Stock Market Wire
September 4, 2013

Italian banks are likely to change their corporate governance structures to improve transparency, reduce conflicts of interest and remove obstacles to capital strengthening, Fitch Ratings says.

Better governance structures and procedures that foster healthy shareholder participation and enhance management effectiveness could support bank ratings.

The Italian banks that experienced the greatest difficulties during the eurozone crisis often had corporate governance weaknesses.[EXPAND Read more]

Mainly cooperative and foundation banks, their credit profiles deteriorated rapidly and convoluted decision-making structures has delayed restructuring and capital raising.

Fitch believes that weak corporate governance structures can deter effective management actions, especially where ownership and management structures are vulnerable to interference from local politics, current and retired employees, and other parties.

Fitch says pressure is increasing for Italian banks with weak governance procedures to make changes so they can raise capital, restructure their business and recover from the crisis.

The Bank of Italy is also encouraging banks to raise standards and has highlighted problems with cooperative banks particularly the largest listed ones, and banking foundations in recent public speeches.

Both types of ownership have made it more difficult for banks to raise fresh equity and to take swift management decisions. [/EXPAND]