Prosecutors in the southern Italian town of Bari are investigating the former chairman of Popolare di Bari for alleged corruption in relation to the central bank's supervisory activity over the failing local lender, a judicial source said on Sunday.

Earlier this month Italy's government approved an emergency decree granting a lifeline of up to 900 million euros ($997 million) to the unlisted cooperative bank, in the latest state bailout of an ailing lender.

Prosecutors began an investigation into the bank three years ago, and the lines of inquiry now involve 10 people, including the bank's former chairman, Marco Jacobini, the source said. The source said Jacobini was being investigated as part of a probe into Popolare di Bari's relations with industry supervisors for allegedly corrupting a public official.

Neither the identity of the official nor that of the institution the person belonged to have been disclosed. A lawyer for Jacobini declined to comment.

Like other regional banks, Popolare di Bari never recovered from Italy's worst post-war recession earlier this decade, which bankrupted thousands of businesses and saddled lenders with a mountain of unpaid loans.

The latest crisis also calls into question the efficacy of the Bank of Italy's supervisory role, with the ruling 5-Star Movement calling for a reform of the appointment procedure of the central bank's top management.

Critics say a key factor in the crisis at Popolare di Bari's was its 2014 acquisition of troubled rival Tercas. The takeover was authorised by the central bank but further weakened Pop Bari by increasing its bad loan burden.

Prosecutors are also probing Popolare di Bari's lending practices and the acquisition of Tercas. A Bank of Italy spokeswoman said that the central bank was cooperating with prosecutors, but it had no information about the investigation concerning Jacobini.

Jacobini stepped down as Popolare di Bari's chairman in July after three decades at the helm of the biggest bank in Italy's disadvantaged south. His family was among founders of the bank in the 1960s and has since kept a tight grip on it.