ECB's Constancio says solution on Veneto banks must take financial stability into account

[June 14, 2017]   ROME (Reuters) - Any solution for banking crises should always take financial stability into account, the European Central Bank Vice President Vitor Constancio said on Wednesday when asked about ailing Italian lenders Popolare di Vicenza and Veneto Banca.

European Central Bank Vice-President Vitor Constancio listens during a news conference following the Governing Council meeting in Tallinn, Estonia, June 8, 2017. REUTERS/Ints Kalnins

Italy is seeking to agree with European authorities a rescue of the two Veneto-based banks that limits losses for investors, hitting only shareholders and junior bondholders in an effort to avoid knock-on effects for the wider banking system.

"It's a general message that financial stability considerations have to be always involved in solutions ... to address difficult situations in the banking sector," Constancio said on the sidelines of an event.

Constancio said he was not referring to specific situations, but warned that financial instability could eventually lead to higher costs than a state bailout.

(Reporting by Isla Binnie, Writing by Valentina Za; Editing by Crispian Balmer)

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