The recent update of Circular no. 263 by the Bank of Italy (entitled “New regulations for the prudential supervision of banks”) has introduced an obligation for the legal representative of the branch of any foreign bank operating in Italy to make an annual certification.

Each certification must attest to the following:

  • the conformity of the business conduct of the branch with the applicable rules and
  • for non-EU banks belonging to the so-called “Group of 10”, the adequacy, functionality and reliability of the system of corporate controls.

The first certificate must be issued by the end of November 2014

In order to meet this requirement, the relevant branch must do the following:

  1. Devise a procedure which will govern the process of assessment of the activities of the branch (and, for non-EU banks, devise a procedure which will govern the annual audit of the branch), in order to ensure that the legal representative of the branch is in the position to be able to issue the required certificate.
  2. Clearly define and describe the activities of the branch and business (as well as other) procedures, which will be required in order to prepare the certificate.
  3. Have a full understanding of the applicable legislation which, as clarified by the Bank of Italy, is not limited to the regulations of the banking sector but extends also to the wider Italian law legal regime applicable to any “permanent establishment” in Italy (in Italian, “stabile organizzazione”). This includes safety procedures, procedures relating to privacy, anti-corruption, Law 231/01, labour law and taxation.
  4. Identify and initiate any action which is necessary to conform to the regulatory requirements.
  5. Consider the form of the certificate and in particular ensure that it contains a clear description of the activity carried out by the branch and the organizational solutions adopted.