ECB monitoring liquidity levels

BRUSSELS: The European Central Bank is checking liquidity levels at a number of Italian banks, including Banca Carige and Monte dei Paschi di Siena , on a daily basis, two sources close to the matter said on Monday.

Italian banking shares have fallen sharply since the start of the year amid market concerns about some 360 billion euros of bad loans on their books and weak capital levels.

The ECB has been putting pressure on several Italian banks to improve their capital position. The regulator can decide to monitor liquidity levels at any bank it supervises on a weekly or daily basis if it has any concern about deposits or funding.  An ECB spokesperson declined to comment on whether the regulator was checking any specific Italian bank, but said that it is normal practice to monitor bank liquidity and capital.

Monte dei Paschi and Carige both declined to comment.

A money market trader told Reuters on Monday there were no apparent signs of stress for any Italian bank on the interbank market banks use to lend each other short-term funds.

Some Italian banks suffered a deposit outflow at the end of last year as their customers took fright at the rescue of four ailing lenders that were saved from bankruptcy in November under tougher European Union rules. Those rules imposed losses on the banks' shareholders and junior bondholders.

Withdrawals continued in the first few weeks of the year as a violent sell-off in banking shares alarmed small investors but appear have eased more recently, bankers say.

Carige and Monte dei Paschi are the only two Italian banks that had to raise capital on the market after failing the ECB stress tests in 2014.