Veneto Banca

Veneto Banca was an Italian banking group headquartered in Montebelluna in the Veneto region. Established in 1877 as Banca Popolare di Montebelluna, it began as a locally oriented cooperative bank and later developed into a broader banking group through the acquisition and integration of other cooperative banks, savings banks, and specialist financial institutions. Its traditional business included retail banking, lending to households and businesses, deposit-taking, wealth management, and services for small and medium-sized enterprises. The bank entered an intensive expansion phase during the 2000s. It enlarged its presence beyond Veneto into other parts of Italy, including the south and central regions, and acquired interests or operations in Eastern Europe. Among the transactions associated with this period were the purchase of 29 branches of Nuova Banca Mediterranea from Banca di Roma in 2001–2002, the development of Banca Meridiana, and the later integration of Banca Meridiana with Banca Apulia. Veneto Banca also acquired Cassa di Risparmio di Fabriano e Cupramontana, strengthening its presence in Marche, Umbria, and Rome. Several acquired institutions were eventually absorbed, while others remained subsidiaries or investments for periods of time. By the middle of the 2010s, Veneto Banca was one of Italy’s larger banks and one of the fourteen institutions directly supervised by the European Central Bank. Its financial condition nevertheless deteriorated as non-performing loans increased and capital requirements became more demanding. In December 2015, legislation required large Italian cooperative people’s banks to convert into joint-stock companies. Veneto Banca completed that transformation from a cooperative society to a società per azioni, changing its governance and voting structure and purchasing shares from members as part of the process. The bank planned a capital increase of approximately €1 billion and sought a stock-market listing in 2016. Investor demand was insufficient: only one institutional investor subscribed and existing shareholders took up a small portion of the offer. The Atlante banking-sector rescue fund consequently subscribed almost the entire issue and became the dominant shareholder. The transaction temporarily strengthened the bank’s regulatory capital, but subsequent loan write-downs and supervisory requirements continued to erode its capital position. Atlante provided additional funding, while Veneto Banca also issued state-guaranteed bonds in 2017. Veneto Banca was also affected by allegations that its own shares had been sold to depositors and retail customers in circumstances that did not adequately reflect the risks or value of the investment. In January 2017, the bank offered to repurchase certain shares sold between 2007 and 2016 at 15 percent of their original price. More than 54,000 shareholders accepted the offer, producing a reported settlement cost of €248.5 million. The initiative was intended in part to reduce litigation and settlement exposure, but it did not resolve the bank’s underlying solvency problem. In March 2017, Veneto Banca and its sister institution Banca Popolare di Vicenza requested precautionary recapitalization from the Italian state. The bank’s business plan also considered a possible combination with Banca Popolare di Vicenza. However, stress-test projections indicated a substantial capital shortfall, and private investors were unwilling or unable to provide the required funds. On 23 June 2017, the European Central Bank and the Single Resolution Board determined that Veneto Banca was failing or likely to fail, while concluding that the conditions for formal resolution under the European framework were not met. The Italian government therefore placed Veneto Banca into compulsory administrative liquidation and divided its operations into good and bad assets. Intesa Sanpaolo agreed to acquire selected performing assets, liabilities, branches, and related operations for a nominal consideration, with state support approved by the European Commission. Banca Intermobiliare was excluded from the transaction. Shareholders and subordinated bondholders were effectively wiped out under the restructuring, while Intesa Sanpaolo established measures intended to assist certain small retail investors holding affected bonds. Veneto Banca subsequently ceased to operate as an independent banking group and continued only as a wind-down entity associated with the liquidation process.

