Italy Rescues Two Failing Lenders

Latest bank bailout tests EU rules
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Italy's banking system is once again the focus on investor concern Monday after officials outlined plans to rescue two failed lenders that appeared to circumvent newly-adopted rules that would prevent the use of taxpayers' funds.

Venento Banca SpA and Banca Popolare di Vicenza SpA will be wound down and folded into the operations of Intesa Sanpaolo SpA (ISNPY) , the country's second-biggest bank, Italy's finance ministry said over the weekend, after the European Central Bank declared the troubled lenders 'failing or likely to fail' late Friday.

"The intervention of Intesa Sanpaolo makes it possible to avoid the serious social consequences that would have otherwise derived from compulsory administrative liquidation proceedings for the two banks," Intesa said in a statement Monday. "This intervention will safeguard the jobs at the banks involved, the savings of around two million households, the activities of around 200,000 businesses financially supported and, therefore, the jobs of three million people in the areas which record the Country's highest economic growth rate."

This article was written by a staff member of TheStreet.