ECB pulls the plug on 2 troubled Italian banks
frankfurt — The European Central Bank pulled the plug on two troubled Italian banks, sending them into insolvency proceedings and pushing ahead with efforts to clean up weak banks holding back the economy.
The two banks, Veneto Banca and Banca Popolare di Vicenza, have struggled to overcome high levels of loans that were not being paid back. The ECB said on Friday it had given the banks time to raise more capital but that the banks had not been able to offer credible solutions. It ruled that they were “failing or about to fail.” They will now face insolvency proceedings in Italy.
Weak banks that can’t lend adequately to businesses have been a key weak spot for Italy and the eurozone economy. The European Central Bank took over as top banking regulator in 2014 as part of an effort to strengthen oversight of the European Union’s banking system. The ECB was given the job because national regulators were considered too slow to address troubles at their home banks.
The decision follows a similar ruling on Spain’s Banco Popular earlier this month, the first time the ECB had exercised its new powers to blow the whistle on a failing bank. In that case, EU banking authorities found that a sale for one euro to the larger Santander bank was an acceptable solution.
The Italian banking fund Atlante invested €3.5 billion ($3.9 billion) in Veneto Banca and Banca Popolare di Vicenza in 2016. However, the financial position of the two banks continued to deteriorate. The ECB said they suffered not only from high levels of bad loans but “underlying challenges to their business models.” — AP