May 30, 2017 / 3:08 PM / in 2 months

Italy's banking fund says no conditions for more investments in Veneto banks

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A Banca Popolare di Vicenza sign is seen in Rome, Italy, March 29, 2017.Alessandro Bianchi

MILAN (Reuters) - Italian banking fund Atlante on Tuesday rejected a request for additional cash by two ailing Veneto-based lenders, saying the conditions were not in place for any further investment in the two banks.

On Friday Banca Popolare di Vicenza and Veneto Banca asked the fund, backed by Italy's healthier banks, to come to their rescue by covering a capital shortfall, as demanded by the European Union.

The lenders have requested state aid to fill a capital gap of 6.4 billion euros (£5.5 billion) but the European Commission has requested them to find an additional 1 billion euros in private capital before taxpayer money can be used to save them.

"At the moment we do not see the conditions for any further investment in the banks by the funds managed by us," Alessandro Penati, head of the Quaestio fund which manages Atlante, said in a letter to the two banks.

He said that it was not clear how much money the two banks needed and whether the amount requested would be enough to ensure the two lenders would be allowed to receive state aid.

Atlante, which has already invested 3.4 billion euros in the two banks since its creation last year, only has 50 million euros left, Penati added.

He said that a spin-off fund called Atlante II and set up specifically to buy up bad bank debts had already made a preliminary commitment to invest 450 million euros in the junior tranche of a planned bad loan securitisation by the two banks.

Any further investment in the bad loans of Banca Popolare di Vicenza and Veneto Banca would be "problematic", Penati said.

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