European Central Bank supervisory chief Daniele Nouy today defended a proposal to tackle soured bank debt, arguing that it is both necessary and within the bank's its mandate.

"The draft Addendum does not establish additional obligations on banks and therefore does not go beyond the existing regulatory framework," Nouy said in a letter to Antonio Tajani, the president of the European Parliament.

"The draft Addendum falls within the supervisory mandate and powers of the ECB," Nouy told Tajani after he criticised the proposal.

"In fact, it is an obligation of the ECB, in line with its supervisory mandate, to address this key vulnerability in the European banking system."

The ECB last week issued new proposals that will force banks from 2018 to set aside more cash against newly classified bad loans and, early next year, could revise recent guidelines for the reduction of the soured debt stock.

Italy - whose banks hold nearly 30% of the bloc’s €915 billion bad loans - has reacted angrily to the proposals, asking the ECB to soften them following a public consultation that runs until December 8.