State aid: Commission approves aid for market exit of Banca Popolare di Vicenza and Veneto Banca under Italian insolvency law, involving sale of some parts to Intesa Sanpaolo

Background:

The announcement followed the declaration by the European Central Bank (ECB) on 23 June 2017 that BPVI and Veneto Banca were failing or likely to fail and the decisions by the Single Resolution Board (SRB) that resolution action was not warranted in the public interest in either case. Accordingly, Italian authorities were asked to wind-down the banks under Italian national insolvency procedures.

On 24 June, Italy notified to the European Commission its plans to grant State aid to wind-down the two banks. The country selected Intesa Sanpaolo as the buyer in an open procedure.

The Commission found these measures to be in line with EU State aid rules, in particular the 2013 Banking Communication. Existing shareholders and subordinated debt holders contributed to the costs, reducing the cost of the intervention for the Italian State. Both aid recipients, BPVI and Banca Veneto, were set to be wound up in an orderly fashion and exit the market, while the transferred activities were planned to be restructured and significantly downsized by Intesa, which in combination would limit distortions of competition arising from the aid.

The development followed a separate case dealt with earlier in June 2017 regarding the Italian bank Monte dei Paschi di Siena (MPS).

The European Commission approved on 25 June 2017 a set of measures by the Italian government to facilitate the liquidation of Banco Popolare di Vicenza (BPVI) and Veneto Banca according to national insolvency law.

The Italian State decided to grant cash injections of about €4.8 billion and State guarantees of a maximum of about €12 billion. These measures enable the sale of parts of the two banks' businesses to Intesa Sanpaolo, including the transfer of employees.

• Primary Source

European Commission: DG Communication: MEMO/17/1792, 25.06.17: State aid: How the EU rules apply to banks with a capital shortfall – Factsheet http://europa.eu/rapid/press-release_MEMO-17-1792_en.htm

The New York Times, 25.06.17: E.U. Commission Approves Billions in Aid for 2 Italian Banks https://www.nytimes.com/2017/06/25/business/eu-italy-banks-popolare-veneto.html

BBC News, 25.06.17: Italy forced to bail out two more banks for 5.2bn euros http://www.bbc.co.uk/news/business-40400210

EurActiv, 26.06.17: Italy coughs up €17bn to deal with two troubled banks http://www.euractiv.com/section/economy-jobs/news/italy-coughs-up-e17bn-to-deal-with-two-troubled-banks/

EUObserver, 26.06.17: EU approves rescue of Italian banks https://euobserver.com/economic/138345

The Guardian, 25.06.17: Italy to wind up two failing banks at potential cost of €17bn https://www.theguardian.com/business/2017/jun/25/rome-to-wind-up-two-failing-banks-at-potential-cost-of-15bn

Bloomberg, 25.06.17: Italy Rushes to Approve Decree Law to Keep Two Veneto Banks Open https://www.bloomberg.com/news/articles/2017-06-25/italy-rushes-to-approve-decree-law-to-keep-two-veneto-banks-open

Deutsche Welle, 25.06.17: Italy readies 17 billion euro package to save two failing banks http://p.dw.com/p/2fM4p

MarketWatch, 25.06.17: Italy may spend billions to shut two failing banks http://www.marketwatch.com/story/italy-may-spend-billions-to-shut-two-failing-banks-2017-06-25

Reuters, 25.06.17: EU Commission clears state aid for Veneto banks https://www.reuters.com/article/us-eurozone-banks-italy-commission-idUSKBN19G0V9

ECB: Banking Supervision: Press Release, 23.06.17: ECB deemed Veneto Banca and Banca Popolare di Vicenza failing or likely to fail https://www.bankingsupervision.europa.eu/press/pr/date/2017/html/ssm.pr170623.en.html

Single Resolution Board: News, 23.06.17: The SRB will not take resolution action in relation to Banca Popolare di Vicenza and Veneto Banca https://srb.europa.eu/en/node/341

EurActiv, 27.06.17: Liquidation of Italian banks shows limits of banking resolution rules http://www.euractiv.com/section/banking-union/news/liquidation-of-italian-banks-shows-limits-of-banking-resolution-rules/

Il Sore 24 Ore, 27.06.17: Bank of Italy forecasts state could bring in €9.9 billion over time from Veneto banks http://www.italy24.ilsole24ore.com/art/business-and-economy/2017-06-23/bank-of-italy-forecasting-to-bring-96-billion-of-deteriorated-credit-from-the-two-veneto-banks-161102.php?uuid=AE5WYClB

The Local.it, 26.06.17: Government to pay 17 billion euro to save two banks https://www.thelocal.it/20170626/government-to-pay-17-billion-euro-to-save-banks

Euro|Topics: Debates, June 2017: Italy pays: Is the banking union redundant? http://www.eurotopics.net/en/181424/italy-pays-is-the-banking-union-redundant

Politico, 26.06.17: Italy tests EU’s new bank rules, again http://www.politico.eu/article/italy-tests-eu-new-bank-rules-veneto-banca-popolare-di-vicenza/

Social Europe, 04.07.17: Rescuing Veneto Banks Would Have Cost Less With Indirect Nationalization https://www.socialeurope.eu/2017/07/rescuing-veneto-banks-cost-less-indirect-nationalization/

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