EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 23 October 2008 
at the request of the Banca d’Italia on behalf of   the Italian Ministry for Economic Affairs and 
Finance on two Decree-Laws containing urgent  measures to guarantee the stability of the 
banking system and the continuity of the provision of credit 
(CON/2008/58) 
 
Introduction and legal basis  
On 16 October 2008 the European Central Bank (ECB)  received a request from the Banca d’Italia on 
behalf of the Italian Ministry for Economic Affairs and Finance (hereinafter the ‘MEF’) for an opinion on 
Decree-Law No 155 of 9 October 2008 containing ur gent measures to guarantee the stability of the 
banking system and the continuity of the provision of credit to businesses and consumers, presented to the 
Parliament on the same date for discussion and conversion into law1, and Decree-Law No 157 of 
13 October 2008 containing further urge nt measures to guarantee the stability of the banking system, 
presented to the Parliament on the same da te for discussion and conversion into law2, (hereinafter jointly 
the ‘Decree-Laws’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions3, as the Decree-Laws relate to the Banca d’It alia and to rules applicable to financial 
institutions insofar as they materially influence th e stability of financial institutions and markets. In 
accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 
Bank, the Governing Council has adopted this opinion. 
 1. Purpose of the Decree-Laws 
1.1 Objectives and nature of the Decree-Laws 
In the context of the current international crisis of  the financial markets and in the framework of the 
coordinated approach of the euro area Member States and in particular in the light of the 
conclusions of the Ecofin meeting of 7 October 2008, the Italian Government urgently adopted two 
Decree-Laws aimed at guaranteeing the stability of the financial markets and of the banking system 
and the continuity of the credit flows to businesses and consumers. As mentioned in the explanatory 
                                                 
1  Atto Camera  No 1762. 
2  Atto Camera  No 1774. 
3  OJ L 189, 3.7.1998, p. 42.  
2 memorandum to Decree-Law No 155/2008, the nationa l legal basis is found in Article 47 of the 
Italian Constitution which provides, inter alia , that the Republic encourages and protects savings in 
all its forms and regulates, coordinates and contro ls the provision of credit. In accordance with, 
Article 77 of the Italian Constitution, the Decr ee-Laws were adopted on an urgent basis and 
immediately published in the Gazzetta ufficiale della Repubblica italiana , entering into force on 
their respective dates of publication4. Thereafter, the Decree-Laws were presented to the Parliament 
for discussion and conversion into law within 60 days of publication, with the possibility of 
amendments to the original texts. 
1.2  Main features of Decree-Law No 155/2008  
Under Decree-Law No 155/20085, the MEF is authorized to subscribe or guarantee the subscription 
of capital raisings of banks incorporated in It aly, provided that: (i) the Banca d’Italia has 
ascertained the capital inadequacy of  the concerned bank; (ii) a stabilisation and reinforcement plan 
having a minimum duration of 36 months has been presented by the bank and assessed as adequate by the Banca d’Italia; and (iii)  the Banca d’Italia has assessed as adequate the dividend policy 
approved by the bank for the period of duration of  the guarantee. As long as the MEF continues to 
hold equity in the bank, any substantial change in  the bank’s stabilisation and reinforcement plan is 
subject to prior approval by the MEF in consultati on with the Banca d’Italia. For the entire holding 
period, the equity held by the MEF will be in th e form of preferred shares, which are privileged 
over all other categories of shares as regards the distribution of dividends.  
Moreover, Decree-Law No 155/2008
6 provides for an extraordinary administration procedure in the 
case of illiquidity of solvent banks, whose ‘serious cr isis situation’ poses a threat to the stability of 
the financial system. In such cas e, the management of the bank involved is replaced by temporary 
commissioners appointed by the MEF, which is allo wed to subscribe to the capital raising of banks 
under extraordinary administration, even where such procedure is still pending. 
Furthermore, it is foreseen that in order to deal  with serious liquidity crises (i.e. ‘emergency 
liquidity assistance’ (ELA)), the MEF may issue a guarantee for any refinancing provided by the 
Banca d’Italia to banks incorporated in Italy as well as to branches of foreign banks in Italy7. 
