MILAN: Up to 3,900 voluntary redundancies and 600 branch closures are on the cards as the Italian government winds up two insolvent Venetian banks to avert a possible threat to the country’s banking system, it was announced on Monday.

The Italian government is stepping in to liquidate the two banks, Veneto Banca and Banca Popolare di Vicenza, at a total cost of up to 17 billion euros (Dh69.78 billion; $19 billion).

As part of the deal, the two failing lenders’ healthy assets are being sold to Intesa Sanpaolo, one of Italy’s biggest banks, for a symbolic price of one euro.

At the same time, their “bad” or “non-performing” loans are being transferred into a so-called “bad bank.”

The healthy assets being taken over by Intesa represent a workforce of 9,960 in Italy and a further 880 abroad, as well as a total 960 branches.

As part of the intervention, across the new Intesa group as a whole some 600 branches will be closed and 3,900 people offered voluntary redundancy, the bank said.

The deal “makes it possible to avoid the serious social consequences that would have otherwise derived from compulsory administrative liquidation proceedings for the two banks,” Intesa said.

The rescue “will safeguard the jobs at the banks involved, the savings of around two million households, the activities of around 200,000 businesses financially supported and, therefore, the jobs of three million people in the areas which record the country’s highest economic growth rate,” it said.

In a separate statement, Italy’s central bank, Banca d’Italia, said that the two Venetian banks’ branches would open for business as usual on Monday.

“Clients are not affected by this move. All banking operations will proceed as normal, but under the responsibility of Intesa Sanpaolo,” it said.

Intesa said it would “allocate 60 million euros in total as restitution to small savers who hold subordinated bonds issued by the two banks.”

Intesa Sanpaolo insisted that the acquisition of the two banks would be “fully neutral” to its core “Tier 1” capital ratio and dividend policy.

Under the rescue package, the government is paying five billion euros to Intesa to cover the costs of integrating the two banks, restructuring them and laying off employees.

The Italian government will also provide state guarantees worth up to 12 billion euros to cover potential losses at the “bad” bank.