Veneto Banca and Banca Popolare di Vicenza

In brief

Two weeks after Banco Popular, the SRB decided that the failure of two mid-sized Venetian banks did not meet the public interest test — sending them into Italian liquidation, with their performing businesses sold to Intesa Sanpaolo alongside state support.

Timeline

2017-06-23

ECB determines both banks failing or likely to fail

2017-06-23

SRB finds resolution not in the public interest

Neither bank is judged to provide critical functions whose interruption would threaten financial stability; winding up under national law is deemed sufficient.

2017-06-25

Compulsory administrative liquidation

Italy places both banks in liquidazione coatta amministrativa; performing assets and liabilities transfer to Intesa Sanpaolo. The Commission approves liquidation aid subject to burden-sharing.

Background

Banca Popolare di Vicenza and Veneto Banca, two cooperative banks from Italy's Veneto region, had been in visible difficulty since 2015: failed listings, capital injections from the Atlante fund, and persistent asset-quality problems. Attempts to arrange a precautionary recapitalisation during 2017 foundered on the requirement for credible private capital participation.

The public interest test

On 23 June 2017 the ECB determined that both banks were failing or likely to fail. The SRB then reached the opposite conclusion to the Banco Popular case: resolution was not necessary in the public interest. In its assessment, neither bank provided critical functions at the national level, and their failure was not expected to threaten financial stability, given their regional footprint. The consequence of a negative public interest assessment is that the bank exits through normal national insolvency procedures rather than through the European resolution toolkit.

The liquidation

Italy placed both banks into compulsory administrative liquidation on 25 June 2017. Under the liquidation, the performing assets, deposits and senior liabilities were transferred to Intesa Sanpaolo, while equity and subordinated instruments remained in the liquidation and absorbed losses in line with state-aid burden-sharing requirements. The European Commission approved Italian liquidation aid to facilitate the transfer and the wind-down of the remaining estate.

Why the case matters

The Veneto episode defined the boundary of the banking union's regime in its first year of full operation: the same failure determination can lead to European resolution or to national liquidation, depending on the public interest assessment — and the treatment of creditors can differ materially between the two paths. The divergence it exposed is a central motivation of the crisis management and deposit insurance (CMDI) reform.