A bill has been presented to parliament by Prime Minister Giorgia Meloni's party to split retail and investment banks.

Should the bill be approved, it would lead to a major overhaul of Italy's banking sector.

The proposal put forward by the Brothers of Italy (FdI) party follows the collapse of Silicon Valley Bank and the Credit Suisse takeover by UBS, which hiked fears of systemic stress that may result in additional bank collapses, Reuters reports.

The draft law would permit banks a 12-month period to adjust their operations and decide between commercial and financial investment activities.

Initially presented to the lower house of parliament on 17th March, the bill is sponsored by the Fdl head in the lower Chamber of Deputies, Tommaso Foti, along with 14 party colleagues, including Giulio Tremonti, Economy Minister.

A similar law was proposed back in 2018 by the Brothers of Italy party when it was in opposition, yet it didn't make it past the committee stage or reach the floor of the house for approval, the Reuters report adds.

"We believe that the issue is worthy of attention, and therefore we have decided to present the bill again," Foti commented.

"Meloni's office was not informed about the legislative proposal as parliamentary initiatives are distinct from government ones," he added.

The move would, in reality, reintroduce legislation from the 1930s that was scrapped in the 90s by deregulation reforms that certain politicians believe led to recent financial crises.

Permitting retail banks to undertake "speculative trading" is "dramatically negative for the real economy and undermines the most elementary principles of safeguard for the social and ethical foundation of the economy," according to the FdI bill.