Bank of Italy governor Ignazio Visco has said that the European Banking Authority could eventually relax the compulsory capital buffers it requires banks to maintain now that the euro zone had agreed on its crisis firewall.

However, Mr Visco said that any softening in the regulator’s stance was a prospect for the medium term and could only come if the volatility affecting government bond yields in the euro zone eased.

“The European Banking Authority itself declared that the creation of a proper European firewall would be a necessary condition for a review of the capital buffer requested to the European banks to hedge exposure risks on sovereign debt holdings,” he said.

“Now, with the compromise on the firewall, I believe we cannot exclude an action on this issue.”