(Finance) – The European Commission has approved the extension until November 20, 2022 of the liquidation regime ordered for small Italian banks (other than cooperatives) with total assets of less than € 5 billion. The scheme, which has never been used yet, was initially approved in November 2020 for a period of one year. The provision facilitates the Italian authorities when they certify the failure of a bank, but believe that the resolution of the bank is not in the public interest and, consequently, place it in compulsory administrative liquidation.
The scheme allows the Italian State to support the sale of assets and liabilities of a failed bank to another bank. According to the scheme, the buyer is selected on the basis of a competitive bidding procedure and must effectively integrate the acquired businesses within one year. The shareholders and subordinated creditors of failed banks will have to help cover losses, helping to minimize the need for state aid.
The Commission found that the Italian measure is in line with the conditions set out in the 2013 Banking Communication for the orderly liquidation schemes of small banks, with the exception of the budget threshold of € 3 billion. In this sense, the Italian scheme will continue to be available for small banks with total assets of less than 5 billion euros.