Number of Italian lenders under special oversight doubled last year

ROME, 30 May Fri May 30, 2014 12:23pm EDT

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ROME, 30 May (Reuters) - - Twice as many Italian banks were placed under special administration last year than in 2012 amid supervisory efforts to assess the damage caused to lenders from a two-year economic recession, a Bank of Italy report showed on Friday.

The annual report on lender oversight by the central bank showed that special administrators were named to run 11 banks last year, up from five new cases in 2012. At the end of February, a total of 13 Italian banks were being managed by officials chosen by the central bank, it said.

The regulator said the decision to put a bank under special administration is based on factors including low levels of capital, serious irregularities in the way banks were run, poor internal controls and lack of compliance with rules against money-laundering.

Last year the Bank of Italy carried out 1,369 supervisory actions in the form of letters of reprimand sent to banks and interviews with bank managers. That was a 9 percent increase on the previous year.

Italy's longest post-war recession left its banks saddled with 319 billion euros ($434.33 billion) in impaired loans as scores of businesses went bankrupt during the slump.

"The outcome of assessments run in 2012-2013 mirrors the worsening of credit quality due to the persistently negative economic situation which has led banks to increase provisions against impaired loans," the report said.

"The negative impact on banks' profitability was not offset by revenues or lower operating costs."

Domestic banks must improve their governance and control systems, the regulator warned, while it praised lenders' efforts to raise fresh capital.

A total of nine Italian banks have plans to raise nearly 11 billion euros in cash from investors to strengthen their capital reserves. They are part of a group of 15 Italian lenders under scrutiny from European authorities in a health check of euro zone banks this year.

Of the capital increases announced so far, the biggest is planned by Banca Monte dei Paschi di Siena, which is aiming to raise 5 billion euros in June. ($1 = 0.7328 Euros)

(Reporting by Valentina Za; Editing by David Goodman)

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