Italy's New Large Banking Groups Must Be Ready to Boost Capital

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Italian lenders set to head two new banking groups being created by merging hundreds of small cooperative banks (BCCs) must be ready to strengthen their capital if needed, the central bank's governor said on Saturday. Italy is forcing its tiny BCC banks to merge and two new groups being formed will undergo an asset check-up this year before moving under the European Central Bank's oversight because of their large size, the International New York Times reported on a Reuters story. Bank of Italy Governor Ignazio Visco said in a speech in the northern Italian town of Verona that such reform was increasingly necessary. The BCC banks found it impossible to raise equity capital on the markets and had seen their profits drop, Visco said, and had lower provisions against loan losses despite a bad loan burden which was two percentage points above the high Italian average. "The groundwork for the establishment of cooperative banking groups must be laid more rapidly," he told the Assiom-Forex banking conference. Read more. (Subscription required.)