Banca Monte dei Paschi di Siena SpAs board stripped Chief Executive Officer Guido Bastianini of his powers, paving the way toward installing banking veteran Luigi Lovaglio as the new head of the troubled state-owned lender.

Bastianini, named by a previous government with the support of the populist Five Star Movement, has fallen out of favor with Prime Minister Mario Draghis administration over the strategy and management of the bank, people with knowledge of the matter said, asking to not be named because the matter is private.