MILAN: Italian bank shares fell sharply Tuesday after UBI Banca announced an unexpected 1 billion euro ($1.4 billion) capital increase ahead of new global capital rules and bank stress tests next month.
Following calls from Bank of Italy governor Mario Braghi for Italian banks to boost their core capital, the country's fifth largest bank said it would raise it's core tier one ratio to 8.1 percent, from 6.95 at the end of 2010.
The increase will take place before the summer, it said.
UBI Banca head Victor Massiah said the decision to raise the capital had been taken independently, without pressure from the Bank of Italy, in order to bring it into line with Basel III rules.
"This will put enormous pressure on banks who do not have UBI's ratio," a Milanese analyst told AFP on condition of anonymity.
Il Sole 24 Ore financial daily said the Banca Popolare di Milano (BPM) could decide to raise its capital from 500 to 600 million euros, though a spokesman at the Milanese bank refused to comment.
The banks most likely to raise their capital are BPM, Banca Monte dei Paschi di Siena (BMPS) and even Intesa Sanpaolo, Italy's second largest bank, the analyst said.
UniCredit may also come under pressure to follow suit if European regulators in June decide it is a strategically important financial institution, he added.
The concern that UBI Banca's move would set off a chain reaction saw Italian bank shares plummet.
At 1415 GMT UBI Banca was down 10.11 percent while BPM had dropped 6.0 percent.
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