- Given their modest size, Veneto Banca and Banca Popolare di Vicenza are set to undergo an insolvency procedure under Italian law rather than under the framework laid down by the European BRRD.
- Intesa Sanpaolo (MI:ISP) is set to take on some of the assets and liabilities belonging to the two banks undergoing liquidation for a token payment of one euro.
- The Italian government is providing state aid consisting of EUR 4.785 billion in cash injections and up to nearly EUR 12 billion in state guarantees for the deal.
Veneto Banca S.p.A. and Banca Popolare di Vicenza S.p.A., respectively Italy’s 15th- and 16th-largest banks in terms of regulatory capital in 2016, were declared on 23 June 2017 to be failing or likely to fail by the European Central Bank (ECB) in its capacity as supervisory authority. Both entities are set to be wind-down under normal insolvency proceedings pursuant to Italian law. For a token euro, Intesa Sanpaolo S.p.A. is set to acquire the healthy assets of both banks undergoing liquidation and to assume a portion of their liabilities. For Intesa, Italy’s second-largest bank, this acquisition represents an increase in its total assets (EUR 725 billion at year-end 2016) of around 8%.
Resolution would have been contrary to the public interest
Both Veneto-based banks will undergo normal insolvency proceedings pursuant to the rules governing the banking union. The Bank Recovery and Resolution Directive (BRRD) is applied as an exception to the general rules and kicks in only if resolution is in the public interest (see figure 1). Contrary to what happened on 7 June 2017 with Banco Popular SA, Veneto Banca and Banca Popolare di Vicenza will not undergo a sale of business procedure as part of a resolution action. The Single Resolution Board (SRB1) decided that, unlike the Spanish situation, it was not in the public interest to proceed with the resolution of the failing entities (Article 18(1)(c) of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 (Single Resolution Mechanism Regulation (SRMR)).
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by Thomas HUMBLOT