ECB's Visco tells Italy's banks to be 'ambitious' in purging bad debts

Sat Feb 8, 2014 8:29am EST
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By Gavin Jones

ROME (Reuters) - Bank of Italy Governor Ignazio Visco on Saturday backed moves by some of the country's lenders to get rid of non-performing loans on their books and suggested they could consider "more ambitious" approaches.

The comments by Visco and his deputy governor at a Rome conference indicate that while Italy cannot afford to set up a public "bad bank" like those adopted in Spain and Ireland, its banks are being encouraged to find similar private sector solutions.

Italy's top two banks, Intesa Sanpaolo (ISP.MI: Quote) and UniCredit (CRDI.MI: Quote), are in preliminary talks with U.S. investor KKR (KKR.N: Quote) about setting up a fund to hold some of their bad debts, sources close to the matter have told Reuters.

Such a vehicle, the latest move by Italian lenders to tackle loans that have soured over years of economic stagnation, would help clean up balance sheets as European regulators conduct a health check of euro zone lenders.

"The actions under way at a number of banks to rationalise the management of non-performing loans by creating dedicated structures ... go in the right direction," Visco said in his speech to a gathering of market participants.

"More ambitious interventions, whose compatibility with European rules must be pondered, are not to be ruled out," he said, noting that Italy has an underdeveloped market in impaired assets.

Visco, who sits on the governing council of the European Central Bank, offered no further details, but a Bank of Italy spokeswoman said he was referring to private sector initiatives or possible partnerships between the public and private sector.

Bank of Italy Deputy Governor Salvatore Rossi told Reuters Italy's strained public finances meant it could not follow Spain's example in setting up a publicly-funded "bad bank" to take over problematic loans.   Continued...

Bank of Italy Governor Ignazio Visco attends during a conference at the Bocconi University in Milan, September 27, 2013. REUTERS/Stringer