Finally, in addition to the guarantee currently pr ovided under the Italian deposit guarantee scheme, 
which covers up to €103,291.38  per bank account, the MEF is en titled to complement the deposit 
guarantee scheme by providing a State guarantee in favour of depositors with  Italian banks for a 
period of 36 months from the entry into force of Decree-Law No 155/20088. 
                                                 
4  Decree Law No 155/2008, published in the Gazzetta ufficiale della Repubblica italiana  No 237 of 9 October 2008, p. 3 
and Decree Law No 157/2008, published in the Gazzetta ufficiale della Repubblica italiana  No 240 of 13 October 2008, 
p. 4. 
5  See Article 1 of Decree Law No 155/2008. 
6  See Article 2 of Decree Law No 155/2008. 
7  See Article 3 of Decree Law No 155/2008. 
8  See Article 4 of Decree Law No 155/2008. 
3 1.3  Main features of Decree-Law No 157/2008 
In order to restore the market for banks’ medium -term financing, it is provided in Decree-Law 
No 157/20089 that the MEF is authorized until 31 December 2009 (i) to provide a State guarantee, 
at market conditions, for liabilities of Italian banks wi th a maturity up to 5 years and issued after the 
entry into force of Decree-Law No 157/2008; ( ii) to enter into temporary swap arrangements 
between government bonds and financial instruments held by Italian banks or liabilities of Italian 
banks with maturity up to 5 years and issued afte r the entry into force of this Decree-Law. Charges 
to be applied to banks under these arrangements will be determined according to prevailing market 
conditions. Finally, the MEF is authorized un til 31 December 2009 (iii) to provide a State 
guarantee, at market conditions, with regard to the operations by Italian banks in order to obtain the 
temporary availability of securities eligible for re financing operations with the Eurosystem. In all 
the abovementioned cases, the guarantee requires an asse ssment by the Banca d’Italia of the capital 
adequacy of the concerned bank. 
 
2. General Observations 2.1 The ECB notes that there is an ongoing discussion at both the international and European levels 
with a view to coordinating actions of countries aimed at preserving confidence in and the stability of the international financial markets. More sp ecifically, the ECB notes that on 12 October 2008 the 
Heads of States of the euro area issued a ‘Declaration on a concerted European action plan of the 
euro area countries’ (‘the Declaration’)
10, in which they confirmed their commitment to act together 
in a decisive and comprehensive way in order to  restore confidence and the proper functioning of 
the financial system, with the aim of restoring a ppropriate and efficient fi nancing conditions for the 
economy. They agreed on common principles to be followed by the EU and euro area governments, 
central banks and supervisors to avoid national measures adversely affecting the functioning of the 
single market and the other Member States. Such coordinated approach includes initiatives aimed at 
ensuring appropriate liquidity; facilitating the fundi ng of banks through various means; providing 
additional capital resources to financial instituti ons; and recapitalisation of distressed banks. These 
principles were also endorsed by the European Council on 16 October 2008 for all Member States. 
Against this background, the ECB highlights th at all the initiatives put in place by national 
governments to restore confidence in financial markets should be aimed at implementing such 
common principles, in the spirit of close cooperation with other Member States and EU institutions. 
2.2  The ECB wishes to draw the consulting authority’ s attention to the recent ECB opinions issued at 
the request of other Member States, whereby the ECB has commented on legislative proposals 
sharing some of the features of the Italian scheme11. It is the ECB’s intention to facilitate 
                                                 
9  See Article 1 of Decree Law No 157/2008. 
10  See the Declaration of 12 Octobe r 2008, available on the French Pres idency’s website at www.ue2008.fr. 
11  See, for example, ECB Opinion CON/2008/44 of 3 October 2008 at the request of the Irish Minister for Finance on a 
draft Credit Institutions (Financial  Support) Bill 2008, ECB Opinion CON/2008/46 of 8 October 2008 at the request of 
the Belgian Ministry of Finance on a pre liminary draft law on measures promoting financial stability and in particular 
establishing a State guarantee for the provision of credit in  the context of financial stability, ECB Opinion CON/2008/48 
4 coordination of the various national efforts addressing the current financial situation, inter alia , 
through the timely adoption and publication of E CB opinions on such draft national legislation.  
