The report focussed in particular on Italian banks, saying the country's lenders were burdened by the highest amount of impaired loans in Europe.

The banks would not have to comply with the regulator's request if they were able to explain why they cannot, the paper said.

On Monday shares in Italian troubled lender Monte dei Paschi di Siena fell more than 10 percent after it said the ECB had told to increase cover for impaired loans by 2026.

A request to apply the rule to existing loans was unexpected, analysts said on Monday.

(Reporting by Francesca Landini; editing by Kim Coghill and John Stonestreet)