(Adds background, context)
By Stefano Bernabei and Giuseppe Fonte
ROME Feb 14 Italy is in talks with European
authorities over a possible 5-billion euro ($5.3 billion) state
bailout of two Veneto-based regional lenders, two sources close
to the matter said on Tuesday.
One of the sources said the discussions were at an embryonic
stage and the final, combined capital shortfall of the two banks
- Banca Popolare di Vicenza and Veneto Banca - had not been
The sources said the scheme being discussed would be a
precautionary recapitalisation of the two banks, which allows
eurozone states to inject taxpayer money into lenders without
violating state aid rules.
The Rome government has already won approval from the
European Commission to use the mechanism for an 8.8 billion euro
($9.30 billion) bailout of Monte dei Paschi di Siena,
the world's oldest bank.
The two Veneto banks are owned by privately backed bank
bailout fund Atlante, which rescued them last year after their
attempt to raise money on the market failed.
The European Commission, the European Central Bank, Popolare
di Vicenza and Veneto Banca declined to comment. The Financial
Times first reported that Rome was looking at a possible
precautionary recapitalisation of the two banks for 5 billion
The Italian government last year earmarked 20 billion euros
to help struggling banks.
The state is expected to provide 6.6 billion euros of the
funds needed by Monte dei Paschi, raising questions over whether
the 20 billion euros will be enough to bolster a banking
industry weighed down by 356 billion euros of problematic loans
accumulated during a harsh recession.
The two Veneto banks are studying a merger, which the head
of Atlante said this month could be completed by early
September. The fund has already pumped 3.5 billion euros into
the two loss-making banks, but they need more capital to cover
losses from expected fresh loan writedowns.
($1 = 0.9460 euros)
(Reporting by Stefano Bernabei and Giuseppe Fonte, writing by
Silvia Aloisi; Editing by Adrian Croft)