Veneto banks had failed ECB capital tests since 2014: documents

FRANKFURT (Reuters) - Failed Italian banks Banca Popolare di Vicenza and Veneto Banca had fallen short of the European Central Bank's capital demands since the ECB became their supervisor in late 2014, documents showed on Monday.

The ECB has attracted criticism for failing to take quick and incisive action on some of the ailing banks on its watch, such as the two lenders from Italy's Veneto region and larger peer Banca Monte dei Paschi di Siena .

For Veneto and Vicenza, the issue came to a head in June when efforts to orchestrate a recapitalization by the Italian government failed and the lenders were declared "failing or likely to fail" by the ECB.

In a redacted version of its assessment, the ECB said the banks had been unable to meet its capital requirements since Frankfurt took over the supervision of large euro zone banks in November 2014.

"The Supervised Entity has, since the set-up of the Single Supervisory Mechanism on 4 November 2014 ... demonstrated its incapacity to steadily comply with the capital requirements," the ECB said in the documents, which are similar for Veneto and Vicenza.

It emphasized that the banks' successive capital injections, partly financed by loans-for-shares schemes with clients, were invariably depleted, showing the "inadequacy" of the firms' business models.

Veneto and Vicenza's best assets were eventually handed over to larger rival Intesa Sanpaolo (NYSE: ISP), while their soured debts were transferred to a bad bank.

(Reporting By Francesco Canepa; Editing by Janet Lawrence)

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