Italy's Atlas fund part of banking reforms: Officials

The newly-set up bank bailout fund in Italy — dubbed Atlas — will help clear uncertainty over the financial system, the country's central banker said as senior officials aim to calm market concerns over the size and impact of the fund.

Speaking at a press conference at the International Monetary Fund (IMF) meeting in Washington, D.C., Bank of Italy's Governor Ignazio Visco reiterated previous statements that the fund — a private-sector initiative to buy up struggling Italian lenders' bad loans — is not state aid.

Shares in Italian banks have fallen sharply since the start of the year as fears over non-performing loans on their books grow.

"(Is it) something that solves all the problems of the banking sector after seven, eight years of 25 percent fall in industrial production once and for all? Obviously not. But it is a good chunk in a process, which has to be a gradual process. You don't solve difficulties on the asset side even if you have taken into account a good part of the expected losses that are coming from that side in a matter of months or over one or two years," Visco said.

Visco also sought to reassure investors over the size of non-performing loans (NPLs) in the country.

"What is clear is that we are in a situation in which the stock of non-performing loans in our country could be halved had we had the same norms and the same behaviors that prevailed in our major partners. In a sense, the banks keep in their books things that elsewhere can be taken out much quicker."

"On one side, this is a legacy tool. It is a legacy of tax, of the number of years that were much longer before you could really count these as losses and not pay taxes on this. This has been reduced and now it is basically as quick as elsewhere, but this does not apply to the stock that has accumulated. "

At the same press conference Italian Finance Minister Pier Carlo Padoan stressed that Italy was undertaking crucial reforms.

"To strengthen weak banks, which have gone through three years of recession with 10 percent GDP loss, it's not just a matter of having a quote-unquote NPL instrument, as Governor Visco just explained. It's also about transforming the banking system which we have done through a number of measures which are already bearing fruits," he said.

"So this, together with the new European regulations, changes dramatically the landscape and generates pressures and incentives for banks to have merger and acquisitions, to raise capital, to become stronger, to become a lower number of banks, but bigger banks, so this is the strategy of the government, it is a structural reform strategy and the measures we will take are part of that strategy. They're very important on their own, they're much more powerful if inserted into the reform framework."

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