Loans-for-shares scheme

Two Italian banks Banca Popolare di Vicenza and Veneto Banca deceived customers into buying their shares as part of their loan or mortgage applications in a bid to boost the banks’ struggling finances.

Between 2012 and 2014, Italy’s eighth biggest lender Banca Popolare di Vicenza granted financing to clients worth around €1 billion in return for purchasing the bank’s shares. This loan-for-shares scheme was devised to make its balance sheets look healthier to regulators than they actually were. The bank also misled its shareholders about the risks involved and misled regulators about its financial soundness. The act of lending money for the purpose of purchasing of a bank’s own shares is against Italian law, except under specific circumstances and after adequately informing shareholders about the risks of such transactions.

In a similar case, Veneto Banca also provided loans to consumers in exchange for buying the bank’s shares from 2012 to 2014. The bank’s stocks subsequently completely lost their value. The Italian Competition Authority fined Veneto Banca €5 million in 2017 for its actions.

Both banks were eventually wound up and required government intervention at a potential cost of €17bn to the taxpayer.