Italy commits up to $19 billion to keep Veneto banks afloat

MILAN: Italy approved emergency rules for two ailing banks in the northern Veneto region, “mobilising” as much as 17 billion euros ($19 billion) to liquidate the lenders and sell their good assets to Intesa Sanpaolo SpA.

Finance Minister Pier Carlo Padoan, speaking after an emergency cabinet meeting in Rome on Sunday, said that the government will first provide Milan-based Intesa wit h more than 5 billion euros to allow the purchase of some assets of Banca Popolare di Vicenza SpA and Veneto Banca SpA at a token price without any impact on Intesa’s capital ratios.

Padoan said that an additional 12 billion euros are available to cover potential risks related to the banks’ liquidation. The two banks will be split into good and bad assets with the good assets purchased by Intesa, Prime Minister Paolo Gentiloni said.

The European Central Bank on Friday declared the lenders failing or likely to fail, and said both would be wound up under Italian insolvency rules.