Europe "not convinced" by Italy's plan to buoy banks after Brexit -EU source

BRUSSELS, June 29 (Reuters) - The European Commission stands ready to support the banking sector in Italy but has not given its backing to Rome’s plan to prop up Italian banks after the turmoil caused by the Brexit referendum, an EU official told Reuters on Wednesday.

On Tuesday in Brussels, Italy’s Prime Minister Matteo Renzi met Commission president Jean-Claude Juncker and vice president Valdis Dombrovskis, who takes control of EU financial services in July after British commissioner Jonathan Hill quit last week.

In bilateral meetings on the sidelines of that meeting, the first EU leaders’ summit after the British referendum, Renzi and Commission officials discussed the impact of Brexit on the Italian banking sector.

“The Commission is ready to help but so far it has not been convinced by what has been proposed by Italy,” one EU official told Reuters.

EU rules allow member states to provide financial help to banks only in case of an exceptional situation.

“Can the Italians really prove that there is a systemic problem caused by the British vote? I don’t know,” the official said.

“There is a special impact on the banks, this is true, but everyone in the world has been affected, not only Italy,” the official said.

A Commission spokeswoman said that the EU executive is “closely monitoring market developments in the European Union, including in Italy”.

“We are in close, regular contact with Italy as part of our normal exchanges. We have no comment on the speculations in the press on any potential specific measures,” she said.

Rome is concerned that Italian banks, which hold 360 billion euros ($400 billion) of bad loans, a third of the euro zone’s total, risk attack by hedge funds betting that Brexit turmoil could tip them into full-blown crisis.

Banking and government sources said on Monday Italy was preparing to protect its banks by requesting more flexibility from the EU on both public spending and state aid for banks. .

On Tuesday, after his meetings with Commission officials, Renzi downplayed the talks on bank financial stability and said that there is no immediate emergency to face. (Reporting by Francesco Guarascio; Editing by Louise Ireland)