The European Central Bank (ECB) has closed two Italian banks – Veneto Banca and Banca Popolare di Vicenza.
Despite having received a previous bailout, both banks were deemed unable to survive.
Here is the ECB statement on the closure:
“On 23 June, the European Central Bank (ECB) determined that Veneto Banca S.p.A. and Banca Popolare di Vicenza S.p.A. were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements. The determination was made in accordance with Articles 18(1a) and 18(4a) of the Single Resolution Mechanism Regulation.
The ECB had given the banks time to present capital plans, but the banks had been unable to offer credible solutions going forward.
Consequently, the ECB deemed that both banks were failing or likely to fail and duly informed the Single Resolution Board (SRB), which concluded that the conditions for a resolution action in relation to the two banks had not been met. The banks will be wound up under Italian insolvency procedures.”
As noted by ZeroHedge, the Italian Economy Minister Pier Carlo Padoan had said the banks would not be shut down. He even said Italy had no banking problem.
Now, “Stockholders will be crushed. Junior bondholders will likely get slammed hard. And the Italian taxpayer might face some additional pain – all of it caused by many years of terrible and reckless bank management.”
Padoan’s misguided comments echo the statements from politicians in 2008 who dismissed the possibility of a crisis and said “the fundamentals of our economy are strong,” as disaster loomed around the corner.
The fall of Veneto Banca and Banca Popolare di Vicenza are not isolated incidents. Behind all the talking points and desperate spin, the fact is that many western economies are stagnant – despite extraordinarily low interest rates and massive amounts of money printing. The same central bankers and politicians who failed to see the 2008 crisis coming continue to double-down on policies that have seen the wealthiest gain even more while the middle-class and working people struggle.
The economic pressures generated by stagnation are expressed in many ways, including bank failures as we saw in Italy. Remember, when times are good, even poorly-managed banks tend to thrive. (Of course the biggest ones get bailed out and profit no matter what happens).
As economic stress mounts, rather than examine the deeper flaw in their economic thinking, the elites instead lurch from crisis to crisis, patching up the system just enough to keep it fumbling along.
Sooner or later though, that approach will reach its end, and a severe crisis will follow. The closing of two Italian banks isn’t even close to the end of it.
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