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MILAN, April 5 (Reuters) - Senior debt issued by Popolare di Vicenza and Veneto Banca extended gains on Tuesday after the two ailing Italian banks said the European Central Bank had confirmed they met criteria for a state bailout. Investors had dumped the two banks' debt last week on concerns they may fail to qualify for a state rescue and would have to be wound down under European Union rules that impose losses on senior bondholders and large depositors.
Under the precautionary recapitalisation scheme that Italy has asked to be allowed to use to pump money into the two banks only shareholders and junior bondholders will take a hit.
By 0957 GMT an October 2018 bond issued by Popolare di Vicenza yielded 12.4 percent, down from 19.4 percent late on Tuesday and 25 percent on Monday. (Reporting by Giulio Piovaccari, writing by Valentina Za,)