June 28, 2016 / 3:11 PM / 3 years ago

UPDATE 1-Renzi says discussing EU support for battered Italian banks if needed

* Renzi says banks do not currently need European support

* Says market fluctuations “normal” after Brexit vote

* Says no risk for Italian savings (Adds Renzi comments, background)

By Francesco Guarascio

BRUSSELS, June 28 (Reuters) - Italian Prime Minister Matteo Renzi on Tuesday said he was holding discussions with European institutions on how to support Italian banks should they need it after suffering huge declines in the aftermath of Britain’s Brexit vote.

Rome is concerned that Italian banks, which are saddled with 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.

Asked before a summit of EU leaders on Tuesday whether he was in talks with European institutions about supporting Italian lenders, Renzi told reporters: “Today in Brussels we’re discussing everything.”

“If there are emergencies, we will deal with them. The important thing is that people know that there is no risk for their savings,” he said.

Earlier on Tuesday, Renzi said there was no current need for extraordinary support for the banks.

Italian bank shares had already declined sharply this year partly because they are saddled with 360 billion euros ($398.20 billion) in bad loans.

They have struggled to find buyers for their bad loans or to raise fresh share capital without heavy price discounts or state-backed bailouts. ($1 = 0.9041 euros) (Reporting by Francesco Guarascio in Brussels; Writing by Steve Scherer; Editing by Raissa Kasolowsky)

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