Pensioner's death turns up heat in row over Italy bank rescue

ROME (Reuters) - The death of a pensioner who lost money in Italy's rescue of four small savings banks has turned up the heat on the government, already facing an outcry from investors and politicians over its handling of the situation.

A police source said on Thursday the man hanged himself in a communal staircase at his home in Civitavecchia, near Rome, in late November.

The pensioner left a note saying Banca Popolare dell'Etruria, in which he had invested more than 100,000 euros (72,390 pound), had been badly managed, the source said.

Prime Minister Matteo Renzi's government's rescue of Banca Popolare dell'Etruria and three other small savings banks last month prompted an angry reaction from some 130,000 shareholders and junior bondholders who lost money.

Renzi's opponents have also cried foul over the 3.6 billion euro (2.60 billion pound) rescue, which the government rushed through last month before tougher European rules come into force in January.

After the pensioner's death, Matteo Salvini, leader of the right-wing Northern League, said the governor of the Bank of Italy should step down.

"A pensioner kills himself because he lost his life savings due to Banca Etruria and the absent government. State suicide," Salvini wrote on Twitter.

Italy approved the rescue of Banca Popolare dell'Etruria, Banca della Marche, Cassa di Risparmio di Ferrara and Cassa di Risparmio di Chieti, on Nov. 22.

The government has been trying to find a way to compensate at least some of those who lost their money overnight due to the rescue, but it faces opposition from the European Commission because of state aid rules.

The government was keen to push ahead with its salvage scheme for the banks because from January, new European Union rules on bank rescues will force losses on depositors with more than 100,000 euros as well as bank investors and bondholders.

The Bank of Italy's head of supervision said on Wednesday that letting the four banks fail under the new rules would have caused devastating losses.

Italian authorities fear the new rules could scare off retail investors, a big source of funding for Italian banks, and even potentially trigger bank runs.

(Writing by Isla Binnie. Editing by Crispian Balmer and Jane Merriman)