Italian Premier Silvio Berlusconi's Cabinet on Friday approved a reform of Italy's central bank that includes a seven-year fixed term for the Bank of Italy governor.
Economy Minister Domenico Siniscalco drew up the reform in the wake of accusations that central bank governor Antonio Fazio discriminated against foreign banks in recent takeover battles.
The central bank governor is currently appointed for life, reports the AP.
According to BBC, the Italian cabinet has agreed to introduce legislation to limit the governor's term of office to seven years, more in line with Europe's other central banks.
But any attempt to force Mr Fazio to step down next year when he turns 70 is likely to be opposed by the Northern League, Mr Berlusconi's coalition partner, commentators said.
The Bank's regulatory procedures are also likely to come under scrutiny with critics keen to ensure that key decisions are taken by committee and not left to a single individual.
But the government has rejected calls to remove its regulatory powers completely.
The Berlusconi government has also promised to overhaul the Bank's ownership structure.
Jean Claude-Trichet, president of the European Central Bank, said on Thursday that he was "monitoring closely" the situation at the Bank.