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By Silvia Aloisi
MILAN, April 4 Struggling Italian regional
lenders Banca Popolare di Vicenza and Veneto Banca confirmed on
Tuesday the European Central Bank has estimated they have a
combined capital shortfall of 6.4 billion euros ($6.8 billion)
after stress tests by the regulator last year.
In almost identical statements, the two banks said that the
ECB had indicated they both qualified for a so-called
precautionary recapitalisation by the state.
The scheme, already used by Italy's fourth biggest lender
Monte dei Paschi di Siena, takes advantage of an
exception to EU banking liquidation rules that allows public
money to be injected into ailing banks with a limited
contribution from their creditors.
The European Commission must now decide whether the two
banks' requests for public support breaches EU state aid rules,
and approve their restructuring plans for the funds to be
unlocked. On Monday, a spokesman for the Commission said it was
confident that a solution could be found in the coming weeks.
The capital shortfall was calculated taking into account the
lenders' score in the adverse scenario of the stress tests,
whose results had not been previously made public.
Two sources close to the matter had earlier put the capital
gap for the two banks at 6.4 billion euros. One of the sources
said the ECB considered the lenders solvent, a key condition for
them to receive the state bailout they have requested.
Popolare di Vicenza said in its statement it had failed the
stress test adverse scenario, which looked at how banks could
withstand a three-year theoretical economic shock, recording a
Common Equity Tier 1 ratio at the end of 2018 of minus 3.19
percent against the 8 percent minimum requirement set by the
ECB. That shortfall translated into a capital gap of 3.3 billion
euros according to ECB calculations, the bank said.
Veneto Banca said it had also failed the baseline scenario
of the tests, but that shortfall had been plugged thanks to an
injection of capital by Italian bank bailout fund Atlante.
The state-sponsored fund - financed mostly by private banks
and financial institutions - rescued both Popolare di Vicenza
and Veneto Banca last year after they failed to raise funds on
the market. It has invested nearly 3.5 billion euros to save
Under the adverse scenario, Veneto Banca recorded a capital
shortfall of 3.1 billion euros, as its CET 1 ratio came in at
minus 2.56 percent versus the 8 percent threshold.
The two banks said the capital shortfalls estimated by the
ECB will be used to calculate the final amount of the
Italy, which has set aside 20 billion euros to rescue ailing
lenders saddled with bad loans, is already expected to spend 6.6
billion euros to bail out Monte dei Paschi.
($1 = 0.9376 euros)
(Editing by Hugh Lawson)