(Corrects day of the week to Monday in first paragraph)
MILAN, June 17 (Reuters) - An Italian parliamentary committee is set to approve later on Monday a tax measure to spur mergers among banks based in the country’s poorer south, a lawmaker of the ruling League party said, warning of lenders in the region at risk of default.
“We’re tackling an urgent issue,” Giulio Centemero, a member of the lower Chamber of Deputies, told Reuters. “Banks are key for the Italian economy and ... in the south there are troubled lenders that could go bust or have insufficient capital.”
The measure will apply to southern lenders not yet declared insolvent that pursue a merger within 18 months, booking losses as part of the process.
The measure allows the merged entity to benefit from up to 500 million euros in tax breaks related to those losses.
Centemero said the measure, which is likely to then be approved by parliament by the end of June, was compliant with European Union rules on state aid.
Italy’s largest southern bank, Popolare di Bari, last week restated its 2018 loss to 397 million euros due to loan writedowns, pushing its core capital ratios further below the minimum thresholds set by the Bank of Italy.
Italy has seen a string of banking crisis in recent years following a recession that wiped out a quarter of the country’s industrial output. Bankruptcies have hit the savings of ordinary Italians that held their local lenders’ shares and bonds. (Reporting by Giuseppe Fonte, writing by Valentina Za, editing by Silvia Aloisi and Mark Bendeich)