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MILAN, April 4 Popolare di Vicenza's and Veneto
Banca's bonds rallied on Tuesday as investors bet the two
troubled Italian regional banks would be granted the state aid
they have requested to stay in business.
Following a meeting with Italian authorities on Monday, a
European Commission spokesman said the EU executive was
confident that a solution could be found in the coming weeks.
Italy wants to avoid having to liquidate the two banks
because this would impose losses on their creditors and large
depositors under European Union rules, which could hit
confidence in the country's frail banking system.
Italian sources familiar with the matter told Reuters on
Monday that an accord over the state bailout request was within
reach. The EU Commission must approve the banks' restructuring
plan to unlock state funds.
Separately, Bloomberg reported that the European Central
Bank had deemed the two banks viable and set the capital
shortfall they must fill at 6.4 billion euros ($6.8 billion).
A source close to the matter confirmed the figure, which is
higher than an expected 5 billion euro capital gap.
A viability assessment is a prerequisite of a state rescue.
The two banks and the ECB declined to comment.
Italy has not managed to help out its troubled banks before
the strict rules limiting state aid to lenders kicked in last
year. These impose losses on bank's creditors and large
depositors before tapping public money in an effort to shield
Rome is trying to prop up its most vulnerable lenders under
an exception to those rules as thousands of ordinary Italians
hold domestic banks' shares and bonds.
The bailout of the two banks, as well as that of bigger
rival Monte dei Paschi di Siena, would use this
exception to the EU rules to spare senior bondholders from
By 1208 GMT a Popolare di Vicenza October 2018
bond yielded 20 percent down from 25 percent late
on Monday. The yield on a Veneto Banca May 2019 bond
fell to 14 percent from 18 percent.
The two banks' senior bonds dropped sharply a week ago after
Popolare di Vicenza reported a 1.9 billion euro 2016 loss and
Veneto Banca on Monday reported a 1.5 billion euro loss for
2016 and said it had also lost deposits due to concerns over its
($1 = 0.9383 euros)
(Reporting by Elvira Pollina and Francesco Canepa; writing by
Valentina Za. Editing by Jane Merriman)