Instead, another LTRO might be useful for smaller banks which cannot easily tap the market for medium- and long term funding, Federico Ghizzoni said.

"I'd say that for banks of a certain size a new LTRO is not a priority...It could be useful for the small and medium-sized ones," Ghizzoni said.

"Funding is going very well, we have been on the market twice already this year paying spreads we had not seen since 2011."

He also said he expected the level of bad loans at his bank, Italy's biggest by assets, to stabilise this year. Lending volumes in Italy should also stabilise in 2014.

(Reporting by Silvia Aloisi, editing by Isla Binnie)