Case Studies: Banco Popolare di Vicenza and Veneto Banca
Nicola Bilotta
Abstract: Banco Popolare di Vicenza and Veneto Banca were the biggest banks by total assets in Italy. Both banks were known for their good business relationships with local economic actors in Veneto. However, in 2017 the two banks went bankrupt and were sold to Gruppo Intesa Sanpaolo for 1 euro. This paper studies how and why two apparently solid banks failed in just a few years. The analysis of the bankruptcy of Veneto Banca and Banca Popolare di Vicenza contextualizes external macroeconomic factors with the widespread misconduct of the banks’ management.
Veneto is not just the region of Venice known for its beautiful canals and Romeo and Juliet’s balcony in Verona. Veneto has been the core of Italian industrialization; its small and middle-sized factories are the symbols of Italian economic growth. Veneto has one of the highest income per capita in Europe and its socio-economic development is comparable to the richest regions in Germany or the Netherlands.
The economic crisis has seriously hit the productive system of Veneto causing the failure of several companies and a fall in factory output. In this fragile macroeconomic context, Veneto’s banks suffer low liquidity and high levels of impaired loans. Two local banks have been the key lenders to Veneto’s enterprises: Banca Popolare di Vicenza and Veneto Banca.
Formerly known as a shining example of good business relationships between local banks and their territories, Banca Popolare di Vicenza and Veneto Banca have become the nightmares of thousands of savers and small investors. Banco Popolare di Vicenza’s stock price fell from a peak of 62.5 euro in 2011 to 0.10 euro in 2015 while Veneto Banca’s stock price dropped from a peak of 40 to 0.10 euro in 2016.
Recently, the Italian government announced an official plan to deal with Banca Popolare di Vicenza’s and Veneto Banca’s troubles. The two banks will be divided into “good” and “bad” segments. Banca Intesa Sanpaolo will acquire while the bad segments will be set aside in a bad bank, triggering a bail in. The Italian Finance Minister, Pier Carlo Padoan, announced a state financial intervention of 5 billion euro, which will be used to upgrade the capital of the two banks while 12 billion euro will be allocated to cover the non-performing loans of Veneto Banca and Banca Popolare di Vicenza. The state hopes to recover most of the non-performing loans in the long term. If this fails, the state will need to cover the unrecovered debt with public funds.
