November 21, 2018 / 8:59 AM / 19 days ago

Italy cabinet secretary suggests ban on shorting bank stocks

ROME (Reuters) - Italian cabinet secretary Giancarlo Giorgetti has called for a ban on the short selling of bank stocks in an effort to protect domestic lenders from a rise in bond yield spreads.

Italian banks, which hold billions of euros of the country’s government bonds, are paying the price for a jump in sovereign borrowing costs triggered by market fears over the ruling coalition’s big-spending, 2019 budget plans.

The European Commission is set to take a first step later on Wednesday towards disciplining Italy over its draft fiscal plan.

The row is pushing some investors to sell Italian assets and shift money in less risky investments.

“Short selling. Let’s try to be clear about this. What we can do and must do is at least to sterilise the impact of the spread on the stock exchange, in particular on banks,” Giorgetti, who is a senior figure in the League, said in a brief statement late Tuesday. He gave no further details.

Short-selling is the process through which an investor borrows shares and sells them on the expectation their price will fall and they can be bought back at a lower price.

Reporting by Giuseppe Fonte, writing by Giselda Vagnoni; Editing by Crispian Balmer

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