Italian banks consider joint rescue of Veneto banks - sources

MILAN (Reuters) - Italian banks are considering assisting in a rescue of troubled lenders Popolare di Vicenza and Veneto Banca by pumping 1.2 billion euros ($1.4 billion) of private capital into the two regional banks, sources familiar with the matter said.

The Italian government plans to lead the rescue but EU competition authorities have requested a private capital injection as a condition to approve the bailout. The two banks need 6.4 billion euros in capital.

Italian banks, which have already pumped 3.4 billion euros into the two ailing rivals, had said until now that they would not stump up more money.

However, one source said on Thursday the banks were aware that it would be much more costly for them if the two Veneto-based banks were to be wound down. In that event, the healthier lenders would need to top up a depositors' protection fund.

The plan has the backing of some leading Italian banks but the participation of the entire banking system is seen as essential, the source said. Each bank would take part based on the size of its deposits.

($1 = 0.8887 euros)

(Reporting by Paola Arosio,)