Berlusconi vows to defend Italian banks

Oct 1, 2008, 14:36 GMT

Naples, Italy - Italian Prime Minister Silvio Berlusconi vowed Wednesday to defend Italian banks hit by the current market slump from hostile foreign takeovers.

'Italians will not lose their money,' said the premier speaking in the southern city of Naples. 'I will not allow speculative attacks on our banks,' he added.

Berlusconi's remarks followed several shaky days of trading for some of Italy's major banks on the Milan bourse.

The country's biggest bank by assets, UniCredit, was suspended from trading earlier Wednesday, but came back strongly by mid- afternoon with a 7.3 per cent surge in its share value to 2.79 euros (3.98 dollars).

UniCredit which controls Germany's Hypovereinsbank (HVB) and has extensive operations in Easter Europe, announced earlier Wednesday it would spin off real-estate holdings to strengthen its finances after shares tumbled 24 per cent in three days.

Milan-based UniCredit also said it would scrap a plan to form a partnership with an investment bank.

Italy's biggest bank by-lending, Intesa San Paolo, was also suspended from trading earlier Wednesday but later resumed to drop 2.8 per cent to a share value of 3.73 euros.

On Tuesday Italy's financial market regulators said in a statement that the fallout from the US financial crisis on the country's banks and insurers is contained and that their liquidity levels are adequate.

But on Wednesday, the Economy Ministry and the Central Bank in Rome suggested that the banks could in fact be vulnerable. The 'necessary measures to guarantee stability to the banking system' and defend account holders would be taken, the said in a statement.