Fears of a renewed eurozone debt crisis are rife on the financial markets if Italy does not address the 360 billion euros ($398 billion) in bad debt sitting in its banks.
Markets have turned sour on several Italian banks, most notably Italy's number-three lender and the world's oldest bank, Banca Monte Paschi.
But Padoan sought to calm nerves on the sidelines of a G20 finance chiefs meeting in the Chinese city of Chengdu.
"All the countries should relax: there is no Italian banking problem," he told AFP.
"There is an economy which has been in recession for three years, there is accumulated non-performing loans, which have been dealt with," he said.
The numbers that were "floating around" were "vastly exaggerated", he added, saying that "a few cases" would be "adjusted".
New eurozone rules limit the use of public money to bail out banks unless investors are required to bear part of the burden, potentially restricting Rome's scope to intervene.
A scheme to rescue Greek private banks a year ago came with demands that the rescued lenders must dispose of assets and cut jobs.
But Padoan insisted that there were "no tensions" between Italy and the European Commission on the issue.
"We are not on a bail-out regime, we are in a bail-in regime, and all the instruments that are considered are within those rules," he said. "There is no need to bail out anybody."
Bad debts restrict economic growth as they reduce the amount of money banks have available to lend, while a banking failure can send shockwaves through the real economy if companies find their access to funds cut off, or debts are called in.
The Italian banking issue was discussed by the G20 meeting, and EU economy chief Pierre Moscovici said that the solution had to be compliant with the EU's common rules.
The messages from the Italian representatives had been "quite affirmative and reassuring", he added.
US officials said that Treasury Secretary Jacob Lew and Padoan had discussed "recent developments in the European banking sector" on the sidelines of the G20 gathering.
In a statement, the US Treasury said that Lew had "noted that while Europe's banking system is stronger as a whole due to reforms put in place in recent years, more work remains".
"Banks should continue to clean up their balance sheets and address legacy asset quality issues," it added.