Italy to Ask Rich Buyers to Help Rescue of Veneto Lenders

Updated on
  • Local businesses would benefit from banks’ survival: official
  • Government in last-ditch effort to avoid winding down lenders

Italy’s government will contact investors in the Veneto region to help fund the rescue of Banca Popolare di Vicenza SpA and Veneto Banca SpA, appealing to local loyalties as it seeks to avert winding down the lenders.

“The finance ministry will sound out potential investors to participate in the banks’ precautionary recapitalization along with the Italian state,” Finance Undersecretary Pier Paolo Baretta said in an interview in Rome. “We’re looking at businessmen from the Veneto area who would benefit the most from the banks’ survival and conversely would be the most damaged by their failure.”

The Rome-based Treasury is seeking permission from the European Commission and the European Central Bank for a state-backed recapitalization of 6.4 billion euros ($7.1 billion). The plans were thrown into doubt last week after the commission rejected a request by the banks to reduce the 1 billion euros of private capital it’s requiring the lenders to raise, according to people with knowledge of the matter.

"It’s very unlikely that Veneto’s entrepreuners are available to put money in those two banks, given the uncertainty about their future,” said Gianluca Codagnone, head of Fidentiis Equities in Milan.

The two banks, which are fighting for survival after failing to raise money from private investors last year, are based in the northeastern region surrounding the city of Venice and also encompassing Verona, Padua and Vicenza.  Home to companies such as Benetton Group SpA and Geox SpA, the dynamic, export-oriented Veneto accounts for about 9 percent of Italy’s gross domestic product.

“The banks’ failure would be disastrous for the region’s economy, and therefore we are confident we can put together a group of investors willing to bet on their turnaround,” Baretta said late Monday. “Private investors entering the banks’ capital along with the state will be able to play a key role when the state exits.”

European authorities have asked for private capital but haven’t set a specific amount, Venice-born Baretta said, when asked to confirm the 1 billion-euro figure. He said the goverment is in daily contact with authorities to find a solution that won’t include a “bail-in” forcing losses on bondholders.

Quaestio SGR, manager of state-orchestrated Atlante fund which has already pumped almost 3.5 billion into the banks, said late Tuesday it doesn’t see conditions for additional investment. The company was responding to requests from the lenders to underwrite a new capital increase.

— With assistance by Alessandra Migliaccio

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