Italy’s banks won’t fail the European stress tests, the country’s economy and finance minister told CNBC on Tuesday, despite fears that the country’s banks are struggling under bad loans and hefty holdings of Italian government debt.
“To consider that this has been some sort of implicit bailout by the Italian banks is an exaggeration,” Fabrizio Saccomanni told CNBC on Tuesday. “The latest indication is that Italian banks are actually reducing their share of government bonds which was never bigger than 7 or 8 percent of their total assets.”
Last month the European Central Bank unveiled plans for its oversight of Europe’s leading banks, including an assessment of their risky assets, the quality of their balance sheets, and the amount of capital they hold.
His comments follow a report on Monday from Reuters in which it said Italian banks were near saturation point in terms of Italian government debt. In August, Italian banks held 397 billion euros ($538 billion) in Italian government bonds, the report showed, near a record 402 billion in June and nearly double what they had at the end of 2011.
Italian banks bought up Italian debt using long-term refinancing operations (LTROs) – cheap three year loans offered by the European Central Bank – to make the most of the higher yields on Italian government bonds.