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Italy's Dual Bank Rescue Tests the EU's New Rules by Tapping Taxpayers

  • For the third time this year senior creditors escape losses
  • European Commission says wind-down ‘fully in line’ with rules
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Italian Finance Minister Pier Carlo Padoan discusses the nation's commitment of up to $19 billion to clean up two failed Italian banks. He speaks with Bloomberg's Mark Barton on 'Bloomberg Markets: European Close.' (Source: Bloomberg)

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Italy’s decision to pour as much as 17 billion euros ($19 billion) into its creaky financial system and spare senior bondholders in the liquidation of two failed banks has left investors wondering whether Europe’s post-crisis rulebook is worth the paper it’s printed on.

In three big tests this year of Europe’s new rules aimed at forcing investors to bear the cost of bank failures, senior creditors have escaped losses each time. The Italian government on Sunday announced the taxpayer-funded wind-down of Banca Popolare di Vicenza SpA and Veneto Banca SpA, two lenders it’s been trying to shore up or shut down for months.