Investors dumped senior bonds issued by Popolare di Vicenza and Veneto Banca on Monday because of concerns Italy's government would fail to rescue the two ailing regional banks due to a lack of private contributors to the bailout. Ciara Lee reports
Both failing. And both now unlikely to get a state bailout - prompting investors to dump senior bonds issued by Popolare di Vicenza and Veneto Banca. The European Commission wants private investors to pump 1.25 billion euros into the two banks before any taxpayer money can be used to stop them being wound down. But there's a lack of private contributors. On Sunday a Treasury source ruled out the idea of winding down the struggling lenders. That following a report Brussels was set to tell Rome it could not use direct state support to rescue them. SOUNDBITE (English) CRAIG ERLAM, SENIOR MARKETS ANALYST, OANDA, SAYING: "I think the government does want to save them but they want to save them with public funding because they've had such difficulty accessing private money. What they don't want them to do is wind them down and this is something that's been an issue since the financial crisis back in 2008. The Italian banking sector has been extremely weak and in many people's eyes, a number of these banks should have been allowed to die and they should have been bought out, or their good assets been bought out by other banks, healthy banks." Italy has approved an emergency decree that will stop Veneto Banca from having to repay 86 million euros of bonds due to mature on Wednesday. Earlier this month European authorities stepped in to avert a collapse of Spain's Banco Popular following a run on the bank. Orchestrating a last-minute rescue by Santander.