October 24, 2017 / 9:44 AM / a year ago

Italian banks drive fall in euro zone bad loans in second-quarter - ECB

FRANKFURT (Reuters) - Italian banks offloaded bad loans faster than their peers in any other euro zone country in the three months to June, European Central Bank data showed on Tuesday.

The data suggested ECB pressure to clean up the euro zone’s biggest pile of unpaid loans, the legacy of Italy’s lasting economic crisis, was starting to bear fruit and coincided with a fierce backlash in the country over the matter.

Italian banks’ non-performing exposure, which includes unpaid loans and other types of foul credit, fell by 50 billion euros (£44.6 billion) to 212 billion euros (£189 billion) in the three months to June - a greater drop than in any other country in absolute and relative terms, the ECB quarterly statistics showed.

Among other crisis-struck countries, Spanish banks reduced their foul credit by 4.7 billion euros, Greek banks by 2.3 billion euros and Portuguese banks by 1.9 billion euros.

Overall, the 114 euro zone banks polled by the ECB were sitting on bad loans worth 843 billion euros at the end of June, down by 71 billion euros compared to three months earlier.

The data also showed the banks had provided for 44 percent of those loans.

Earlier this month, the ECB published proposals forcing banks to provide for the full amount any new unpaid loan and it is studying similar measures for legacy ones.

Yet central bank sources have told Reuters that ECB supervisors are having to rethink their proposals on existing bad loans after complaints from Italy that they would hinder the country’s recovery.

Reporting by Francesco Canepa; editing by Mark Heinrich

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