Italy may aid banks ahead of stress tests

The Italian government is considering options for a public backstop to cover potential shortfalls in bank capital ahead of European stress tests in October, two people with knowledge of the plan said.

Officials are weighing multiple options, according to the people who asked not to be named because the review is private. The government may set up a fully- financed pool that would be ready for use immediately or draw up the legal framework without raising funds, said one. The government may also opt to do nothing, the person said.

The biggest European banks are undergoing examinations of their ability to withstand economic downturns before the European Central Bank (ECB) takes over as pan-European supervisor in November. Banks may be required to raise capital if they are judged to have a shortfall.