The European Central Bank will require banks in the euro zone to set aside more money for their soured loans. The news came as a major blow to shares in Italian banks, which are saddled with the largest amount of impaired loans in the single currency bloc.
Italy’s Deputy Prime Minister Matteo Salvini responded to the news, accusing the ECB of harming Italian banks.
“The new attack by the ECB supervisor on the Italian banking system and Monte dei Paschi shows once again that the banking union … not only does not make our financial system more stable, but it causes instability,” Salvini said in a statement.
As reported by the Reuters news agency, the ECB will set a target date for each of the banks it supervises to make a full provision for its bad debts, both existing and new, a source familiar with the matter said.
The date may differ from bank to bank and will be an expectation for the medium term rather than a binding requirement, the source added, confirming a report in Italian newspaper Il Sole 24 Ore.
According to Reuters, Italy’s troubled lender Monte dei Paschi di Siena said it was told to increase coverage for impaired loans by 2026, sending its shares down by more than 10%.