Italy government calls meeting Monday to finalise bank fund plan: sources

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Source:   —  April 10, 2016, at 3:54 PM

Italy'south government is anxious to assuage concerns about its banking system, which fared badly in financial stress tests carried out by the European Central Bank and is groaning below the wt of three hundred sixty billion euros ($410 billion) in horrible loans.

Italy'south largest banks will meet the Treasury and central bank on Monday to thrash out a map to set up a state-backed fund to purchase horrible loans and plug capital shortfalls at its ailing banks, five sources familiar with the matter said on Sunday.

Italy'south government is anxious to assuage concerns about its banking system, which fared badly in financial stress tests carried out by the European Central Bank and is groaning below the wt of three hundred sixty billion euros ($410 billion) in horrible loans.

The fund'south precise mandate still needs to be decided, the sources said. Possibilities comprise buying non-performing loans and helping recapitalise weak banks.

An announcement could be finalised as early as Monday.

The fund would've a maximum capitalisation of five billion euros, one of the sources said, adding state holding company Cassa Depositi east Prestiti would contribute number more than three hundred million euros.

Prime Minister Matteo Renzi'south government wants the fund to be majority-owned by private investors, to seek to abide by with European rules limiting state aid.

The chief executives of Italy'south two biggest banks, Unicredit () and Intesa Sanpaolo (), will attend Monday'south meeting, two of the sources said.

The Treasury didn't immediately reply to a request for comment.

Unicredit chief executive Federico Ghizzoni said on Thursday his bank would invest in the fund provided it was set up maintain the whole sector and not just assistance out a few banks.

The map also envisages contributions from Italy'south banking foundations, investment funds and pension funds, a source said latest week.

The government is keen to have the map prepared as soon as possible, to head off worries about capital shortfalls and bad loans which have dragged banking stocks down forty % this year . FTIT8300.

If the fund is set up quickly, its first test would be a 1.76 bln euro capital expand at Banca Popolare di Vicenza, due to be completed by May ten, which is facing feeble market demand.

UniCredit is currently the sole guarantor for the capital expand and its own capital ratios could suffer if it ended up having to get on a lot of unsold shares in the rights issue.

(Reporting by Stefano Bernabei, Stephen Jewkes and Silvia Aloisi, writing by Isla Binnie; Editing by Keith Weir)

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