Italy's 5-Star says ECB bank supervision will damage country

ROME (Reuters) - Lawmakers from Italy's ruling 5-Star Movement on Tuesday said the European Central Bank's supervision of domestic lenders, which are being asked to set aside more money to cover impaired loans, will harm the country.

"The rules of oversight should guarantee stability, not cause the whole system to explode," 5-Star members of the lower house finance committee said in a statement. They added that the ECB's latest move will cause "grave damage to Italy".

Earlier on Tuesday, a source told Reuters the ECB would give the banks it supervises a target date to fully provision for all of their bad debt, existing and new. The move surprised some investors and particularly spooked Italian lenders because many hoped the ECB would be more flexible.

(Reporting by Steve Scherer; Editing by Crispian Balmer)