Banca Monte dei Paschi di Siena

The European Union on Tuesday proposed making it harder for states to pour billions of euros of aid into an ailing bank, as Italy did with Monte dei Paschi di Siena six years ago.

Proposals from the EU's executive seek to ensure that banks hold enough resources, in particular debt that can be written down to release cash in a crisis, to avoid taxpayer handouts.

European authorities will prepare by the end of next year enhanced disclosure requirements on bad loans as part of an action plan to tackle the risk of non-performing loans (NPL).

EU economic and finance ministers (Ecofin Council) are expected to adopt today (11 July) a plan to decrease the high level of bad loans held by banks in member states.

The European Central Bank needs greater oversight and more accountability, as it has strayed into the realm of political decision-making but without the necessary scrutiny, global watchdog Transparency International said in a report on Tuesday.

Pier Carlo Padoan, the Italian Minister of Economy and Finances couldn’t hide his disagreement with ECB on the Monte dei Paschi di Siena recapitalization.

Last Friday the Italian government announced the nationalization of the third biggest bank of the country, Monte dei Paschi di Siena. The bank had failed to find 5,5 bn Euros from private investors it needed to stay afloat.

The European Central Bank, however, is of the opinion that the bank needs no less than 8,8 bn Euros.

By Inyoung Hwang

European stocks fell, erasing earlier gains, as lenders sent Greek and Italian stocks lower.

European shares turned lower on Thursday as banks in countries such as Italy, Greece and Spain resumed their recent downtrend.

Shares in peripheral banks have mostly been falling since the publication of the results of the European Central Bank's stress tests over the weekend.