Bank chief says Italy must offer support

MILAN // The chairman of Italy's Banca Popolare di Milano has raised concerns that the government is not doing enough to support Italian banks competing with other European lenders who have access to state funds. "As some countries have taken Tier 1 of their banks above eight per cent, I ask myself whether it works for our system to accept this imbalance," Roberto Mazzotta told Il Sole 24 Ore newspaper yesterday.

European governments have moved to shore up their banks against financial turmoil with billions of euros in funds, but so far Italy has said it would act on a case-by-case basis with no specific cash allocation. Britain's £37 billion (Dh216.4bn) recapitalisation package for its banks looks set to take Core Tier 1 levels - which measure a bank's capital against risky assets - higher than eight per cent.

Mr Mazzotta pointed to the examples of France and Germany, which have set up funds to support banks and shore up capital ratios, bringing them close to those projected in Britain. "The Italian state has to say whether it can do the same thing or not," Mr Mazzotta said. Referring to the impact on the economy if banks restricted lending, he said countries which had fortified their banks would have an advantage.

"It's a very dangerous battle where the winners will be the national economies that compete under the guidance and protection of strong states, like France and Britain," he said. He suggested Italy should introduce tax changes and reinforce the capital of intermediaries. But he added that no Italian bank needed rescuing. "We are not talking about rescues, because I don't think any bank needs saving." * Reuters