Officers of the Israel Police National Fraud Squad have grilled Prime Minister Ehud Olmert over allegations he intervened in the sale of one of Israel's largest banks when serving as finance minister.

The questioning, which was conducted under caution, is due to continue this week.

The prime minister is the last to be questioned in the investigation, which got underway in January. The results of his interrogation will be pivotal in deciding whether to file an indictment.

According to the allegations, Olmert intervened in the 2005 tender for the privatisation of Bank Leumi, to make its terms more advantageous for personal friends, who, in the end, did not bid for the bank. He has denied any wrongdoing.

The 62-year-old prime minister, one of Israel's most experienced politicians, is also facing a criminal probe into allegations that while mayor of Jerusalem he purchased a house in an upscale neighbourhood for hundreds of thousands of dollars below the market price, in return for promising to use his influence as mayor on behalf of the contractor.