2.3 Moreover, the ECB reiterates the importance of ensuring that the proposed arrangements will be 
applied in full compliance with the relevant Co mmunity law provisions, including EU financial 
services legislation, the single market principles and State-aid principles, in compliance with the 
criteria set out in the recently adopted Commission’s guidance12. 
2.4 The ECB understands that implementing rul es will expand on the details of the Decree-Laws13. 
Consequently, the ECB expects to be consulted on any proposed implementing legislation to be 
adopted in connection with the Decree-Law s on matters within the ECB’s competence14.  
 3. The relationship with the single  monetary policy of the euro area  
3.1  The ECB notes that, in line with the Declarati on, Member States must act in a coordinated manner 
to avoid significant differences in national impl ementation from having a counter-productive effect 
and creating distortions in global banking markets.  The Declaration acknowle dges the need to work 
in cooperation with the ECB to ensure consistenc y with the Eurosystem’s management of liquidity 
and compatibility with its operational framework. Against this background, the ECB notes that 
uncoordinated decisions among Member States should be avoided as they may lead to a 
fragmentation of the euro area money market. In  this respect, the ECB makes the following 
observations, which are important from a monetary  policy perspective, as regards the measures 
contained in Decree-Law No 157/2008. 
3.2  First, the ECB notes that the MEF may i ssue a State guarantee until 31 December 2009 covering 
new liabilities of Italian banks with a maturity up to 5 years. The ECB thus understands that the 
scheme seeks to implement Article 8 of the Declaration which states, inter alia , that the euro area 
                                                                                                                                                             
of 15 October 2008 at the request of the Irish Minister fo r Finance on a draft Credit Institutions (Financial Support) 
Scheme 2008, ECB Opinion CON/2008/50 of 17 October 2008 at the request of th e Belgian Ministry of Finance on a 
draft royal decree adopted under Article 117 bis of the Law of 2 August 2002 on the supervision of the financial sector 
and on financial services; ECB Opinion CON/2008/52 of 17 Oct ober 2008 at the request of the Spanish State Secretary 
for Economic Affairs on a Royal Decree-L aw creating a Fund for the acquisition of financial assets and on a Royal 
Decree-Law adopting urgent financial and economic measures in  relation to the concerted European action plan of the 
euro area countries, ECB Opinion CON/2008/54 of 17 October 2 008 at the request of the Danish Ministry of Economic 
and Business Affairs on a proposed Law on financial stability, ECB Opinion CON/2008/56 of 21 October 2008 at the 
request of the Banque de France on a draft amending financ e law for the financing of the economy, and ECB Opinion 
CON/2008/57 of 21 October 2008 at the request  of the German Ministry of Finance on a Law on the implementation of a 
package of measures to stabilise the fina ncial market and an order on its implementation. All ECB opinions are available 
on the ECB website at www.ecb.europa.e u/ecb/legal/opinions /html/index.en.html.  
12  See ‘Communication from the Commission – The application of State aid rules to measures ta ken in relation to financial 
institutions in the context of the current global financial cris is’ of 13 October 2008, which sp ecifies that ‘The eligibility 
criteria of financial institutions … must  be objective, taking due account of their role in the relevant banking system and 
the overall economy, and non-discriminatory so as to avoi d undue distortive effects on neighbouring markets and the 
internal market as a whole. In appl ication of the principle of non discrimi nation on the grounds of nationality, all 
institutions incorporated in the Member State concerned, in cluding subsidiaries, and with significant activities in that 
Member State should be covered by the scheme’; the document is available on the Commission’s website at 
www.ec.europa.eu. 
13  See e.g. the ‘general administrative measures’ to be adopted by the MEF unde r Article 5, paragraph 1 of Decree-Law 
No 155/2008. See also the ‘general admini strative measures’ to be adopted by the MEF under Article 2, paragraph 1 of 
Decree-Law No 157/2008. 
