Italian PM 'guarantees' savers' accounts in 2 troubled banks

Posted June 26, 2017

With government taking on the liquidation of so-called "bad" assets of the two banks, some of the costs might be recouped eventually, Padoan noted.

The EC's competition commissioner, Margrethe Vestager, said allowing Italy to use state aid would "avoid an economic disturbance in the Veneto region".

The decree must be approved by midnight on Sunday, in time for the reopening of bank branches and markets on Monday.

The Italian government would provide state guarantees worth up to €12bn to cover potential losses at the "bad" bank, Pier Carlo Padoan, the finance minister, told reporters in Rome.

In the evening, the European Commission said in a statement from Brussels approved the measures taken by Italy.

Intesa, Italy's biggest retail bank, has paid a symbolic one euro for the two banks' good assets.

Italy will pay up to 17 billion euros to break up two insolvent Venetian banks, which have posed a threat to country's banking system, the government announced Sunday.

A treasury source said the government estimated that the total 12 billion euros in guarantees would translate into a fair-value exposure of just 400 million euros for the state, but did not explain how it arrived at that figure.

"Italy will support the sale and integration of some activities and the transfer of employees to Intesa Sanpaolo", and said the action will "also remove $18 billion ($20 billion) in non-performing loans from the Italian banking sector and contribute to its consolidation".

Setting tough conditions for the deal, Intesa CEO Carlo Messina has insisted that his bank's capital ratios and dividend policy would not be affected by the transaction.

Earlier this month, the European Union anti-trust authority approved Italy's massive rescue of another troubled bank, its third-largest and oldest, Monte dei Paschi di Siena (BMPS).

The two banks' branches and employees will be part of Intesa by Monday morning in a move created to avoid a potential run on deposits that could have spread to other Italian banks.

Those EU rules could have imposed losses on senior bondholders and large depositors, a politically unpalatable prospect ahead of national elections next year given that Italian households hold a large chunk of bonds issued by banks.

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