Italy to pay up to 17 bn euros to deal with two troubled banks: Govt

Rome: Italy will pay up to 17 billion euros ($19 billion) to break up two insolvent Venetian banks, which have posed a threat to the country’s banking system, the government announced.
Both face bankruptcy and European authorities had urged Italy to devise a rescue framework, selling off the good assets of the stricken Banca Popolare di Vicenza and Veneto Banca and transferring their toxic assets to a “bad bank,” essentially financed by Rome.
The move comes less than a month after the EU anti-trust authority approved Italy’s massive rescue of the country’s troubled third-largest bank, Monte dei Paschi di Siena (BMPS), which has been in deep trouble since the worst of the euro zone debt crisis.
The Italian government will stage the two Venetian banks’ rescue with support from the country’s biggest retail bank, Intesa Sanpaolo, which will take up the good assets to protect the banks’ customers and to minimise staff lay-offs.
The European Commission in a statement said it “has approved, under EU rules, Italian measures to facilitate the liquidation of BPVI and Veneto Banca under national insolvency law”.
EU competition commissioner Margrethe Vestager said that Italy considers state aid necessary “to avoid an economic disturbance in the Veneto region”.
She added that “Italy will support the sale and integration of some activities and the transfer of employees to Intesa Sanpaolo”.
Padoan said 4,785 billion euros would be set aside immediately to “maintain capitalisation” of Intesa Sanpaolo, which has made that a condition of any cooperation.
For its part Intesa has put one symbolic euro on the table and attached a further string to the deal by insisting its share dividend policy remain unaffected.
“The total resources mobilised could reach a maximum of 17 billion euros — but the immediate cost to the state is a little more than five billion,” said Finance Minister Pier Carlo Padoan.
“This decree allows the stabilisation of the Venetian economy and safeguarding of the economic activity of the Venetian banks,” said Padoan. Italian Prime Minister Paolo Gentiloni portrayed the move as necessary to shore up the situation of current account holders and ordinary savers as well as of bank workers, in order to bolster “the good health of our banking system.” — AFP