Italian banking shares rebounded on Thursday after a week of plunging prices, with Prime Minister Matteo Renzi seeking to reassure investors that the sector was solid despite its mountain of bad loans. Laura Frykberg reports
It's been a bad time for Italian banks. Shares in two of them plunged to record lows this year, sinking under the weight of weak capital and risky loans. That problem saddles the whole system, Italian banks hold billions of dollars in bad debt. Italy's Prime Minister says the country needs fewer and stronger players. (SOUNDBITE) (Italian) ITALIAN PRIME MINISTER MATTEO RENZI SAYING: ''It is clear that the world of banks in Italy have the chance and necessity to make significant changes'' But the European Commission is yet to agree on how that's implemented. Rome wants to allow bad loans to be put into seperate entities, however tighter EU rules may not allow it. With a struggling economy, a weak banking sector is the last thing Italy needs, says CMC Market's Michael Hewson. (SOUNDBITE) (English) CMC MARKETS, MARKET ANALYST, MICHAEL HEWSON SAYING: ''Have European regulators dealt with the problem of the non-performing loans of European banks?The answer to that question is no. And until they do that is going to act as a significant break on European economic growth. Simply because the banks provide the juice to oil the wheel of the European economy. '' Talks on how to resolve Italy's banking crisis are due later this week.