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Italy digs deep to wind up struggling Veneto banks

Monday, June 26, 2017 - 01:45

Italian government bond yields have risen after the European Commission approved the rescue of assets of two struggling Veneto banks. As Ciara Lee reports, it ended months of speculation over whether Italy would be able to bypass regulations preventing state bailouts of banks.

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It could cost it up to 17 billion euros - but the Italian government felt it was left with little choice. Winding up two failing banks - Popolare di Vicenza and Veneto Banca - after years of mismanagement and poor lending. (SOUNDBITE) (Italian) ITALIAN PRIME MINISTER, PAOLO GENTILONI, SAYING: "So this was a very important decision, very urgent . I trust now that parliament will give the extensive support that this decree merits, the largest support possible." The two lenders' good assets will be placed in the hands of the nation's biggest retail bank, Intesa Sanpaolo. The government will pay the lender 5.2 billion euros and provide up to 12 billion euros to cover any toxic assets or bad debts left behind.. The deal approved by the European Commission, allows Italy to solve a banking crisis on its own terms. But the cost to taxpayers is hefty. And some, including Germany, say the deal flouts Europe's rule that bondholders, not taxpayers, should take the bigger hit when a bank fails. (SOUNDBITE) (English) WORLD FIRST, CHIEF ECONOMIST, JEREMY COOK, SAYING: "If we are going to see a European agreement on how further banking crisis' are going to have to be dealt with, then they all need to be singing from the same hymn sheet if they're still part of the European Union. And those bond holders for example in the Spanish bank in Popular Bank will maybe be feeling a little bit aggrieved that they they had to bail in to their bailout, whereas the Italian shareholders of these of these two Venetian banks didn't have to." Branches of the banks are expected to open normally this week. The fear of a cash run may have disappeared. But concerns over jobs will take its place. Thousands of redundancies are expected at the two banks with around 600 branches at risk of closure.

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Italy digs deep to wind up struggling Veneto banks

Monday, June 26, 2017 - 01:45