italian authorities.