Banks to dump more Italian debt ' IFR

European banks are planning to dump more of the 300 billion euros they own in Italian government debt, as they seek to pre-empt a worsening of the regions debt crisis and avoid crippling write downs - a move that could scupper the European Central Banks efforts to bring down soaring yields.Still reeling from heavy losses on money they lent to Greece, lenders are keen not to make the same mistake twice. Then, under the pressure of governments and a hope that credit default swaps would protect them against heavy losses, they held on until it was too late to sell.According to Reuters, with the ECB providing a bid for Italian bonds that might not otherwise exist, board members at some of Europes largest bank say now is the time to accelerate disposals. Many are also reversing long-standing policies of buying into new Italian bond issues, denying Rome an important base of support."Our traditional buying days are no longer," said one board member at a European bank, one of Italys 10 biggest creditors, who added that the bank has also sold off previous bond purchases. "Unless there is more certainty on Italians changing direction, it will be very tough for them to find buyers."Banks are important creditors to Rome, having bought about 40 per cent of the 22 billion euros Italy issued in euro-denominated syndicated bonds since 2009. According to the European Banking Authority, the regions biggest 90 banks held 326 billion euros of Italian debt at the end of last year.Many banks have since reduced their holdings, although the EBA numbers - released in July - are the most up-to-date cross-industry figures on nominal holdings. Italys debt load totals around 1.7 trillion euros, with more than 300 billion due to mature next year alone."Youre better off doing it now rather than waiting," said one investment banker who is currently working on plans for bank clients to further sell down their Italian bond holdings. "Its better to take the losses now when everyone is expecting it rather than wait around for a default."The ECB has been buying Italian bonds to keep down yields since August. Since then, the institution has bought about'110bn of European government debt, some of which traders say is Italian debt. Most sales have been and will be on the open market.
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