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Italy forced to bail out two more banks for 5.2bn euros | Italy forced to bail out two more banks for 5.2bn euros |
(35 minutes later) | |
Italy's government is bailing out two banks in the Venice region at a cost of 5.2bn euros (£4.6bn; $5.8bn). | Italy's government is bailing out two banks in the Venice region at a cost of 5.2bn euros (£4.6bn; $5.8bn). |
The move comes two days after the European Central Bank warned that Banca Popolare di Vicenza and Veneto Banca were failing or likely to fail. | The move comes two days after the European Central Bank warned that Banca Popolare di Vicenza and Veneto Banca were failing or likely to fail. |
The banks' "good" assets will be taken on by Intesa Sanpaolo banking group. | The banks' "good" assets will be taken on by Intesa Sanpaolo banking group. |
Italian Prime Minister Paolo Gentiloni said the rescue was needed to protect savers and ensure "the good health of our banking system". | Italian Prime Minister Paolo Gentiloni said the rescue was needed to protect savers and ensure "the good health of our banking system". |
The two banks' branches and employees will be part of Intesa by Monday morning in a move designed to avoid a potential run on deposits that could have spread to other Italian banks. | The two banks' branches and employees will be part of Intesa by Monday morning in a move designed to avoid a potential run on deposits that could have spread to other Italian banks. |
Economy Minister Pier Carlo Padoan said Rome would also offer guarantees of up to 12bn euros for potential losses to Intesa from bad and risky loans. | Economy Minister Pier Carlo Padoan said Rome would also offer guarantees of up to 12bn euros for potential losses to Intesa from bad and risky loans. |
"Those who criticise us should say what a better alternative would have been. I can't see it," he told a press conference on Sunday. | "Those who criticise us should say what a better alternative would have been. I can't see it," he told a press conference on Sunday. |
Rome's plan has been approved by the European Commission and avoids a bailout under potentially tougher European rules. | |
The EC's competition commissioner, Margrethe Vestager, said allowing Italy to use state aid would "avoid an economic disturbance in the Veneto region". | |
She added: "These measures will also remove 18bn euros in non-performing loans from the Italian banking sector and contribute to its consolidation." | |
Intesa, Italy's biggest retail bank, has paid a symbolic one euro for the two banks' good assets. | Intesa, Italy's biggest retail bank, has paid a symbolic one euro for the two banks' good assets. |
"Without Intesa Sanpaolo's offer - the only significant one submitted at the auction held by the government - the crisis of the two banks would have had a serious impact on the whole Italian banking system," financial analysts at Messina said. | "Without Intesa Sanpaolo's offer - the only significant one submitted at the auction held by the government - the crisis of the two banks would have had a serious impact on the whole Italian banking system," financial analysts at Messina said. |
The failure of the two Venetian banks could result in as many as 4,000 job losses, La Repubblica newspaper reported. | The failure of the two Venetian banks could result in as many as 4,000 job losses, La Repubblica newspaper reported. |
Bailout fund | Bailout fund |
Sunday's rescue is the latest twist in the drive to fix the Italian banking system, which is saddled with bad loans worth about 350bn euros - a third of the eurozone's total bad debt. | Sunday's rescue is the latest twist in the drive to fix the Italian banking system, which is saddled with bad loans worth about 350bn euros - a third of the eurozone's total bad debt. |
In early June the European Commission and the Italian government agreed a state bailout for Monte dei Paschi di Siena (MPS) that included big cost cuts, losses for some investors and a pay cap for its top executives. | In early June the European Commission and the Italian government agreed a state bailout for Monte dei Paschi di Siena (MPS) that included big cost cuts, losses for some investors and a pay cap for its top executives. |
The agreement followed months of talks over the fate of the world's oldest bank and Italy's fourth-biggest lender - the worst performer in last year's European stress tests. | The agreement followed months of talks over the fate of the world's oldest bank and Italy's fourth-biggest lender - the worst performer in last year's European stress tests. |
Monte dei Paschi was forced to ask for state aid in December 2016 to help cover a capital shortfall of 8.8bn euros after investors declined to put more funds into the troubled bank. | Monte dei Paschi was forced to ask for state aid in December 2016 to help cover a capital shortfall of 8.8bn euros after investors declined to put more funds into the troubled bank. |
The same month Mr Gentiloni said his government had set up a 20bn euro fund - largely to bail out MPS. | The same month Mr Gentiloni said his government had set up a 20bn euro fund - largely to bail out MPS. |
Sunday's announcement comes less than a month after Spain's Banco Popular was rescued by Santander. | Sunday's announcement comes less than a month after Spain's Banco Popular was rescued by Santander. |
The European Central Bank said Banco Popular was "failing or likely to fail" due to its dwindling cash reserves. | The European Central Bank said Banco Popular was "failing or likely to fail" due to its dwindling cash reserves. |
The bank has struggled after billions in property investments turned sour. | The bank has struggled after billions in property investments turned sour. |
The rescue will cost Santander about 7bn euros (£6.1bn). | The rescue will cost Santander about 7bn euros (£6.1bn). |