UPDATE 1-Italy cbank says EU stakes directive is in effect

* Clears way for stake increase to 10 percent

* Stems from 2007 EU directive for banks

* Italian parliament failed to pass by March 21 deadline

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ROME, May 18 (Reuters) - A European Union directive on purchases of larger bank stakes is in effect in Italy even though the country's parliament has yet to ratify it, the Bank of Italy said on Monday.

The 2007 Brussels directive provides for central banks to give pre-emptive approval for holdings of 10 percent or more in banks, insurers and investment houses, the central bank said in a supervisory statement. The limit had been 5 percent.

A number of Italy's biggest banks, including Intesa Sanpaolo SpA (ISP.MI: Quote, Profile, Research), UniCredit SpA (CRDI.MI: Quote, Profile, Research) and Mediobanca SpA (MDBI.MI: Quote, Profile, Research), have stakeholders just under the existing 5 percent limit.

The move by Bank of Italy Governor Mario Draghi clears the way for purchases of larger stakes without a green light from the central bank. Parliament had failed to pass the directive by a March 21 deadline.