Italian Banks Slump After Bond Purchase Report

Italian bank shares were sharply lower in Wednesday morning trade after Reuters reported German Finance Minister Wolfgang Schaeuble said the euro zone's rescue fund should only purchase bonds on the secondary market in exceptional circumstances.

Piazza Venezia, Rome, Italy
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Euro zone leaders agreed on a second bailout package for Greece last Thursdayand said the European Financial Stability Facility (EFSF) bailout mechanism could buy bonds on the secondary market if the European Central bank recommended it do so.

"Even in the future, such purchases should only take place under very strict conditions when the European Central Bank deems there are exceptional circumstances on the financial markets and dangers for financial stability," Reuters quoted Schaueble as saying in a letter it obtained on Wednesday dated July 26.

At 9:15 London time, shares in Intesa Sanpaolo were down 6 percent, while shares in Ubi Banca and Unicredit were trading just over 5 percent lower. Banco Popolare shares were off 5 percent.