Shares in Italian lenders slumped on Tuesday when it emerged that the ECB wanted euro zone banks to set aside more money for their soured loans.

According to a source, Frankfurt will set a target date for each of the banks it supervises to make full provisions for both existing and new stock of bad loans.

The date may differ from bank to bank, the source said.

In a statement on Wednesday UniCredit said that as of the third quarter last year it had cut its bad loan portfolio by more than 36 billion euros (£31.9 billion) since the same quarter in 2016.

"UniCredit considers its NPE (Non Performing Exposure) coverage fully adequate," it said.

But the lender said its talks with the ECB on regulations could lead to "a low annual single-digit basis-point impact on its CET1 ratio for any additional coverage of its NPE stock for each year up to 2024."

Most of Italy's top banks said new ECB guidelines on bad loan provisions would not have a significant impact on their financial targets but gave no timeline.

Last Friday Monte dei Paschi said the ECB had asked it to set aside more money to cover for losses on its bad loans by 2026.

Banks in the euro zone's third biggest economy held 159 billion euros in non-performing loans at the end of June, accounting for 9.7 percent of all their loans.

(Reporting by Stephen Jewkes, editing by Louise Heavens)