Italian Government, Banks To Meet Monday To Finalize Fund To Tackle Bad Loans

Executives from Italy’s largest banks will meet with Italian Treasury and central bank officials Monday to discuss the creation of a fund that would help the banks tackle non-performing loans and introduce fresh capital, according to media reports.

Italy’s banks are currently loaded with about 360 billion euros ($410 billion) in bad loans, Reuters reported. The fund will be financed by major banks, including UniCredit SpA and Intesa Sanpaolo SpA along with state lender Cassa Depositi e Prestiti to help the cooperative lenders in sales of shares and bad debt.

Terms of the deal are still under review and a final agreement may be reached as soon as next week, sources told Bloomberg.

Earlier this year, Italy struck an agreement with the European Commission, which allowed Italian banks to bundle their bad loans in securities for sale, in a bid to work out a recovery from a recession in Europe’s third-largest economy.

Meanwhile, on Saturday, Pier Carlo Padoan, the country's economy minister said that Italian banks can deal with the pile of bad loans over the next two to three years, adding that the situation of their balance sheets was "difficult but manageable."

Italian banking stocks have lost 40 percent of their market value this year, Reuters reported.