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The regulatory regime applicable to banks
In addition to the EU legislation (specifically the Capital Requirements Directive (CRD IV), the Capital Requirements Regulation (CRR) and the Single Supervisory Mechanism (SSM) Regulation), the principles governing banking activities and investment services are contained in the Banking Act and the Financial Act, respectively. In 2017 and 2018, both Acts underwent an indepth review to, inter alia, implement PSD2 and MiFID II, and align national legislation with the MiFIR.
The regulations implementing these principles are primarily set by the Bank of Italy, in particular through Circular No. 229 of 21 April 1999 and Circular No. 285 of 17 December 2013, as subsequently amended (Supervisory Instructions); and by Consob, the independent public authority responsible for regulating the Italian securities market, notably through intermediaries, issuers and market regulations. Further rules can be set by the MEF and the Inter-ministerial Committee for Credit and Saving (CICR, and all four together, the supervisory authorities). Specific powers in the anti-money laundering (AML) field are ascribed to the Financial Intelligence Unit.
The laws and regulations on banking and financial markets govern lending, deposit taking, securities activities and cross-border operations. Although deposit-taking is reserved to banks, the Bank of Italy Regulation of 8 November 2016 clarified the conditions and limits under which certain activities (e.g., lending-based crowdfunding) fall outside the savings collection regime, and thus can also be performed by non-regulated entities. Lending activities can be carried out by banks, financial intermediaries, insurance undertakings, special purpose vehicles (subject to limitations), EU alternative investment funds and Italian investment funds, if certain requirements are met.
While Consob continues to be responsible for the securities market, following the SSM's entry into force in November 2014, the tasks ascribed to the Bank of Italy changed as a consequence of the distinction between SIs and less significant banks (LSIs), and the key role played by the ECB. Specifically, under the SSM:
- the ECB is responsible for:
- supervising Italian SIs, with the assistance of the Bank of Italy;
- resolving on applications to obtain and withdraw a banking licence, and the authorisation to acquire qualified or controlling shareholdings in banks, regardless of their significance (see Section VI); and
- ensuring the effective and consistent functioning of the SSM and the Bank of Italy; and
- the Bank of Italy's tasks mainly consist of:
- supervising LSIs;
- monitoring all Italian banks in relation to transparency, consumer protection and AML matters; and
- assisting the ECB in supervising Italian SIs.
As clarified through a letter addressed to EU SIs published in June 2017, the ECB also has supervisory powers granted under Italian law in relation to, inter alia, the following operations involving Italian SIs:
- outsourcing of activities;
- mergers and de-mergers;
- asset transfers and divestments; and
- amendments to by-laws.
Foreign banks may carry out business in Italy through the establishment of a branch, or on a cross-border basis, in accordance with a procedure that differs for EU and non-EU banks. EU banks can start mutual recognition activities after a notification procedure between the home country authority and the Bank of Italy, whereas non-EU banks can only operate after being duly authorised to do so, and are subject to stricter requirements. Following the implementation of MiFID II, non-EU banks are now allowed to provide investment services for retail clients in Italy exclusively through the establishment of a branch.
Similar principles apply to Italian banks when they intend to undertake banking activities in other EU countries, including the Bank of Italy's authorisation for an Italian bank wishing to operate in a non-EU country.
Currently, there are 53 banking groups, 505 banks (of which 131 belong to banking groups) and more than 25,000 active bank counters established in the Italian banking market. Regarding the presence of foreign banks, 692 operate in Italy without a permanent establishment (up 92 from 2018), and 37 have set up a local branch, bringing the total number of branches to 64 branches (a decrease of 29 from 2018).
Regarding legal form, 137 banks are incorporated as companies limited by shares, 265 as CCBs and 22 as mutual banks.
With Law Decree No. 18 of 14 February 2016, CCBs underwent significant changes that include, inter alia, mandatory adhesion to a cooperative banking group to obtain authorisation as a cooperative bank; the parent company duty to be set up as a joint-stock company; and the right to issue financial instruments. Subsequently, in November 2016, the Bank of Italy adopted implementing regulations to set, inter alia, the minimum organisational and operational requirements for parent companies of cooperative banking groups, and the minimum content of cohesion contracts between a parent company and its affiliated CCBs (Circular No. 285 of 17 December 2013 as amended in November 2016). Furthermore, in May 2018, the Bank of Italy published new supervisory instructions to align the special rules applying to CCBs with the new rules on banking cooperative groups (see Section III.ii).
Finally, following the reform of mutual banks introduced by Law Decree No. 3 of 24 January 2015, eight of the 10 largest mutual banks (those with an asset value above €8 billion) were transformed into joint-stock companies. Two of them subsequently merged, forming Italy's third-largest banking group. The remaining two largest mutual banks (Banca Popolare di Sondrio SCpA and Banca Popolare di Bari SCpA) were prevented from transforming into joint-stock companies following the suspension in December 2016 of the reform's implementing provisions as a result of questions regarding the constitutional legitimacy of the restrictions on shareholders' withdrawal rights. In March 2018, the Italian Constitutional Court concluded that the question of constitutional legitimacy was unfounded. However, in October 2018 the reform was suspended again by the Italian Administrative Supreme Court as a result of a preliminary ruling requested to the Court of Justice of the European Union (the deadline for the transformation was extended to 31 December 2019).
