Italy may spend billions to shut two failing banks

As Italian authorities said on Sunday may spend EUR17 billion for the two failing Banks Veneto Banca and Banca Popolare di Vicenza. Veneto Banca and Banca Popolare di Vicenza, are midsize bank in the north east of Italy in the very industrialized Veneto.

On Friday the European Commission approves aid for market exit of BPVI and Veneto Banca under Italian insolvency law, involving sale of some parts to Intesa Saopaolo. This announcement follows the declaration by the European Central Bank (ECB), in particular stated “if Member States consider public support necessary to mitigate the effects of a bank’s market exit, EU State aid rules apply, requiring that shareholders and subordinated bondholders fully contribute to the costs and competition distortions are limited. “

The President of the Council Paolo Gentiloni also came back on the subject. “ The government’s intervention on the Venetian banks, he explained, was not only legitimate but necessary and is addressed not to the defendants but to others: to 2 million customers, to the SME, to the economy of the territory “.

The purchase does not cover the entire scope of activities of Popolare di Vicenza and Veneto Banca, but the total is broken down by impaired loans (probabilities, probabilities of default and overdue exposures), subordinated bonds issued, as well as equity investments and other legal relationships considered non-functional acquisition.

IntesaSanpaolo will receive from the State:

 – 3.5 billion euro in cash, as a public contribution to cover the impacts on capital ratios, to determine a Common Equity Tier 1 ratio.

– € 1.285 billion, in cash, as a public contribution to cover the integration and rationalization costs associated with the acquisition, which concern, inter alia, the closure of approximately 600 branches.

– public guarantees, amounting to € 1.5 billion, aimed at the sterilization of risks, obligations and commitments involving IntesaSanpaolo for facts prior to the sale.

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