(Adds details)
By Andrea Mandala
MILAN, Jan 25 (Reuters) - European Central Bank supervisors want euro zone lenders to reduce the weight of impaired loans so it falls below 10 percent of total debts fairly quickly, the head of Italy's fifth-largest bank UBI said on Thursday.
The ECB is pressuring European lenders to tackle a $1 trillion pile of debts that turned sour due to an economic slump. In Italy, problematic loans still account for around 16 percent of total lending three years after the recession ended.
Italy's slow-moving judicial system and the sheer size of the problem mean a speedy reduction can only be achieved through sales, which are carried out at a loss.
But UBI CEO Victor Massiah told reporters his bank was not under obligation to sell its bad loans.
"We're proving, as you'll see it from our full-year results, that we are able to reduce them on our own," he said on the sidelines of an event in Milan.
He declined to say what soured loan ratio UBI would target but added it was "very clear that regulators wish to see a single-digit, and not a double-digit, ratio over a relatively short timeframe."
UBI's problematic loans accounted for 14 percent of total debts at the end of September.
Sales of bad debts burn through lenders' capital as market prices, despite having risen on good demand for distressed assets in Italy, are still below the loans' book values.
Analysts expect banks to write down further their bad debts by taking advantage of the new IFRS9 accounting rule that comes into force this month and which gives them time to book writedowns without hurting profits although they still hit capital.
Massiah said the introduction of the IFRS9 rule "offered an opportunity" for UBI to deal with its bad debts. "We could take advantage of it but it's one thing to say we're assessing it and another that we have to do it," he added.
He did not rule out the possibility UBI might follow Intesa SanPaolo , which this month said it was discussing selling part of its debt collection business, if a good offer was made. But he said it was not part of UBI's current strategy.
Sources have said Intesa's bad loan unit has been valued at 500 million euros and that the regulatory stance on soured debts had triggered the lender's move.($1 = 0.8048 euros)
(Writing by Valentina Za; Editing by Crispian Balmer and Edmund Blair)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.