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Economy ministry approves bad bank without public funds

Institutions support putting non-performing assets into entity

10 February, 17:41
Economy ministry approves bad bank without public funds (ANSA) - Rome, February 10 - The Italian economy ministry said Monday that it accepts the idea of so-called "bad banks" so long as there is no expectation that public funding would be involved.

In a statement, the ministry said the proposed initiative that would see banks hive off non-performing assets into an entity known as a bad bank, could be acceptable as long as it remains a private venture.

Earlier in the day, Premier Enrico Letta denied a report from the Financial Times that Italy had rejected the idea of setting up a bad bank. "The premier has never said he was opposed," said a statement from his office. Citing an unnamed government official, the UK financial daily reported Sunday that Italy was afraid such a bank would put the country's credit rating at risk by focusing market attention on the exposure of its banks to a rising level of non-performing loans. Ignazio Visco, the head of the Bank of Italy, argued in favor of creating a bad bank in a speech to Italy's top bankers over the weekend, underlining that lending to Italian companies, especially smaller firms, had fallen 9% in the past two years.