Top Italian banks are planning to offer €2.7bn ($3bn) credit line to the country’s interbank deposit protection fund (FITD), Reuters has reported.
One of the sources told the news agency that the banks involved are UniCredit, Intesa Sanpaolo, Banco BPM, UBI Banca and Banca Monte dei Paschi di Siena.
What is FITD?
FITD is a collective fund established under the supervision of Bank of Italy to safeguard bank deposits under €100,000 in case of bank failures.
The move is expected to strengthen the financial system in the country. It will also support the weaker lenders in the country during potential market shocks.
However, Intesa Sanpaolo and Unicredit did not confirm the move, while others were not available to comment.
The top five banks advocated granting a loan instead of injecting funds into the FITD. It will enable the banks avoid any direct impact on their revenues.
Later this month, other smaller banks are also expected to join the move, a source told Reuters.
The initiative follows the speculative reports on the state of Italian banking system due to new government policies.
Italian banks are said to hold €370bn of government securities. The value of the securities drops when the interest rates go up.
However, the latest central bank data shows that the NPA level of Italian banks dropped to their lowest in six years.