Bank of Italy Chief Says Some Italian Banks May Need Aid

"A public intervention cannot be ruled out given that in a context of high uncertainty specific problems can impact confidence in the [whole] banking system," said Mr. Visco.

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The U.K. vote to leave the European Union has rekindled tension in the Italian banking sector, with investors dumping local banks' shares over concerns about their massive holdings of bad loans and chronically low profitability.

In response to market upheaval, especially among banks such as Banca Monte dei Paschi di Siena SpA and Banco Popolare SC, the Italian government has been discussing the possibility of state intervention with European authorities to shore up the system.

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In a speech at the annual meeting of Italian banking lobby ABI, Mr. Visco referred to a European rule that allows precautionary recapitalization of solvent banks that fail stress tests run by supervisory authorities.

In such cases, European rules allow government money to be pumped into banks without triggering losses for shareholders, bondholders and uninsured depositors, which are otherwise a prerequisite for a government rescue of ailing banks.

Considering the current market situation is full of risks for financial stability, Mr. Visco said a public backstop for banks--to be used if needed and in compliance with European rules--must be created.

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The Italian government orchestrated the creation of Atlante earlier this year to backstop capital increases at ailing banks and buy bad loans. The fund raised €4.25 billion from banks and other institutional investors, but has already spent roughly €2.5 billion to underwrite the capital increases of troubled banks Banca Popolare di Vicenza SpA and Veneto Banca SpA.