Veneto Banca originated in 1877 as Banca Popolare di Montebelluna, a cooperative institution serving the local economy of Montebelluna and the surrounding Veneto area. During the 1960s it began expanding by acquiring or integrating nearby cooperative and savings institutions, including Banca Popolare di Intra. This created the basis for a regional banking group rather than a single-town savings bank. The bank’s expansion accelerated around 2000. It moved into northwestern and southern Italy and also pursued acquisitions and banking investments in Eastern Europe. In 2001–2002, it acquired 29 branches of Nuova Banca Mediterranea from Banca di Roma and transferred them to Banca Meridiana, a group institution formerly associated with Banca Popolare del Levante. Banca Meridiana was later merged with Banca Apulia in 2010. Veneto Banca also acquired Cassa di Risparmio di Fabriano e Cupramontana, known as CARIFAC, which operated mainly in Marche and also had a presence in Umbria and Rome. Other institutions associated with the group included Banca di Bergamo, Banca Popolare di Monza e Brianza, and Banca Popolare di Intra, several of which were eventually absorbed. By 2014–2015, Veneto Banca had become one of Italy’s larger banks by assets and was among the fourteen Italian banks directly supervised by the European Central Bank. It passed the 2014 European stress test after recapitalization. Its expansion, however, left it exposed to the deterioration of credit quality in the Italian economy. Rising non-performing loans required substantial write-downs, while supervisory capital requirements placed increasing pressure on the group. Italian Decree-Law No. 3/2015 required large cooperative people’s banks to change their legal form. Veneto Banca converted from a società cooperativa per azioni into a società per azioni in December 2015. The reform altered the one-member-one-vote cooperative structure and required the bank to repurchase shares from members who exercised their rights in connection with the conversion. At the same time, the bank planned a capital increase of approximately €1 billion and a listing on Borsa Italiana. The 2016 listing and capital raising failed to attract meaningful market demand. The share price was reduced substantially during the offering, and existing shareholders subscribed to only a small fraction of the issue. Atlante, a rescue fund financed by contributions from Italian financial institutions, subscribed almost the entire remaining amount and became the dominant shareholder. The capital increase initially lifted the bank’s reported CET1 ratio, but further loan impairments and supervisory requirements quickly weakened the improvement. Atlante later deposited additional funds intended for a future capital increase, and Veneto Banca issued state-guaranteed bonds in February and June 2017. A separate crisis concerned the sale of the bank’s own shares to customers and depositors. Investors alleged that the shares had been marketed or sold without adequate disclosure of their risks and without a realistic account of their declining value. In January 2017, Veneto Banca offered to buy back shares sold during the preceding decade for 15 percent of the original purchase price. By April, 54,374 shareholders had accepted, representing approximately 72.6 percent of the shareholder base and a reported cost of €248.5 million. The offer was designed partly to reduce legal and settlement expenses, but it also highlighted the depth of the bank’s governance and conduct problems. In March 2017, Veneto Banca and Banca Popolare di Vicenza requested precautionary recapitalization from the Italian government. Their proposed 2017–2021 plan contemplated a possible merger, but European stress-test projections showed that Veneto Banca alone faced a substantial capital shortfall in an adverse scenario. Private investors did not provide the required funds, and Atlante had exhausted its capacity to invest further. A draft 2016 annual report approved in April showed a severely weakened group CET1 ratio after loan impairments. On 23 June 2017, the ECB and the Single Resolution Board concluded that Veneto Banca and Banca Popolare di Vicenza were failing or likely to fail, but that they did not satisfy the criteria for resolution at the European level. Italy therefore used its domestic liquidation framework to divide the banks into good and bad operations. The European Commission approved state aid connected with the transfer, and Intesa Sanpaolo signed an agreement on 26 June to acquire selected good assets and corresponding liabilities of Veneto Banca for a nominal fee. Banca Intermobiliare was excluded. The transaction included support for recapitalization and branch rationalization. Equity holders and subordinated bondholders lost their investments, while a mechanism was announced to assist certain small investors. Veneto Banca consequently ceased to function as an independent operating bank and entered a wind-down process.

• 2017

  Declared failing or likely to fail

  [1]Veneto Bancaen.wikipedia.org

  European authorities determined that the bank was insolvent but not eligible for European resolution.

• 2017

  Good assets transferred to Intesa Sanpaolo

  [1]Veneto Bancaen.wikipedia.org

  The Italian liquidation process transferred selected assets and liabilities to Intesa Sanpaolo while excluding Banca Intermobiliare.

• 2016

  Stock-market offering fails and Atlante takes control

  [1]Veneto Bancaen.wikipedia.org

  Weak investor demand led Atlante to subscribe almost the entire capital increase and become the controlling shareholder.

• 2015

  Converts from cooperative society to joint-stock company

  [1]Veneto Bancaen.wikipedia.org

  The bank completed its legal conversion in December under Italy’s cooperative-bank reform.

• 2014

  Passes European banking stress test after recapitalization

  [1]Veneto Bancaen.wikipedia.org

  Veneto Banca passed the stress test after strengthening its capital base.

• 2010

  Banca Meridiana is merged with Banca Apulia

  [1]Veneto Bancaen.wikipedia.org

  The group consolidated two of its southern Italian banking operations.

• 2001

  Acquires branches of Nuova Banca Mediterranea

  [1]Veneto Bancaen.wikipedia.org

  Twenty-nine branches were acquired from Banca di Roma and transferred to Banca Meridiana.

