Tuesday

25th Jan 2022

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".

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

Italy to hold elections on 4 March

Elections could mean the end of centre-left rule in Italy, with Silvio Berlusconi's centre-right party doing well in the polls.

Covid variants put Schengen under pressure

The EU Commission also raised concerns about the proportionality of Belgium's ban on non-essential travel, for people wishing to leave the country.

Opinion

Europe must plot its own course on China

Given China's size and interconnectedness with Europe, a strategic policy of non-engagement hardly deserves the label "strategic".

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Latest News

  1. EU eyes Indian Ocean naval adventure
  2. EU auditors slam fragmented, sluggish 5G rollout
  3. EU and UK try to melt ice in post-Brexit talks
  4. German ministers condemn 'unrealistic' EU hydrogen rules
  5. 15 years on: How are Bulgaria and Romania doing in the EU?
  6. Coerced into pleading guilty: the rise of trial-waivers in Europe
  7. Poland and Hungary go hard on Belarus migrants
  8. EU ministers to condemn Russian 'aggression'

Join EUobserver

Support quality EU news

Join us