ROME (Reuters) - The governor of the Bank of Italy said on Sunday European Union rules on bank rescues should be applied "reasonably" after the BOI came under fire for the failure and rescue of four lenders which wiped out the savings of thousands of retail investors.
Italy last month ploughed 3.6 billion euros (3 billion pounds) into Banca Marche, Banca Etruria (MI:PEL), CariChieti and CariFeto save them from collapse, using financing from healthy banks.
However, people who had bought shares and junior debt took painful losses, sparking fierce criticism of Prime Minister Matteo Renzi's government, the BOI and the financial market regulator.
Ignazio Visco defended the BOI's conduct in two interviews on Sunday and echoed Renzi in blaming in part the new EU rules which seek to impose more losses on investors when a bank is in trouble to protect taxpayers.
"Europe is slowly starting to realise what the real consequences of the new rules can be," he told La Repubblica newspaper, adding that the bloc's legislative decisions in this area had "honest intentions" but it would have been fairer not to apply the new rules retroactively.
Taking fright at the losses incurred in the rescue, other retail investors who have traditionally been a steady source of funding for their banks have rushed to sell out.
"We now have to reassure savers that all our institutions are working to avoid more (similar) cases, and to ensure that European Union rules are not applied mechanically," Visco said.
On a television show later on Sunday, Visco said he did not object to the principle that taxpayers should not have to pay for saving a bank, but warned that a loss of confidence could weaken other banks.
The scandal intensified after it emerged that many ordinary Italians had been sold risky subordinated bonds which stood last in the ranking of creditors in the event of bankruptcy.
Asked by the TV show host whether banks selling securities to their depositors risked creating a conflict of interest, he said limits needed to be put in place to protect customers.
Economy Minister Padoan has said the average Italian has little financial understanding, leaving them vulnerable to abuse when choosing investments, and Visco said Italy needed to invest heavily in financial education.
Visco also told La Repubblica that the BOI was now in the final phase of resolving the problems of several small banks it had put under special administration in recent months.
However, despite the uproar over the banks' problems, Visco said the more pressing risks to the economy lay elsewhere, in global geopolitics, a slowdown in emerging markets and the continued threat of deflation in the euro zone.
"The imminent risks are macroeconomic, not micro," he said.