Italy's Prime Minister will seek assurances from EU authorities that its banking system will not face "inappropriate measures" that hamper lending under stepped-up efforts to manage bad loans.
The European Central Bank (ECB) that supervises the eurozone's biggest banks has proposed that banks should set aside larger amounts of money against new bad loans.
According to Reuters, investors are concerned that this will lead to further loan writedowns, with Italian banks prominently in the firing line as ECB data shows they hold nearly 30% of the bloc's €915bn of problem debt.
Prime Minister Paolo Gentiloni said on Thursday he would raise the issue of bank loans with European Commission President Jean-Claude Juncker and would “insist” on the necessity of the banking union being a tool to improve bank lending. He added: "There should not be inappropriate or untimely measures that could hamper lending and reduce the protection of savers."
Reuters reports: "Gentiloni made no direct reference to the ECB, which is independent of the Commission and has faced criticism from Italy over its proposal.
"Eurozone countries have launched a scheme to strengthen their banking system under a plan known as banking union. Under the scheme, banks have a single supervisor - the ECB's Single Supervisory Mechanism - and a single set of rules on resolution if they collapse.
"The missing part of the union is a pan-European system to protect bank deposits, which Germany does not want to agree to until eurozone banks reduce their bad loans."