A man walks on a logo of the Monte Dei Paschi Di Siena bank in Rome, Italy. Picture: REUTERS
A man walks on a logo of the Monte Dei Paschi Di Siena bank in Rome, Italy. Picture: REUTERS

Rome — Italy’s populist parties are planning an overhaul of its banking system that would reverse years of national and international regulatory policy as part of their governance plan.

A 39-page draft programme published by Corriere della Sera, and confirmed by Five Star and League officials, contains plans to reimburse retail shareholders of banks that have been wound down; review the Basel banking accords, whose parameters "threaten the existence of Italy’s small and medium companies"; review the strategy for lender Monte dei Paschi di Siena; and separate investment banking from deposit-taking consumer banking.

Italy last year was forced to nationalise Banca Monte dei Paschi di Siena after losses on nonperforming loans. The country has been struggling to fix a crisis legacy of soured loans that peaked at more than €360bn, and which have held back credit and an economic recovery.

Luigi di Maio, leader of the anti-establishment Five Star Movement, and Matteo Salvini of the anti-immigrant League, are meeting on Thursday to review sections of the policy plan, which include key points of their electoral campaign such as tax cuts, pension reform, a review of European Union treaties and accounting rules, and more controls on immigration.

The banking section also contains a call to "radically reform" the EU’s bail-in system to ensure more protection for savers, and a section that says supervisors should be "held to greater accountability".

"These proposals are far from easy to implement and EU hurdles stand in the way," said Vincenzo Longo, an analyst at IG Markets in Milan who focuses on the banking sector. "It is very unlikely that the EU will centrally change the rules."

The threat of expansive public spending in the policy programme of Five Star and the League, and reports of plans to write off €250bn in government debt, unsettled bond markets, with the spread between Italy’s 10-year bonds and comparable German bonds rising to 156 basis points, the most since January.