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Italian PM plays down banking problem amid fall of bank shares

Xinhua, August 2, 2016 Adjust font size:

Italian Prime Minister Matteo Renzi on Tuesday played down the problem in the country's banking system, saying Italian banks are good and the oldest bank Monte dei Paschi di Siena's troubles were over with a new relaunch plan.

According to the ANSA news agency, Monte dei Paschi di Siena (MPS) was the only one of five Italian banks to fail last week's European stress tests after receiving the bail-out program of the 5-billion-euro(about 6 billion U.S. dollars) injection, its third cash call in two years.

"For the first time we have eliminated the problem of non-performing loans (NPLs)," Renzi told American news television channel CNBC. "Now for the first time Monte dei Paschi (di Siena) is without NPLs because the Atlante (rescue fund) operation has cleaned the bank of every non-performing credit," he said, adding that he was confident it was the "final" solution for the lender when asked if it would be MPS's last recapitalization.

"My view is that Italian banks are good," Renzi said. "There are some problems, yes. The first is Monte dei Paschi, we know. But Monte dei Paschi is also a great brand, the most ancient bank around Europe. If now, without NPLs, with a clear strategy, I think this bank could be a very good bank for the future".

Last week's European stress tests showed that the "Italian banks are not the problem for the European system - this is the new development," Renzi said. "They said every day over the last 12 months that Italian banks were the problem and we replied it was not true," Renzi told CNBC.

"In the end the stress tests showed the reality: we have the best European bank, Intesa Sanpaolo, and four banks out of five are in a good situation, " he said. "The problem is MPS for which we have worked hard for a market solution. Therefore we are satisfied with the result," Renzi added.

The Milan stock exchange's FTSE Mib index was down by 2.1 percent after about one hour of trading on Tuesday, with bank shares taking another pounding. Trading in five lenders, MPS, Unipol, Banco Popolare, BPER, UBI Banca and UniCredit was suspended due to excessive volatility.

Among those bank shares, MPS was down 8.03 percent at 0.28 euros. It closed up 0.6 percent on Monday after the struggling lender announced a new plan featuring the 5-billion-euro capital increase and avert nationalization. But investors seem concerned that the plan, featuring no state aid but only private funding, might be difficult to implement.

UniCredit, the largest Italian bank, was also hit badly, losing 6.6 percent, after performing less well than expected in the European Union-wide stress tests. Enditem