Italian banks are mulling plans to create a new company to buy back bonds issued by Parmalat, the stricken Italian foods group, and Cirio, the Italian food company that defaulted on its debts in 2002 and was declared insolvent last summer.

Bankers at Italy's fourth largest bank Capitalia, which is understood to be leading negotiations about the possible creation of the new entity with other Italian banks that sold the two food companies' bonds to retail investors in Italy, were unavailable for comment on Wednesday.