• 1960

  Begins expansion through local bank acquisitions

  [1]Veneto Bancaen.wikipedia.org

  The bank expanded beyond its original locality by acquiring cooperative and savings institutions, including Banca Popolare di Intra.

• 1877

  Established as Banca Popolare di Montebelluna

  [1]Veneto Bancaen.wikipedia.org

  The institution was founded in Montebelluna as a local cooperative bank.

A northeastern Italian regional bank serving households, local businesses, and small and medium-sized enterprises, later expanded through a national acquisition strategy.

• Banking

  Retail banking

  Veneto Banca served households through branch-based banking, deposit accounts, payment services, current accounts, and related everyday financial products. Retail banking was also connected to the bank’s later controversy over the distribution of its own shares to depositors and retail customers.

• Banking

  Commercial and SME banking

  The bank’s regional identity was closely tied to lending and relationship banking for small and medium-sized enterprises and local commercial customers. As the group expanded, this business extended beyond Veneto into other Italian regions.

• Credit

  Consumer and corporate lending

  Veneto Banca provided financing to households and businesses. Credit quality problems and the accumulation of non-performing loans later became central to its capital crisis and required extensive loan write-downs.

• Financial services

  Wealth management and investment services

  The group offered wealth-management and investment-related services through its banking network and associated financial interests. Its activities included the distribution of financial products to customers and investments in specialist financial institutions.

• 2017

  Alleged mis-selling of Veneto Banca shares

  Retail investors and depositors alleged that the bank had sold its own shares between 2007 and 2016 without adequately reflecting their risks or declining value. Veneto Banca offered to repurchase qualifying shares for 15 percent of their original price, and more than 54,000 shareholders accepted the offer.

  Source

Read more

• 2017

  Offer to repurchase shares sold to retail customersOther

  Background

  The bank faced allegations that its own shares had been mis-sold to depositors and retail investors, creating potential litigation and settlement costs.

  Action taken

  Veneto Banca offered to buy qualifying shares sold from 2007 through 2016 for 15 percent of their original purchase price.

  Aftermath

  A reported 54,374 shareholders accepted, with an aggregate cost of €248.5 million, but the measure did not restore the bank’s solvency.

  Share repurchase cost. Original purchase price of qualifying shares → €248.5 million reported cost for accepted offers (2017)

  Source

• 2017

  Seek precautionary recapitalization and consider combination with Banca Popolare di VicenzaStrategy

  Background

  Further non-performing-loan write-downs and supervisory capital requirements produced a large projected capital shortfall.

  Action taken

  Veneto Banca and Banca Popolare di Vicenza requested Italian state support and considered a merger as part of their 2017–2021 business planning.

  Aftermath

  Private-sector funding was not secured, and European authorities later determined that both banks were failing or likely to fail.

  Source

• 2017

  Transfer selected good assets to Intesa SanpaoloM&A

  Background

  The ECB and Single Resolution Board concluded that the bank was insolvent but did not meet the conditions for European-level resolution.

  Action taken

  The Italian government wound down the bank and agreed to transfer selected good assets and corresponding liabilities to Intesa Sanpaolo, excluding Banca Intermobiliare.

  Aftermath

  Veneto Banca ceased operating as an independent bank. Shareholders and subordinated bondholders lost their investments, while the remaining operations entered liquidation.

  Source

• 2016

  Accept Atlante underwriting after failed market offeringOther

  Background

  The planned capital increase and listing attracted insufficient institutional and existing-shareholder demand.

  Action taken

  Atlante subscribed approximately €988.6 million of the €1 billion issue and became the bank’s majority shareholder.

  Aftermath

  The transaction temporarily improved regulatory capital but concentrated ownership in a rescue fund that later lacked the resources to provide further support.

  Atlante subscription. Planned capital increase of approximately €1 billion → Approximately €988.6 million subscribed by Atlante; reported ownership of 97.64 percent (2016)

  Source

• 2015

  Convert the cooperative bank into a joint-stock companyStrategy

  Background

  Italian legislation required large cooperative people’s banks to change their legal form and governance structure.

  Action taken

  Veneto Banca completed its conversion from a cooperative society to a società per azioni in December 2015 and repurchased shares from members exercising related rights.

  Aftermath

  The conversion changed voting rights and prepared the bank for a planned capital increase and stock-market listing.

  Source

1. 1Veneto Bancaen.wikipedia.org