Never before have the risk of default and the shadow of a bail-in (i.e. bailout for shareholders, bondholders and account holders) threatened Banca Popolare di Vicenza and Veneto Banca with depressive effects on stock market prices of most banking stocks.
After the cold shower from the European Antitrust on the restructuring, recapitalization and merger plan of the Veneto banks and Brussels' request for at least another billion in private capital as well as support from the Treasury to avoid State aid infringements, the Minister of Treasury, Pier Carlo Padoan tried to reassure the North East, public opinion and the markets by excluding that the two banks would end up in resolution and that a bail-in would be triggered for both or at least one of them.
However, to really avoid the bail-in, the alternative is clear and, at the same time, very complicated: either the Government manages to convince the European Commission, often in another orbit than the ECB, to lower the demands on new capital for the Venetian banks or for Popolare di Vicenza and for Veneto Banca it is necessary to find other private capital, of which not even the shadow is seen after the refusal of the main banks and the Atlante fund to pass out.
But, if a solution were not found quickly, the risks not only for the two Veneto banks and their customers but for the entire Italian financial system would be very high. The weekly "Milano Finanza" has calculated that, if the half-bail-in of the 4 banks that previously ended up in resolution, namely Banca Etruria, Banca delle Marche, Carife and Carichieti, cost the banking system around 30 billion in terms of bond funding , the default of Popolare di Vicenza and Veneto Banca would impose a risk of 80 billion on the Italian financial system if we consider the effects of the general crisis of confidence that would affect all the banks as well as the reputational risk, the interbank cost, the bond placements and the contraction of deposits, rates and spreads.
After all, the appreciation recorded in the last few days by the senior bonds of the two Veneto banks is a worrying sign that photographs the very strong uncertainty that continues to hang over the banks and which, if it is not quickly defused, will continue to cast its shadows on the banking system and financial, on the markets but, at this point, also on the political system just a few months before the new general elections.
