Italian Banks
How safe are Italy's banks? The European Central Bank wants to know as it becomes their supervisor from November 2014.Reuters

Italian banks had €156bn in bad loans on their balance sheets at the of 2013 - 8.1% of total loans in the Italian banking system and the highest level since May 1999, according to Italy's Bankers' Association (AIB).

The figure, produced in AIB's monthly report on lenders, is in line with what the Bank of Italy published and came amid widespread turmoil in Italy's political system and revelations that the banking system might be much weaker than previously thought.

Italian lenders raised €33bn ($45.3m, £27.1m) fewer funds from clients compared to the previous month, a 1.9% drop compared to a year earlier.

Meanwhile, Bloomberg reported that two Italian banks had provided poor quality data to the ongoing review of the eurozone's banking system being conducted by the European Central Bank.

Bloomberg said it had seen a document submitted to the Bank of Italy on 10 February which showed that three out of 15 banks taking part in the eurozone's stress test clampdown on weak banks had given poor data.

The European Banking Authority and ECB are trying to diagnose the health of banks as it moves into a position to supervise the continent's financial system.

ECB officials have made it clear that they want to know about any vulnerabilities in the financial system before they assume the supervisory role, which will see the central bank's powers greatly expanded.

Fitch Ratings revealed that Spanish companies have seen a 45% jump in their debt issuance in 2013.

Meanwhile, other countries rocked by the European sovereign debt crisis such as Greece, Ireland, Italy and Portugal saw bond issuance increase by 22% over the same period.

Italy saw its corporate issuance fall by 9%

Two previous stress tests conducted by the ECB failed to be useful at detecting weaknesses on many banks' balance sheets.

Significantly, Spanish and Irish banks that underwent these stress tests were spectacularly exposed in the eurozone's sovereign debt crisis that erupted in 2010.