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Two Italian Banks Ordered to Dissolve -- WSJ

24 Jun 2017 6:32 am
By Tom Fairless 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the US print edition of The Wall Street Journal (June 24, 2017).

FRANKFURT -- Troubled Italian lenders Veneto Banca and Banca Popolare di Vicenza will be wound down after the European Central Bank decided Friday they are likely to fail.

The decision by the eurozone's top banking supervisor indicates Italy is moving closer to addressing its slow-moving banking crisis, which has been fueled by a mountain of nonperforming loans.

Italy's Treasury had been seeking European Union approval for a rescue of the two lenders, which have combined assets of around EUR60 billion ($67 billion) and are based in northeastern Italy.

But in a statement published Friday evening, the ECB -- the Eurozone's top bank supervisor -- said the banks' plans to raise additional capital had proved inadequate.

The two banks "repeatedly breached supervisory capital requirements," the ECB said. They had been given time to present capital plans but "had been unable to offer credible solutions going forward," it said.

The Single Resolution Board, which is in charge of dealing with Europe's failing banks, accepted that the two lenders should be wound down under national Italian insolvency laws.

The two banks needed to fill a multibillion-euro capital shortfall identified by the ECB during bank stress tests in 2014. Their financial positions have since deteriorated further as they struggled with a high levels of nonperforming loans and challenges to their business models, the ECB said.

A EUR3.5 billion capital investment in 2016 from Italy's government-sponsored banking fund, Atlante, didn't solve the problems.

The Italian government will meet over the weekend to enact measures aimed at shielding depositors and senior bondholders from losses arising from the banks' liquidation.

Italy faces a tense political calendar over the coming months, with national elections due by next May in which the euroskeptic Five Star Movement is expected to emerge as the largest political force.

Julia-Ambra Verlaine contributed to this article

Write to Tom Fairless at tom.fairless@wsj.com
 

(END) Dow Jones Newswires

June 24, 2017 02:32 ET (06:32 GMT)

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