Italian Banking and Financial Law: Crisis Management Procedures, Sanctions, Alternative Dispute Resolution Systems and Tax Rules

D. Siclari, D. Siclari

• Editore: Palgrave Macmillan
• Anno: 2016
• ISBN:
  9781137507624
• Argomento: Betriebswirtschaft
• Categoria: Finanzbuchhaltung

Within an environment made difficult by the continuing economic crisis, the Italian model for crisis management and resolution has helped to avoid many difficulties faced by intermediaries across the globe. However, the Italian model for crisis management will be forced to adapt to the new EU Bank Recovery and Resolution Directive, which introduces a unified regime for such events in all EU countries.This book explores the various methods for crisis management employed in Italian finance. The authors discuss procedures used in the banking and insurance sectors, such as deposit guarantee schemes and alternative dispute resolution systems. They also explore the evolution of the administrative sanctioning systems, and the roles of tax rules and credit rating agencies in Italian finance. This book analyses the evolution of the various crisis management processes, and discusses potential goals and improvements within the context of recent measures suggested by the European Commission.

1

Introduction

Domenico Siclari

Italian Banking and Financial Law, Volume IV deals with the Italian regulation of injunctive remedies and crisis management procedures, deposit guarantee schemes, administrative sanctions, alternative dispute resolution systems and tax rules.

Within an environment made difficult by the continuing economic crisis, the Italian model of crisis management and resolution has helped to avoid the difficulties faced by intermediaries, thus, contributing to the systemic stability and to the depositors’ confidence in the banking system.

This national model and its features will have to adapt to the new EU Bank Recovery and Resolution Directive, which introduces in all the EU countries a harmonized regime for dealing with banking crises. Such harmonization is also essential for the proper functioning of the Single Resolution Mechanism and for the coordination in crisis involving intermediaries operating in the non-Member States.

In Italy, one of the basic elements of the so-called “safety net” is traditionally the deposit guarantee. The Interbank Deposit Protection Fund, established in 1987 as a voluntary consortium, is now a private law mandatory consortium among about 300 banks, recognized by the Bank of Italy. Mutual banks joined in their turn into the Deposit Guarantee System of Mutual Banks. Claims eligible for reimbursement are those relating to repayable funds acquired by the banks in the form of deposits or in other forms as well as bankers’ drafts and equivalent instruments, so that in the event of a bank failure, traumatic effects on depositors may be avoided. Also in this field, however, the national characteristics must comply with the new EU directive reforming the rules on deposit guarantee schemes.

In order to enforce the financial provisions aimed to achieve the assigned objectives of financial stability, protection of investors, efficiency and transparency, administrative sanctions can usually be imposed by the supervisory authorities to the extent of their duties. In 2013, the new supervisory provisions relating to penalty proceedings in the banking sector came into force. They were designed to enhance the effectiveness and efficiency of the sanctions inflicted by the Bank of Italy, as well as to rationalize its discipline.

Transparent contractual conditions and correct relations with customers are also protected through systems for the settlement of disputes between customers and banks or financial intermediaries as alternatives to appealing the courts (so-called Alternative Dispute Resolution System (ADR)). Since 2005, the law made it obligatory for banks and financial intermediaries to participate in systems for the out-of-court resolution of disputes with customers, implemented in 2009 (Banking and Financial Ombudsman – Arbitro Bancario Finanziario). In financial markets, the Conciliation and Arbitration Chamber within the Consob is in charge of the conciliation and arbitration proceedings involving disputes between investors and financial intermediaries about compliance with disclosure obligations, correctness and transparency as envisaged in the contractual relations with customers or regarding investment or asset management services.

The role of ADR is intended to increase customers’ awareness of their rights and to persuade intermediaries to a stricter respect of the rules, thus improving the level of enforcement of the regulation of the sector.

