EU Approves Extended Sale Process for Four Italy Bridge Banks

(Bloomberg) -- Italy won approval from the European Commission to extend the deadline for the sale of four small domestic lenders rescued from collapse last year because negotiations with potential buyers are still under way.

“The sales process aims to maximize the value of the four bridge banks, thereby minimizing the cost to the taxpayer and ensuring that no new state aid would become necessary,” according to a commission statement on Friday.

The commission didn’t disclose the new deadline “precisely to protect this procedure and allow it to continue,” said Ricardo Cardoso, the commission spokesman for competition issues, told reporters in Brussels on Friday.

The sale of the four lenders -- Banca delle Marche, Banca Popolare dell’Etruria e del Lazio, Cassa di Risparmio di Ferrara SpA and Cassa di Risparmio della Provincia di Chieti-- is crucial to Italy’s attempts to shore up a banking industry that’s weighed down by 360 billion euros ($401 billion) of bad debt. The Italian government in November approved a plan to place the four lenders under special administration with the Bank of Italy after their capital buffers slumped.

The four lenders’ bad assets were put into a single separate unit -- with shareholders and subordinated-debt holders incurring some losses -- and the four resulting “good banks” were then recapitalized and put on sale. Roberto Nicastro, a former UniCredit SpA executive, is the sole chairman of the four banks and is running the sale process.

UBI Banca SpA has expressed interest in purchasing three of the banks, while Italy’s Atlante fund may buy bad loans of the lenders to ease the disposals, la Repubblica reported Oct. 4 without citing anyone.

The Bank of Italy may seek additional contributions from lenders to bolster the country’s resolution fund if the sale of the four rescued banks doesn’t generate enough cash to repay creditors, people with knowledge of the matter said in June.

--With assistance from Stephanie Bodoni and Sonia Sirletti To contact the reporters on this story: Dan Liefgreen in Milan at dliefgreen@bloomberg.net, Jones Hayden in Brussels at jhayden1@bloomberg.net. To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Simone Meier at smeier@bloomberg.net, Neil Callanan