The chief executive of Monte dei Paschi di Siena, Fabrizio Viola, and the Italian bank's former chairman, Alessandro Profumo, are under investigation for alleged false accounting and market manipulation, a source with knowledge of the matter said.
The investigation, which started in 2015 following complaints filed by small shareholders and consumer associations, comes as the Tuscan bank prepares to launch a 5 billion euro ($6 billion) stock sale after emerging as the weakest bank in Europe in industry stress tests in July.
A spokesman for Monte dei Paschi said the decision to investigate Viola and Profumo followed a proposal by two shareholders to seek damages from the two executives which was rejected by other shareholders at an April meeting.
"(Under Italian law) prosecutors are bound to open an investigation when they receive a complaint," the spokesman said in an emailed comment.
This comment reflects Profumo's position, a separate spokesman for Profumo said.
Being placed under investigation in Italy does not imply guilt and does not automatically lead to charges being laid.
The source said on Thursday prosecutors in Siena alleged the bank did not correctly book two derivatives trades known as Alexandria and Santorini between 2011 and 2014.