ROME: Co-operative banks in Italy should seek approval from their parent company before granting large loans, the European Central Bank said on Monday. The comment is part of a legal opinion on a Bank of Italy’s circular implementing the Italian government’s reform of co-operative lenders, aimed at making that part of the Italian banking system more efficient and safe.
“In particular, the parent bank should be given specific powers to confirm loan transactions… that exceed a specific percentage of the affiliated bank’s own funds,” the ECB said. “Similarly, the parent bank should be empowered to approve transactions where the total exposure towards the same client or a group of connected clients is above predefined thresholds.”
Italy’s high pile of bad loans has been a key source of concern for the ECB, which is due to publish shortly new guidelines on how banks should bring down their soured credit.