Given the close correlation between corporate governance and financial stability, new corporate governance rules for banks and financial intermediaries also aim to regulate composition of the company boards. To define and solve the problem of board loyalty, especially in cases of conflicts of interest, in particular, the appointment of non-executive independent directors is required. In the Italian legal system, in order to achieve a more efficient system of corporate governance and to protect more effectively the interests of the minority shareholders, the Law no. 262 of 2005 introduced, among other things, the figure of the independent directors of companies with shares listed on regulated markets. Particular problems relate to the assessment and compliance with independence requirements, the specific role attributed to non-executive independent directors in the company’s transactions with related parties, the forms of judicial review on non-executive independent directors’ activity.

Finally, in the financial sector, taxation design is important to avoid distortions caused by tax rules conceived by each EU Member State. In Italy, the level of taxation on the banking and financial sector is becoming progressively higher. Peculiarities of tax rules can bring about fragmentation of financial markets and products between actors, with the risk of unequal treatment of financial institutions in the EU. Uncoordinated national tax measures may lead to fragmentation of the tax treatment for financial services in the internal market with the consequent possibility of distorting competition between financial instruments, actors and market places across the European Union. An example of these issues is represented, as is well known, by the problematic nature of the current form of the common system of financial transaction tax (FTT), proposed in 2011 by the European Commission.

2

Italian Crisis Management Procedures in the Banking Sector

Valeria Leggio

2.1 Introduction

The public interest in enhancing those key development factors consisting of savings and investments deeply influences the Italian law system on banking and financial markets in general as well as legislation on crisis prevention and management in particular. The ratio of a strengthened state intervention in this sector is aimed at reducing the probability of a systemic crisis, avoiding losses in economic welfare that follow a banking crisis, minimising taxpayer exposure and safeguarding the trust and confidence of investors and savers. Banks, as well as financial and investment intermediaries, are commonly considered not only – and not always – to be “too big”¹ (which is more true for multinational banks, less so for small domestic ones), but also – and more often – “too interconnected”, “too important” and “too complex” to fail.² Those are enterprises whose critical functions are such that their unexpected liquidation would cause severe adverse consequences for the rest of the financial system and global economy. Thus, the guiding regulatory principle of faith in the free market and its self-corrective nature, which was strong and pervasive in other systems during the last few decades,³ was therefore considered by the Italian legislator to be not sufficient alone to ensure the stability of the financial and banking system.

However, recent crises in financial systems worldwide have demonstrated the close linkages between financial stability and the health of the real economy, so that Italy financial stability is considered a public good, warranting the attention of national legislatures.⁴ Banks, investment and insurance companies are accorded special treatment also in insolvency, as they play a special role in a country‘s economy; this is such an important function so as to constitute a sort of public service.⁵

From this point of view, Italy had a pioneering approach, having provided for specific crisis and pre-crisis remedies since the 1936–1938 Law on Banking, updated and merged into the 1993 Consolidated Law on Banking (CLB)⁶; this approach is even more significant if compared to EU legislation, whose measures to prevent and manage bank failures have been recently revised and reinforced,⁷ introducing intervention tools already known and applied in Italy.⁸

As a matter of fact, the protection of savings (and the strictly connected preservation of the entire financial system stability), as a public interest, is part of Italy’s legal tradition and, since 1948, is also a constitutional value established in Art. 47 of the fundamental Chart.⁹ Therefore, the crisis management framework has always been part, mutatis mutandis, of the Italian banking system, and the mechanism finally set out by the CLB has revealed its effectiveness during the recent financial turmoil, to the point that some tools have been under consideration by the EU for adoption at union level.¹⁰

Thus, with its consolidated special resolution mechanism, the Italian model can be considered the precursor of many of the solutions now being proposed also at an international level. It has been, additionally, the reference model for many countries wishing to adopt or to change their own crisis management systems.

Moreover, the Italian framework is one of the few legal systems providing a specific regulation of banking group crises.

