Saturday

23rd Sep 2017

EU approves rescue of Italian banks

  • "The government has utilised European rules in the best possible way," said Italian finance minister Pier Carlo Padoan. (Photo: Council of the EU)

The European Commission on Sunday (25 June) approved a €17-billion plan by the Italian government to save two failing banks.

The Italian government had decided a few hours before to cut both the Banca Popolare di Vicenza (BPVI) and Veneto Banca into two, to keep their good assets in a "good bank" and the toxic assets in a "bad bank".

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The banks, which were weakened by a lack of capital and massive debts due to non-performing (non-repaid) loans, were taken over by the Intesa Sanpaolo bank, for one symbolic euro.

The Italian state injected €4.785 billion to keep both the financial institutions alive. The government also offered a guarantee up to €12-billion, to cover the cost of Intesa liquidating the banks' bad assets.

The commission said that the plan was "in line with EU state aid rules", because "existing shareholders and subordinated debt holders have fully contributed to the costs" and the two failing banks "will be wound up in an orderly fashion and exit the market".

The EU executive also said that Intesa was chosen in an "open, fair and transparent sales process".

Because financial markets open on Monday, the process was completed over the weekend. It was triggered after the European Central Bank (ECB) said on Friday that BPVI and Veneto Banca had failed to present credible recapitalisation plans and were "failing or likely to fail".

The banks, both located in the Veneto region in Italy, were being monitored by the ECB since 2014, after one of its evaluations had shown capital shortfalls.

Despite a €3.5 billion cash injection last year by Atlante, an Italian fund, the banks' situation had worsened this year.

"Italy considers that state aid is necessary to avoid an economic disturbance in the Veneto region," EU competition commissioner Margrethe Vestager noted in a statement on Sunday.

She also said that BPVI and Veneto Banca's rescue will remove €18 billion in non-performing loans from the Italian banking sector and "contribute to its consolidation".

It is the second time this month that the EU executive has approved a plan to save Italian banks.

On 1 June, it agreed "in principle" to the Italian state's rescue of Monte dei Paschi di Siena (MPS), the country's fourth largest bank, which had also been worn down by massive debts and required around €9 billion.

"The government has utilised European rules in the best possible way," said Italian finance minister Pier Carlo Padoan on Sunday.

He insisted that the plan to save BPVI and Veneto Banca was "burden-sharing, not a bail-in" and that it would use public money that was already provisioned.

Italy reaches EU deal on failing bank

After months of negotiations, the European Commission and Italy agreed on the terms of rescue for Monte dei Paschi di Siena bank, including job cuts, salary caps and private sector involvement in the bailout.

EU takes time to ponder tech giant tax

The EU commission published a paper that outlined several options on how to increase tax income from internet companies' activities, but fell short of proposing legislation.

EU commission changes gear on trade

The EU executive seeks new deals with Australia and New Zealand, while aiming to overhaul the global investment protection system. It also wants to screen foreign investments.

Investigation

EU bank accused of muzzling watchdog

An ongoing review of the the European Investment Bank's "complaints mechanism" could make the oversight branch less independent and less effective.

News in Brief

  1. Dutch state appeals ban on taking air-polluting measures
  2. May proposes 2-year transition period after Brexit
  3. May to call on EU's 'sense of responsibility'
  4. Catalonia has 'contingency plans' for independence vote
  5. Last German polls confirm Merkel's lead
  6. EU to step up sanctions on North Korea
  7. Tusk calls 'euro summit' in December
  8. Report: May to seek two-year EU transition

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel