The Italian government looks set to put Veneto Banca and Banca Popolare di Vicenza, two troubled regional lenders, into liquidation, selling off the good assets to a rival bank for a symbolic price. The toxic assets would be transferred to a bad bank, mostly funded by the government. Shareholders and junior bond-holders would contribute to the rescue, while senior creditors would be spared.
This plan is a slap in the face of Italian taxpayers, who according to some estimates could end up paying around 10 billion euros ($11.1) for it. The government could have taken a less expensive route, involving the "bail in" of senior bondholders. It chose not to: Many of these instruments are in the hands of retail investors, who bought them without being fully aware of the risks involved. The government wants to avoid a political backlash and the risk of contagion spreading across the system. However, 10 billion euros is a whale of a premium to pay as an insurance against a contagion. And Rome may still face a backlash -- from taxpayers who will feel defrauded.
Rome will effectively by-pass the EU's "single resolution board" which is supposed to handle bank failures in an orderly way and the "Banking Recovery and Resolution Directive," which should act as the euro zone's single rulebook. The advantage will be to spare senior bondholders but the cost will be huge: denting, perhaps irreversibly, the credibility of Europe's newly formed institutions.
source: https://www.bloomberg.com/view/articles/2017-06-23/europe-s-banking-union-is-dying-in-italy