ECB announced the names of two bankrupt Italian banks, a possible short-term decline in EUR

The European Central Bank stopped the work of two banks in Italy and announced they were in bankruptcy proceedings. The measure is part of the ECB's effort to clean up weak banks retreating the economy.

The two Italian banks - Veneto Banca and Banca Popolare di Vicenza - are struggling with high levels of bad credits.

The central bank announced on Saturday that it had given them enough time to raise capital, but banks have failed to deal with it. For this reason, the ECB has ruled that they are "bankrupt or going bankrupt" and will now face a bankruptcy procedure in Italy.

The Italian Ministry of Economy and Finance announced that they will do whatever it takes for the bank's clients not to be harmed.

Most likely, however, the shareholders and holders of secondary bonds will not be able to get their funds back.

The Italian bank, Intesa Sanpaolo, announced it wants to acquire parts of Veneto Banca and Banca Popolare di Vicenza, as long as it does not harm its own finances.

In 2016, the Italian bank Atlante invests EUR 3.5 billion in the two troubled banks, but their financial condition continues to deteriorate. According to the ECB, they have suffered not only from high levels of bad loans but also from major challenges to their business models.

Comment: The news may have a short-term negative impact on the euro and observe a correction of the upward trend.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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