ECB said to see Vicenza, Veneto as solvent, needing 6.4b euros

[MILAN] The European Central Bank estimates that Banca Popolare di Vicenza SpA and Veneto Banca SpA need about 6.4 billion euros (S$9.539 billion) to bolster their balance sheets, and considers the two struggling Italian lenders to be solvent, according to people familiar with the matter.

The ECB identified their capital needs based on the results of the lenders' stress tests and other assessments and has informed the Italian Treasury of its findings, people with knowledge of the matter said Monday, asking to not be identified because the deliberations are private.

The finding of solvency is key because under European Union bank-failure rules, it's a requirement to qualify for a recapitalisation that won't impose losses on senior bondholders.

Veneto and Vicenza, both based in Italy's north-east, are seeking state funds as part of a reorganisation that would see them merging in a so-called "precautionary recapitalisation" that needs approval from the ECB and the European Commission.

Spokesmen for Veneto, Vicenza and the ECB declined to comment. A spokesman for the Italian Treasury wasn't immediately available for a comment.

Earlier Monday, Veneto posted a 1.5 billion-euro loss for 2016, saying its deposits dropped last year and that it needs a capital increase to keep operating.

Two months, ago the two banks submitted a plan to the ECB that said they needed about 4.5 billion euros in capital, people familiar with the matter have said.

Representatives of the ECB, the European Commission and the Italian Treasury reviewed the request for a precautionary recapitalisation at a meeting in Brussels on Monday.

The meeting focused on the compatibility of the banks' request with European rules on state aid, an Italian official said. Constructive talks are ongoing, a European Commission spokesman said, adding he is confident a solution can be found withing weeks.

BLOOMBERG