14  See the definition of ‘draft legislative provisions’ under Ar ticle 1(1) and also the sixth indent of Article 2(1) of 
Decision 98/415/EC. 
5 governments ‘would make available … a Government  guarantee … of new medium term (up to 5 
years) bank senior debt issuance’. The ECB also u nderstands that the Decree-Law applies to all 
banks’ liabilities. It is the ECB’s view that th e extension of the State guarantee to cover all 
interbank deposits should be avoided. It could entail a substan tial distortion in the various national 
segments of the euro area money market by potentially increasing short-term debt issuance activity across Member States and thereby impairing the implementation of the single monetary policy, which is an exclusive competence of the Eurosystem under Article 105(2) of the Treaty. In this 
context, it is crucial to ensure the coordination of  the price determination of such guarantees within 
the euro area and the EU, as a level playing field is  of essence. The ECB should be involved in such 
coordination, and would welcome the explicit pr ovision for this in subsequent legislation. 
3.3  Second, the MEF may enter into temporary swap arrangements between government bonds and 
financial instruments held by Italian banks or liabilities of Italian banks . Although such measures 
should restore confidence in the Italian banking syst em, it is important that such operations will be 
conducted at market prices, as mentioned in D ecree-Law No 157/2008. In this respect, the ECB 
recalls the importance of such transactions and th eir price determination being conducted within the 
euro area in a coordinated manner between euro area governments.  
3.4 Finally, the ECB welcomes the fact that th e stabilisation measures provided for by Decree-Law 
No 157/2008 are made on the basis of the Banc a d’Italia’s evaluation of the banks’ capital 
adequacy.  
 4.  Emergency liquidity assistance and the prohibition on monetary financing  4.1 One of the specific tools available to central banks in a crisis situation is the provision of 
emergency liquidity assistance to individual banks. This provision of liquidity assistance by central 
banks consists in giving support in exceptiona l circumstances and on a case-by-case basis to 
temporarily illiquid but solvent credit institutions
15. The extension of emergency liquidity 
assistance falls within the Banca d’Italia’s task of contributing to the stability of the financial 
system.  
4.2 It is the ECB’s view that ‘national legislati on foreseeing the financing by NCBs [national central 
banks] of credit institutions other than in connec tion with central banking tasks (such as monetary 
policy, payment systems or temporary liquidity support operations), in particular to support insolvent credit and/or other financial institutions , is incompatible with the monetary financing 
prohibition’
16. In this respect, the ECB is of the view th at a clarification, which states that a central 
                                                 
15  See the ECB Financial Stability Review, December 2006, pp.171-172 and the ECB’s Annual Report 1999, p. 98; see also 
ECB Opinion CON/2008/42 of 10 September 2008 at the request of the Banque ce ntrale du Luxembourg on amendments 
to the draft law improving the legislative framework for Luxembourg as a financial centre and amending the Law of 
23 December 1998 on monetary status and on the Banque cen trale du Luxembourg, paragraph 4.10 (footnote 16) and 
ECB Opinion CON/2008/46, paragraph 3.1. 
16  See the ECB’s Convergence Report May 2006, p. 68; the Convergence Report December 2006, p. 30; the Convergence 
Report May 2007, p. 22 and the Convergence Report May 2008, p. 24, all of which are available on the ECB’s website at 
wwe.ecb.europa.eu. Cf. paragraph 4.10 of the ECB Op inion CON/2008/42, paragraph 4.2 of the ECB Opinion 
CON/2008/46 and paragraph 3.3. of  the ECB Opinion CON/2008/54. 
6 bank extension of financial support to an insolvent financial institution must be considered as a 
form of prohibited monetary fi nancing, should be explicitly contained in the Decree-Law 
No 155/2008. In the same vein, it would be advi sable to introduce into the same Decree-Law a 
direct reference to the prohibition on moneta ry financing as defined in Community law or 
alternatively to Article 101 of the Treaty. 
