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The Unlisted Dead! ECB Deemed Veneto Banca and Banca Popolare di Vicenza Failing or Likely to Fail

Two Italian banks, Veneto Banca and Banca (Un)Popolare di Vicenza, have shut down due to lack of capital. Both bank’s stocks are unlisted.

On 23 June, the European Central Bank (ECB) determined that Veneto Banca S.p.A. and Banca Popolare di Vicenza S.p.A. were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements. The determination was made in accordance with Articles 18(1a) and 18(4a) of the Single Resolution Mechanism Regulation.

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The ECB had given the banks time to present capital plans, but the banks had been unable to offer credible solutions going forward.

Consequently, the ECB deemed that both banks were failing or likely to fail and duly informed the Single Resolution Board (SRB), which concluded that the conditions for a resolution action in relation to the two banks had not been met. The banks will be wound up under Italian insolvency procedures.

The Italian banking fund Atlante invested 3.5 billion euros ($3.9 billion) in Veneto Banca and Banca Popolare di Vicenza in 2016. However, the financial position of the two banks continued to deteriorate. The ECB said they suffered not only from high levels of bad loans but “underlying challenges to their business models.”

Veneto Banca has a bond outstanding that matures on 09/17/2017. It’s current yield is 660.5%.

The Veneto’s bond price has collapsed since December 2016.

At least small bondholders may get protected from the ensuing bank liquidation.

(Bloomberg) — The Italian government will seek to shield subordinated small bondholders from losses in the Veneto banks liquidation, Corriere della Sera reports, without saying where it got the information.

Govt may reimburse retail investors for mis-sold bonds, as in the Monte Paschi bailout plan
Retail investors hold one third of EU700m-EU800m subordinated bonds of the Veneto banks: Corriere

Cost of state plan to liquidate Veneto banks and cover NPLs losses estimated at EU8b-EU10b: Corriere

NOTE: Italy Spares Senior Creditors in Local Veneto Banks Liquidation

Here is a photo of ECB regulators shutting down the zombie Italian banks.

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