State intervention could help Italy banks offload bad debts - BOI
By Silvia Aloisi and Valentina Za
MILAN (Reuters) - State intervention could help Italian banks offload soured loans, the governor of the Bank of Italy said on Saturday as the government considers options to mop up problematic debts and revive bank lending to the economy.
Bad loans stood at 181 billion euros ($208 billion) in November, accounting for 10.6 percent of all loans at leading Italian banks, which fared worst in a Europe-wide health check of the sector last year.
Speaking at a financial conference in Milan, Bank of Italy Governor Ignazio Visco said banks must sell their non-performing loans to raise cash to fund the real economy that has shrunk an estimated nine percent since 2007.
He said direct state intervention could be used to this end, "within a framework whereby, in accordance with European rules on competition, banks participate fully in the costs of the operation and public support is suitably remunerated."
Tax reliefs or state guarantees on assets backed by bad debts would smooth the way for the creation of a private market for non-performing loans, he said.
He noted that so far the sale of bad loans had been possible in only a few cases and at "very low prices" -- something that bankers say has discouraged bigger disposals.
The government is working on several options to tackle the problem and strengthen banks' balance sheets, including setting up a bad bank, a Treasury spokesman said this week.
The chief executive of Italy's biggest bank by assets, UniCredit , said a state-sponsored bad bank -- or a special vehicle to pool together lenders' bad debts -- would mostly be aimed at small and medium lenders.
"We are not interested and I don't think it's meant for us," Federico Ghizzoni said.
Speaking about the role of the European Central Bank as banking supervisor, Visco -- a member of the ECB Governing Council -- said Italian banks still had room to improve their efficiency and that there was scope for mergers in the sector.
Visco praised a recent government decree which scraps the one-vote-per-investor rule giving shareholders in Italy's top 10 cooperative lenders equal voting rights regardless of the size of their stake. The decree, if it passes into law, is expected to prompt consolidation among the cooperative banks, but Visco said it did not mean they would fall prey to "foreign capital".
He also said that requests to banks for additional capital by regulators must be calibrated so as not to undermine the signs of economic recovery by holding back lending.
Italian central bank officials have been increasingly critical of the hard line taken on capital by the ECB.
Nine Italian banks failed the ECB stress tests last year. Two of them -- Monte dei Paschi di Siena and Carige -- still have capital shortfalls to fill and are in the middle of negotiations with the ECB on how to do this.
(Addiitonal reporting by Gianluca Semeraro, Stefano Bernabei, Elvira Pollina and Francesca Landini; Editing by Crispian Balmer)
