Bank of Italy suggests bonus cutback

15 March 2013

The Bank of Italy has suggested a number of Italian banks should cut back on bonus payments.

According to the central bank, lenders that are in the red should refrain from handing out bonuses and distributing dividends, claiming a significant reduction in these handouts is expected this year when compared against 2012's figures, Reuters reports.

The Bank of Italy has conducted an audit of banks in the country regarding their accounts for last year - accounts that resulted in some financiers increasing their loan loss coverage.

In addition to recommending a scaling back on bonuses and dividends, the central bank also instructed lenders to raise the provisions they have made against bad debts to reflect the worsening economic situation.

It stated: "It is ... necessary that the banks adjust their total loan loss provisions to the current and future development of the economic context."

The Bank of Italy also said it anticipates the economy in Italy to contract by around one per cent over the year.

By Gary Cooper

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