ECB picks Italy's Enria as banking watchdog: sources

FRANKFURT (Reuters) - The European Central Bank picked Italian-born Andrea Enria as its new banking watchdog on Wednesday after a hotly contested run-off with Ireland's Sharon Donnery, two sources familiar with the decision told Reuters.

Enria will take over from Daniele Nouy as the head of the Single Supervisory Mechanism that oversees the euro zone's 118 top lenders, a 21 trillion euro industry still reeling from the last recession and facing new challenges from hacking to fintech.

Chair of the London-based European Banking Authority since 2011, Enria has had a major role in shaping the European Union's new financial rulebook in the aftermath of the financial crisis.

A former supervisor at the Bank of Italy and the ECB, he is viewed as politically neutral and ruffled some feathers at home for what was seen as an overly tough stance on unpaid bank loans and credit to small companies.

Pending approval from the European Parliament, he will start his new job at the beginning of next year.

The ballot of the bank's Governing Council was secret, but sources had told Reuters ahead of it that Enria's candidacy would be backed by the central banks of Italy and other southern European countries.

They were alienated by Donnery's even harsher approach as the main architect of the ECB's drive to clean up banks' balance sheets from bad loans, which are mainly concentrated in Cyprus, Greece, Portugal and Italy.

The initiative was eventually watered down due to opposition from Italy.

The two candidates had been approved by the European Parliament's Committee on Economic and Monetary Affairs after informal hearings.

The representative of Italy's eurosceptic League party on that committee did not back Enria.

Just hours ahead of the vote, two German and one British member of the EU parliament wrote to ECB President Mario Draghi to "clarify (their) positive view" of Donnery, according to an email seen by Politico.

The Committee's chair, Italian Roberto Gualtieri, called their comments "inappropriate" and singled out the UK parliamentarian for an "unacceptable" involvement ahead of Britain's exit from the EU. [nF9N1TZ00X]

(editing by John Stonestreet)