FRANKFURT –  European Central Bank President Mario Draghi denied suggestions on Thursday that he had been lax in his oversight of the scandal-hit Monte dei Paschi when he was governor of the Bank of Italy.

Italy's third largest bank, which is dependent on state loans, has been at the center of a financial and political storm over a series of derivatives and structured finance trades undertaken from 2006-2009 that have left it facing losses of 730 million euros.

In his first public comments on the crisis, Draghi told the ECB's monthly news conference in Frankfurt that the Bank of Italy had "done everything it should and appropriately and on time."

As governor of the Bank of Italy at the time, Draghi was ultimately responsible for bank oversight prior to his departure for Frankfurt to head the ECB in November 2011.

Stuttering slightly over his words as he began his first answer on a scandal that has dominated Italian media for days, Draghi also cited a report by the International Monetary Fund which had supported the BoI.

He said much of the criticism of the central bank was due to "noise" ahead of national election this month.

Prosecutors are investigating the central bank for alleged inadequate supervision as Monte Paschi ran into trouble and irregularities in its operations came to light, and Draghi has been targeted by some politicians and Monte Paschi shareholders and savers.

He said he had signed two reports into Monte Paschi by Bank of Italy inspectors, the first of which, from mid-2010, has been leaked to the press and raised several irregularities in Monte Paschi's operations and accounts.

This sparked much of the criticism of the central bank for not acting faster to sanction Monte Paschi executives even though it was aware of these irregularities.

Draghi said that as it does not have policing powers, the Bank of Italy was limited in its ability to counter fraud, one of the charges which prosecutors have leveled at Monte Paschi's former management.

Facing several different questions on the historic lender, Draghi suggested that the Bank of Italy could have benefitted by having more powers to supervise effectively.

He cited a power of veto over banks' executives and to remove individual executives if they are not considered "fit and proper"

"I think one thing this story shows in that having more powers would have helped, although when you have to deal with fraud, you never know."

(Reporting by Gavin Jones; editing by James Mackenzie)