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Report: Italy in talks with strong lenders to contribute to Venetian bank rescue

Italy's government and stronger lenders are mulling over a plan under which each bank would contribute to the rescue of Banca Popolare di Vicenza SpA and Veneto Banca SpA, forestalling a scenario under which European regulators could shut down their operations, "sources familiar with the matter" told Reuters.

Veneto and Popolare di Vicenza are seeking approval for a so-called precautionary recapitalization by the government to fill a €6.4 billion shortfall, but they have been told by the European Commission that they must raise €1.2 billion of private capital before the injection of state capital can take place. Italian banks would contribute to that pool based on the size of their deposits, according to one source, while a second source said Italy was putting pressure on Intesa Sanpaolo SpA and UniCredit SpA to take part so other lenders would follow suit.

UniCredit CEO Jean-Pierre Mustier has already held talks with the Italian government and European authorities, according to the first source.

Should the precautionary recapitalization fail and the banks be wound up, Italian lenders would have to fund some €11 billion of compensation for depositors, "two sources familiar with the matter" told Reuters.

The recent acquisition of Banco Popular Español SA by Banco Santander SA after the ECB judged the former to be "failing or likely to fail" strengthened the case for authorities to wind down the two Venetian banks, an EU official said June 7.