MILAN (Reuters) - If UniCredit's bid for German rival Commerzbank is successful, Italy's powers to shield the country's strategic assets, including its banks, from unwanted foreign interest will become ineffective, a union leader said.

Speaking at a conference in Milan organised by the ruling Brother of Italy party, Lando Maria Sileoni, the head of Italy's main banking union FABI, said that the European Central Bank backed UniCredit's efforts to combine with Commerzbank.

"Such attempts can only succeed and are only made public if the ECB is behind them... and the ECB has long said it is in favour of a reduction in the number of euro zone banks, which would help its supervisory efforts," he said.

UniCredit last month built a near 21% stake in Commerzbank, conditional on supervisory clearance, that would make the Milanese bank the main investor in Germany's No.2 lender. The Berlin government has said it supports Commerzbank's strategy centred around its independence. Rome has so far kept out of the debate.

The ECB has said large, European banks would be better able to compete with bigger rivals in the United States.

Sileoni said the issue of where a combined UniCredit-Commerzbank group would base its headquarters remained something to be addressed even though UniCredit has repeatedly said there is no reason to shift its base away from Italy.

He added that a successful bid by UniCredit would usher in a new era for banking consolidation in which governments would have no power in stopping foreign takeovers and Italy would risk losing its banks to foreign hands.

Italy, like France, has opted for a wide-ranging interpretation of European Union rules on the screening of foreign direct investments designed to fend off non-EU buyers.

Under Italian rules, the government has powers to vet bids from EU buyers in a number of sectors which include banks.

In Germany, instead, such vetting of EU interest applies only to assets in the defence sector, while for the other industries the government can only screen non-EU suitors.

The government of former Prime Minister Mario Draghi in 2021 cleared a takeover bid by French bank Credit Agricole for small Italian lender Creval.

Sileoni mentioned Credit Agricole's 9.9% stake in Banco BPM, which is Italy's No.3 bank, and said a UniCredit takeover of Commerzbank would effectively "sweep away" any government powers to shield domestic banks from unwanted interest.

(Reporting by Valentina Za, editing by Giulia Segreti and Elaine Hardcastle)