Italy's PM says banking system 'solid' despite market rout: paper

[MILAN] Italy's government is watching with concern a rout in domestic banking shares but the system is solid, Prime Minister Matteo Renzi was quoted as saying on Thursday.

The Milan market's Italian banking stocks index has fallen 24 per cent this year as investors'attention has turned to a high level of bad loans amid the wider concerns for global economic growth in financial markets.

Monte dei Paschi, Italy's third-largest bank and the most vulnerable among top lenders, has borne the brunt of the fall, shedding 59 per cent of its value since the end of 2015.

"We're vigilant and concerned about tensions in the banking sector, though it could even be an opportunity," Mr Renzi told financial daily Il Sole 24 Ore. "The system is much more solid than some investors rightly fear ... Current events will ease mergers, tie-ups, purchases."

However, Mr Renzi also said the market would decide what was the best solution for troubled lender Monte dei Paschi di Siena.

The world's oldest bank has been looking for a merger with a stronger peer as recommended by the European Central Bank. "Monte dei Paschi is trading at an incredible price," Mr Renzi said. "I'd really like the solution (for the bank) to be Italian but whoever comes along will get a great bargain." Turning to an ongoing dispute between Rome and Brussels over deficit spending and immigration, Renzi said Italy had to "put a stop to the provincialism of those who spend their time thinking Brussels is infallible". "I'm not raising my voice. I'm raising my hand. And asking questions," Mr Renzi said.

European Commission President Jean-Claude Juncker last week invited Mr Renzi to tone down his criticism of the Commission "at every street corner".

Mr Renzi said he believed Mr Juncker got both "form and substance"wrong. "But I'm not touchy. If Juncker gets a press conference wrong, so be it. If Juncker gets his policies wrong, then I'm worried," he said.

REUTERS