Italy can meet challege of recapitalisation: Bank of Italy

MILAN: Italy's banks are in position to rise to the "new challenge" of recapitalisation if necessary, Mario Draghi, the head of the Bank of Italy and future governor of the European Central Bank, said Wednesday.

EU finance ministers have asked lenders to bolster their capital reserves to avoid havoc in the banking sector as heads of state and government mull proposals for banks to take at least a 50-percent hit on Greek debt.

"Italian banks are in a position to respond to this new challenge," Draghi said as European leaders headed back to Brussels to tackle the eurozone crisis.

Most Italian banks increased their reserves at the start of the year under pressure from the central bank, which is "confident" they will do so again if necessary.

The short-term liquidity situation is suffering from tensions on the market but remains "balanced," Draghi said.

Bank loans rose by 3.9 percent over a 12-month period in September but businesses were finding it increasingly difficult to get credit, he said.

The head of the Italian banking association, Giuseppe Mussari, also insisted on the solidity of Italy's banks on Wednesday, adding that he did not think Rome was the "weak link" in the eurozone.

Draghi called once again on the government to adopted structural reforms, citing "uncertainties and delays" as one of the key reasons for market distrust towards Prime Minister Silvio Berlusconi's ruling coalition.

Copyright AFP (Agence France-Presse), 2011