LESS than two years ago, the spectacular bankruptcy of Parmalat, a family-controlled Italian dairy group, sent shock waves throughout Italy. It was the biggest scandal in European corporate history, revealing a €14 billion ($17 billion) accounting hole that had grown over a decade of deception. The saga cast regulators, bankers and auditors in a desperately unfavourable light for not spotting the fraud much more quickly than they did.

Europe’s Enron offered a chance for the comprehensive reform of Italy’s financial regulation that it so badly needs. Yet the growing scandal over the contested bids for Banca Antonveneta by Banca Popolare Italiana (BPI) and ABN Amro, a Dutch bank, shows that this opportunity was instead comprehensively missed.

In the first weeks after the Parmalat scandal erupted, reforms were introduced at surprising speed. Just before Christmas 2003, new insolvency legislation was pushed through, inspired by America’s Chapter 11. The government was also keen to improve financial regulation. Giulio Tremonti, the finance minister of the moment, wanted to replace the existing hotchpotch—Italy has four financial regulators other than its powerful central bank, all toothless and understaffed—with one strong super-regulator, an Italian equivalent of Britain’s Financial Services Authority (FSA). Mr Tremonti also tried to replace the central bank governor’s current job for life with a term limited to seven years.

This provoked the first of a series of clashes between Mr Tremonti and Antonio Fazio, governor of the Bank of Italy. Mr Tremonti criticised Mr Fazio for failing to spot the massive accounting fraud at Parmalat. Mr Fazio countered that the central bank was not responsible for how companies report their finances. Yet it does have an internal database that tracks the debt of the country’s almost 800 international and domestic banks. It could have acted on warnings that bankers were financing a house of cards, critics claim.

Mr Fazio gained the upper hand, and Mr Tremonti was forced to quit. His proposal was reduced to a draft law calling for the replacement of Consob, the securities-market watchdog, with an Authority for the Protection of Savings, with various responsibilities and resources pinched from the central bank and the antitrust authority. A limit on the central-bank governor’s term remained in the draft law but the law itself is still pending in parliament.

Recent developments in the soap opera that the takeover battle for Antonveneta has become have revived discussion of Mr Tremonti’s proposal. After ABN Amro announced in March that it would bid for Antonveneta, BPI raised its small stake in the bank to 29% in several steps that involved allegedly illegal financial manoeuvres, now the subject of investigation. The central bank approved each step.

Against this background, Italy’s magistrates stepped in. Several weeks ago Milan prosecutors launched a probe into allegations that BPI had violated securities laws. On July 25th they confiscated shares owned by BPI and ten investors amounting to 41% of Antonveneta’s stock. On July 27th Consob suspended, belatedly, its approval of BPI’s bid. The Bank of Italy finally followed suit. On August 2nd a Milan judge ordered Gianpiero Fiorani, BPI’s boss, suspended from his job for 60 days, for fear that he might tamper with evidence. Earlier that day, the judge ratified the seizure of BPI’s Antonveneta shares. BPI’s board named Giorgio Olmio its interim chief executive.

At the same time, lawsuits and arrests related to Parmalat came as a timely reminder of the fallout of that gigantic corporate scandal. Last week prosecutors requested indictments of Citigroup, UBS, Deutsche Bank, Morgan Stanley, Nextra, the asset-management arm of Banca Intesa, and 13 individuals connected to these banks. On August 2nd prosecutors re-arrested Luca Sala, a former Bank of America employee who worked for Parmalat as chief liaison officer with that bank.

Did nothing change, then, in Parmalat’s wake to prevent this banking mess? As soon as the worst of that crisis was over, reform efforts slackened. Maybe Enrico Bondi, special administrator of Parmalat, has done too good a job of cleaning house. Rather than breaking up the firm, he decided to keep it alive and save thousands of jobs. In July Parmalat revealed healthy first-half profits. It is planning to re-list on the Milan stock exchange in October.

Meanwhile, the Italian government is at last waking up to the scale of the dodgy manoeuvres to gain control of Antonveneta. On August 3rd the cabinet met to discuss a report by Domenico Siniscalco, the finance minister, on Mr Fazio’s role in the matter. Mr Fazio is no stranger to criticism: in 1999, for instance, he raised eyebrows by vetoing a bid for Banca di Roma by Sanpaolo IMI, a big bank in Turin, without much of an explanation. But this time he may have trouble outrunning it.

As opposition politicians bayed for the governor’s blood, the cabinet was probably wrestling with two issues. The first arises from transcripts of telephone conversations tapped in connection with the BPI probes. These show that Mr Fazio called Mr Fiorani on the night of July 12th to break the news that the central bank was approving BPI’s bid for Antonveneta. Lawyers argue that he was breaching banking laws by tipping off Mr Fiorani with market-sensitive information. The other is Mr Fazio’s decision to overrule his own staff’s opposition to BPI’s two bids, and to sign their approvals personally.

Mr Fazio is not under investigation for wrongdoing. His main motive for promoting BPI’s bids seems to have been the desire to keep Antonveneta in Italian hands. Another reason, say some, was that BPI was on its last legs, and merging it with a healthy bank three times its size was a discreet way of rescuing it. So far, there seems little disposition in government circles to remove Mr Fazio from office. In fact, most ministers are probably hoping that pressure to get rid of him will evaporate during Italy’s traditional summer break.

What now for Antonveneta? Although ABN Amro said last week that its attempted takeover had failed, things look different now. With two-fifths of Antonveneta’s shares confiscated, the Dutch are technically in control of the bank. They say they are keen to acquire the remaining shares. BPI’s appeal against the seizure of its stake in the bank is likely to be heard in court in September. And Consob can suspend BPI’s bid until the end of October.

All this has left Italy’s reputation as a sensible place in which to invest more than a little damaged. Yet chances are slim that politicians will soon seek to repair it by enacting financial reform. With elections looming in 2006, every move will be made with an eye on the polls. And that means that very little will change.