* Italy seeking to bail out two regional lenders
* Nouy seeks greater discretion in capital demands
(Adds detail, quotes)
By Francesco Canepa and Balazs Koranyi
FRANKFURT, March 23 Some euro zone banks may
need to be shut if they become unviable, the European Central
Bank's top supervisor said on Thursday, as the Italian
government seeks to bail out two regional lenders.
Daniele Nouy, the head of the ECB's supervisory arm, told
the European Parliament there were too many banks in the euro
zone and called for Frankfurt to be given greater discretion
when deciding how much capital they must hold.
As the euro zone's top bank supervisor, the ECB will have to
decide whether Banca Popolare di Vicenza and Veneto Banca are
solvent and how much capital they need, as it did with their
larger peer Monte Paschi late last year, if Italy's
planned rescue is given a preliminary green light.
Nouy did not name any bank or country but stressed European
rules allowed for some banks to be shut down.
"In specific cases consolidation may also take the form of
the unwinding of banks if they become unviable," she told a
Nouy said she welcomed the European Commission's new
proposed rules on bank capital, which introduce several tweaks
to globally agreed standards.
But she warned they constrained supervisors' powers,
particularly when it comes to set capital requirements, known in
the industry as Pillar 2.
"Most prominently, the proposal may frame supervisory action
too tightly," Nouy said.
"It does so by constraining the flexibility required by the
supervisor in taking action in cases not foreseen in the
legislation and in determining the composition of the Pillar 2
Specifically, she said supervisors should be able to demand
that their requirements be met with Core Tier 1 capital, such as
equity, and to impose individual deductions, provisions or
filters to specific banks.
She also said deviations from global rules made banks more
vulnerable and difficult to compare for investors, while the
Commission's proposal did not go far enough in making rules more
homogeneous across Europe.
(Reporting By Francesco Canepa; Editing by Balazs Koranyi and