Pier Carlo Padoan, Italy’s former finance minister, has been named as the next chairman of UniCredit, the country’s largest financial institution by assets, the company said in a statement.

Mr Padoan, currently a member of parliament for the Democratic party, Italy’s junior coalition partner, has been appointed as a non-executive director to replace Elena Zambon, who resigned last month, and will serve as a board member until Unicredit’s annual general meeting later this year. 

The bank said Mr Padoan, 70, was “the best candidate for the position of chairman for the next term 2021-2023” and his candidacy had been vetted by rigorous internal processes. He will succeed Cesare Bisoni, who was named chairman after the sudden death of Fabrizio Saccomanni, another former finance minister, at the end of 2019.

Mr Padoan’s appointment comes at a crucial time for Italy’s fragmented banking sector as regulators and political institutions demand consolidation, which has been opposed by UniCredit chief executive Jean Pierre Mustier. 

Despite Intesa Sanpaolo’s takeover of UBI Banca, the country’s third-largest bank, Mr Mustier has rejected demands by the Italian government to buy Monte dei Paschi di Siena. The lender was bailed out with taxpayers’ money in 2017 by Mr Padoan’s ministry and is currently majority-owned by the state.

Bankers in Milan and government officials in Rome believe Mr Padoan’s appointment is a “conservative pick” and a clear signal that UniCredit will be forced to play a direct role in the consolidation of the Italian banking sector, despite Mr Mustier’s pushback.

“Padoan is a heavyweight in the country. His won’t be an honorary role. He’s going to have a strong say within the board,” said one person close to UniCredit.

According to two executives in Milan and one official in Rome, Mr Padoan’s appointment could pave the way for a