The main features of the Italian crisis management system are: (1) a preventive supervisory approach which enables early detection of bank problems; (2) a resolution regime which provides procedures for banking restructuring and liquidation; (3) the concentration of powers which allows the authority in charge to confront complex situations in order to pursue the stability and the efficiency of the financial system; (4) the legislative regime of the crisis management procedures, which is governed by administrative law.

The role of the supervisory authority is therefore crucial in the Italian system, where crisis management and resolution tasks are integrated with the supervisory activity; both supervisory and crisis management functions are assigned by the CLB to the Bank of Italy. The concentration of powers in the Bank of Italy’s hands has proven to be particularly effective, especially in cases of particular complexity, as to the sizes and kinds of business,¹¹ to the point that this continuity between supervision and resolution resulted to be a real added value of the Italian legal system.¹²

2.2 Procedures for managing bank and banking group crisis

The Italian special discipline for bank and banking group crisis is provided for by title IV, Chapter 1 and 2 of the CLB and is basically constituted by two intervention procedures: Special Administration (SA) and Compulsory Administrative Liquidation (CAL). The first could be numbered into the so-called going concern situations,¹³ whereas the crisis of a bank is still considered as reversible, as the causes of disarray may be removed, after which the entity is evaluated to be potentially able to continue its activity. The second is typical of a “gone concern situation”¹⁴ and is aimed at leading the bank to an ordered divestiture, so that internal and external effects of the irreversible crisis are weakened and controlled. The state intervention is pervasive, since both the procedures are designed to be triggered, supervised and directed by the Bank of Italy.¹⁵ The authority also has the power to adopt a third kind of measure, such as the so-called temporary management (TM),¹⁶ for a faster resolution of temporary and/or minor distress, as well as the power to order specific actions to a bank, by serving “extraordinary injunctions”.

Thus, the CLB provides for a well-articulated “toolkit” to be activated in the case of a bank’s difficulties, which allows plenty of space to the Bank of Italy’s evaluation and discretion and, therefore, is characterized by a peculiar flexibility.¹⁷ One of the most evident peculiarity of the Italian system is, in fact, the administrative regime of the crisis management procedures, which is directed and coordinated by the public authority – and not the judicial court.

As a consequence, only the provisions set out in the CLB apply to bank and banking group crisis; general Bankruptcy Law (BL, Royal Decree No. 267/1942, reformed by Legislative Decree No. 5/2006, recently modified by Law no. 98/2013), intended for common commercial enterprises, finds application, where compatible, exclusively for the matters not expressly provided for by CLB.¹⁸ This “special treatment”, informed of the principles governing public and administrative law, has as its primary objective the protection of savings in view of, among other things, the strong social impact of crises on the various individuals concerned: depositors, users of investment services, other creditors, employees, shareholders and the connected stability of the financial system.¹⁹

Italian legislation, differently, so far, from the majority of the single European countries, also provides a detailed discipline of banking group crisis, which considers a banking group as a whole and not as a sum of several units, this supplying a consistent view of the remedies to be applied in case of a disorder of one or more of the gathered companies.²⁰

2.1.1 Special Administration – SA (Arts 70–77 CLB)

According to Art. 70 of CLB, the Minister of Economy and Finance, acting on a proposal from the Bank of Italy, may issue a decree dissolving the administrative and control bodies of an Italian bank where: (a) serious administrative irregularities or serious violations of laws, regulations or statutes governing its activity are found; (b) serious capital losses are expected; (c) the dissolution of the bodies has been the object of a reasoned request by the administrative bodies or by an extraordinary meeting of shareholders. The dissolved bodies are replaced by one or more commissioners (the so-called extraordinary commissioners), and a Supervisory Committee of three or five members (who nominate their president by majority vote); both the bodies are appointed and directed by the Bank of Italy with the duty to exercise the power of direction and administration of the bank (the commissioners), as well as the power of control (the Supervisory Committee), for a maximum period of one year from the issuing of the minister’s decree.²¹

It can be inferred from these provisions, that a bank’s stability is expected to be...