Italy’s banking crisis could spread to the rest of Europe and rules limiting state aid to lenders should be reconsidered, Societe Generale SA Chairman Lorenzo Bini Smaghi said.

“The whole banking market is under pressure,” the former European Central Bank executive board member said in an interview with Bloomberg Television Wednesday. “We adopted rules on public money; these rules must be assessed in a market that has a potential crisis to decide whether some suspension needs to be applied.”

With Italian banks weighed down by about 360 billion euros ($389 billion) in soured loans, the government has been sounding out regulators on ways to shore up lenders amid a renewed selloff in the wake of the British referendum to leave the European Union. The government would invoke an EU rule allowing temporary state aid if regulatory stress tests uncover a shortfall at Banca Monte dei Paschi di Siena SpA, a person with knowledge of the discussions said Tuesday.

Despite the struggling market, it’s important to protect European banking rules set up in recent years, Klaus Regling, CEO of the EU Stabilization Fund, said in a separate television interview. Many solutions under the existing rules are still available to Italy, he said.

‘Find a Way’

"The Italian government is in a dialogue with the European commission on how to apply the framework to these specific circumstances,” Regling said. “I am confident they will find a way."

Europe’s banking market faces the risk of a systemic crisis unless governments accept the idea of taxpayer money as the ultimate recourse in a crisis, Bini Smaghi said. Any intervention should be as swift as possible, he said.

Both Italy and Germany have too many banks that are not profitable and more consolidation is needed, the chairman said. Italy must do more to deal with non-performing loans and Prime Minister Matteo Renzi will have to take politically unpopular steps including cost cuts and job reductions, he said.

“What’s needed is a European solution,” he said. “So far, we’ve had national solutions. We need a clear backstop.”

On Brexit, Bini Smaghi said he expects “very long” negotiations. He expressed concern that Britain’s proposal to reduce corporate taxes to attract companies could lead to risky tax competition across Europe.