4.3 Under Article 3.2 of Decree-Law No 155/2008, the MEF may issue a guarantee for any refinancing 
provided by the Banca d’Italia to the banks incor porated in Italy as well as to branches of foreign 
banks in Italy, to address serious liquidity crisis17. In line with its previous opinions18, the ECB 
understands that such refinancing refers exclus ively to ’emergency liquidity assistance’ and 
considers that providing such emergency liquidity  assistance on the basis of the guarantee provided 
by the State should be an autonomous decision that the Banca d’Italia must be in a position to take 
in complete independence. To this effect, the De cree-Law should stipulate th at the same degree of 
independence is granted to the Banca d’Italia as regards the pr ovision of emergency liquidity 
assistance as with respect to the pe rformance of its ESCB-related tasks19. It follows that central 
bank lending to a solvent credit institution on the basis of a State guarantee is, in principle, possible, 
provided that the central bank’s compliance with the monetary financing prohibition under 
Article 101 of the Treaty is ensured. Specific cr iteria for such complianc e must be respected as 
noted by the ECB in recent opinions issued with  respect to other EU jurisdictions which have 
legislated in response to the current market turmoil20. 
 5. Recapitalisation of banks  The ECB notes that Article 1 of Decree-Law No  155/2008 refers to certa in conditions for the 
underwriting of shares, to be ascertained by the Ban ca d’Italia, including the adequacy of the bank’s 
stabilisation and reinforcement plan presented in conn ection with the approval of the capital increase and 
the dividend policy of the bank. It further specifies th at the shares held by the M EF have a privilege in the 
distribution of dividends over all other categories of  shares. The ECB recalls the principle contained in 
the Declaration that financial institutions to wh ich Member States make available additional capital 
resources should be obliged to accept additional restric tions, notably to preclude possible abuse of such 
arrangements at the expense of non-beneficiaries.  
                                                 
17  Article 3(2) of the Decree-Law No 155/2008. 
18  See paragraphs 4.9-4.11 of the ECB Opinion CON/2008/42,  paragraphs 3.1-3.4 of th e ECB Opinion CON/2008/46; and 
paragraphs 3.1-3.3 of the ECB Opinion CON/2008/54. 
19 Alternatively, a reference to the same level of indepe ndence as provided for in Article 108 of the Treaty could be 
considered. Cf. paragraph 4.11 of the ECB Opinion C ON/2008/42; paragraph 4.2 of the ECB Opinion CON/2008/46. 
20  See paragraph 4.3 of ECB Opinion CON/2008/46 and para graph 3.9 of the ECB Opinion CON/2008/48. These ECB 
opinions specified the following criteria under which a central bank may engage in lending to a solvent credit institution 
on the basis of collateral in the form of a State guarantee: (i) the central bank needs to independently exercise full 
discretion regarding the de cision whether to extend emergency liquidity assistance; (ii) it should be ensured that the credit 
provided by the central bank is as short term as possible; (iii) there must be systemic stability aspects at stake; (iv) there 
must be no doubts as to the legal validity and enforceability of the State guarantee under applicable national law; and 
(v) there must be no doubts as to the economic adequacy of the State guarantee, which should cover both principal and 
interest on the loans, thus fully preserving the financial independence of the central bank. 
7 6. Deposit guarantee scheme  
The ECB notes that Article 4 of Decree-Law No 155/2008 states that the MEF may provide a State 
guarantee as a ‘complement to and in addition to’ th e existing depositor guarantee scheme in favour of 
depositors with Italian banks for a period of 36 mont hs from the entry into for ce of the same Decree-Law. 
The ECB notes that, should such additional guarantee be  activated, the existing funding mechanism of the 
deposit guarantee scheme should be used to the extent po ssible; moreover, in line with past opinions, the 
ECB also notes that appropriate safeguards should be established to ensure that the beneficiary 
institution(s) will not be unfairly advantaged by maki ng undue use of their guaranteed status. Finally, the 
ECB underlines that it is crucial to ensure the coordi nation of such guarantee within the euro area and the 
EU. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 23 October 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET