Banca Monte dei Paschi (>> Banca Monte dei Paschi di Siena SpA) Chairman Alessandro Profumo said Sunday that Italian banks are solid, and that he doesn't see any signs of bank runs in the country.
"They [Italian banks] hold lots of Italian sovereign bonds that some think they will not be repaid, but if they'll be repaid then banks are solid," Profumo said in an interview broadcast by Italian state TV channel Rai Tre.
He gave the example of the bank he chairs--often referred to as the world's oldest, and Italy's third largest--as a bank whose capital shortfalls depend only on its holdings of Italy's debt.
"The EUR3.26 billion of capital shortfall identified by the European Banking Authority depends only on the country's sovereign bonds we own," he said. MPS currently owns EUR26 billion of BTPs--the country's long term debt.
Profumo said all Italian banks bought those bonds because, until September 2011, these purchases didn't absorb capital and yields were attractive.
"Then rules changed," he said, referring to EBA's new rules which don't consider these sovereign bonds risk free and therefore have an impact on capital needs.
He added that to resolve the problems affecting European banks there is a need for further European integration. "Project bonds and euro-zone bonds will eventually arrive, I think," Profumo said.
Project bonds are debt instruments backed at euro-zone level which will be used to finance infrastructure projects, while euro-zone bonds are sovereign bonds backed by euro-zone countries.
However, while he's said to be optimist about the future of European integration, he conceded the euro is at risk and said he sees a more than 50% probability of a Greece's exit from the common currency.
In May, Banca Monte dei Paschi di Siena posted a 61.2% decline year-on-year in net profit for the first quarter, mainly due to large writedowns on its loan portfolio.
Profumo was nominated chairman of MPS in April. Previously, he was UniCredit Spa (>> UniCredit SpA)'s chief executive.
-By Giovanni Legorano, Dow Jones Newswires, +39 342 7006537; [email protected]