October 10, 2017 / 8:54 AM / a year ago

Bad loans at Italian banks fall to three-year low

MILAN, Oct 10 (Reuters) - Insolvent loans held by Italian banks fell to their lowest level in August since July 2014 as the country's economy gathers pace and lenders work to shift risky assets off their balance sheets.

The Bank of Italy said in its monthly report Italian banks' bad debts totaled 172.85 billion euros ($204 billion) in August, down from 173.58 billion euros in July -- when a jumbo bad loan sale by UniCredit helped cut the stock by 18 billion euros.

While Italy's economic recovery has lowered the share of loans turning sour back to pre-crisis levels, banks are still under pressure to reduce the backlog of impaired debts.

Italian banking stocks have been falling in recent days after the European Central Bank unveiled a proposal to introduce automatic writedowns of the value of newly-classified bad debts.

For a graphic of Italian bad loans click on tmsnrt.rs/2z9QrWe ($1 = 0.8492 euros) (Reporting by Valentina Za)

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