The Italian cabinet has cleared the bank reform bill which requires the country’s cooperative banks to become a joint stock companies over the next 18 months.
The plan, personally driven through by Prime Minister Matteo Renzi, aims to improve the governance of the cooperative banks.
The governance of cooperative banks has come under scrutiny in recent times from the EU and International Monetary Fund due to spiraling of their non-performing loans and slow credit flows.
The decree would apply to only cooperative banks which have at least EUR8bn ($9.24bn) in assets, and would force the lenders to reform their one shareholder, one vote governance.
Prevailing law permits shareholders of cooperative banks have one vote regardless of the size of their stake.
The bill, which is expected to be cleared by the Italian parliament, is expected to pave the way to consolidation in the banking sector.
The banks affected by the move include Banca Popolare, Banca Popolare di Milano and Ubi.
The bill also has a provision which will make it easier for bank customers to transfer current accounts without paying heavy fees.