October 11, 2017 / 2:57 PM / 9 months ago

Italian banking stocks rebound after EU Commission proposal on soured loans

MILAN (Reuters) - Italian banking stocks rose sharply on Wednesday with traders citing relief that new proposals by the EU Commission to strengthen the banking sector made no reference to stricter provisioning rules on the existing backlog of bad loans.

FILE PHOTO - A man looks at an electronic board displaying stock index outside a bank in downtown Milan June 13, 2013. REUTERS/Alessandro Garofalo

Italian banks have been hit by a sell-off over the past week after the European Central Bank unveiled plans to require lenders to set aside more money on new soured debts. This has angered Italy, which fears this treatment could be extended to the current stock of non performing loans (NPLs).

The EU Commission said it would make new legislative proposals by next spring to address the NPL problem. It said it would consider possible measures on “minimum levels of provisioning which banks must make for future NPLs arising from newly originated loans.”

Italy’s bank index .FTIT8300 was up 0.9 percent by 1445 GMT, outperforming a 0.3 percent fall in the pan-European banking index .SX7P.

Italian banks are seen as particularly exposed because they hold nearly 30 percent of the euro zone’s 915 billion euros (819.46 billion pounds) of bad loans.

Reporting by Danilo Masoni and Kit Rees

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