EN ECB-PUBLIC 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 25 March 2015 
on the reform of popolari banks 
(CON/2015/13) 
 
Introduction and legal basis 
On 20 February 2015, the European Central Bank (ECB) received a request from the Ministry of 
Economy and Finance for an opinion on Article 1 of Decree-Law No 3 of 24 January 2015 on urgent 
measures for the banking system and investments (hereinafter the ‘Decree-Law’)1. 
The ECB’s competence to deliver an opinion is ba sed on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indents of Article 2(1) of Council 
Decision 98/415/EC2, as the Decree-Law relate s to the Banca d’Italia and to the supervisory tasks 
conferred upon the ECB and to rules applicable to financ ial institutions insofar as  they materially influence 
the stability of financial institutions and markets. In ac cordance with the first sentence of Article 17.5 of 
the Rules of Procedure of the European Central Ba nk, the Governing Council has adopted this opinion. 
 1.  Purpose of the Decree-Law 
1.1  Popolari banks are currently set up as co operative companies limited by shares. Their 
distinguishing features are, inter alia, the fact th at shareholdings are limited to 1 per cent of share 
capital, except where a bank’s articles of asso ciation provide for lower limits (between 0.5 and 
1 per cent), the ‘one member one vote’ principle, an d the fact that the board of directors reserves 
the right to approve the admission of new members. The purpose of Article 1 of the Decree-Law is 
to reform popolari banks by amending Legisl ative Decree No 385 of 1 September 1993
3. 
1.2 A distinction can be made between popolari banks which are relatively small and have limited 
territorial coverage, and those which have cross-bo rder operations or are listed on the stock 
exchange. In line with this distinction, the Decr ee-Law divides popolari banks into two categories, 
depending on the value of their total assets. Those with assets of more than EUR 8 billion are 
obliged to either convert to joint-stock compani es (with subsequent application to them of the 
ordinary regime for such companies), wind up or r educe their assets to below that threshold. In 
order to facilitate such a conversion, the qualif ied majority voting threshold has been lowered for 
approving changes to the legal form of a popolare bank, as well as for decisions on mergers and 
acquisitions.  
                                                 
1 Gazzetta Ufficiale della Repubblica Italiana  No 19, 24.01.2015. 
2 Council Decision 98/415/EC of 29 June 1998 on the Consultation of t he European Union by national authorities 
regarding draft legislative provis ions (OJ 189, 3.7.1998, p. 42). 
3  Gazzetta Ufficiale della Repubblica Italiana  No 230, 30.09.1993 
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2 1.3 Popolari banks with assets of EUR 8 billion or less  are also affected by the Decree-Law. In contrast 
to the current regime, under the Decree-Law, a popolare bank’s memorandum of association may allow for the issuance of financial instruments bea ring certain economic and administrative rights. 
Owners of these financial instruments may, where so provided by the memorandum of association, 
exercise voting rights up to a maximum of one third of the total votes in the general assembly of 
shareholders and appoint as many as one third of the members of the managing and supervisory 
bodies of the bank
4. Furthermore, company members who ar e legal persons may cast up to five 
votes if the memorandum of association so provides. In addition, under the Decree-Law, where proxy voting is allowed, the applicable voting right ceiling should not be set below 10 and may be 
increased to 20. A popolare bank with assets below the EUR 8 billion threshold will apply the lower 
qualified majority voting threshold, should it deci de to convert into a joint-stock company. In 
addition, the requirement that the majority of di rectors are appointed from among the members or, 
where members are legal entities, from among persons designated by them, is removed. 
1.4  Finally, under the Decree-Law, the right to rede em shares in the event of withdrawal from the 
cooperative, even in the event  of transformation, death or exclusion of shareholders
5, may be 
limited by the Banca d’Italia if such measure is deemed necessary in order to preserve the 
adequacy of the Common Equity Tier 1 capital. 
 
2.  The appropriate time to consult the ECB 
2.1 The ECB must be consulted at an appropriate stage  in the legislative process. This should be at a 
time that enables the ECB to adopt its opinion in all required language versions and that enables 
the authority initiating the legislative provision to  take the ECB’s opinion into account before it 
decides on the substance6. 
2.2 In the Italian legal system, a decree-law, adopted by the Government, enters into force following 
publication in the Gazzetta Ufficiale  and must be submitted on the same day to Parliament for 
conversion into law. If not converted within 60 days of publication, the decree-law is rendered 
invalid with retroactive application. In the light  of the above, the ECB should be consulted before 
the adoption of a decree-law7. 
2.3 In the present case, as the Decree-Law was adopted and published on 24 January 2015, not only 
was the ECB not consulted before its adoption but the submission of the consultation request was 
unnecessarily delayed. The request was receiv ed by the ECB on 20 February 2015, when the 
Ministry of Economy and Finance asked the ECB to consider the consultation as a matter of 
                                                 
4  More specifically, holders of financial instruments, in accordance with the memorandum of association, might appoint 
up to one third of the supervisory board members and one th ird of the management board me mbers in case of two-
tier governance system (Article 1(1)(d)(1) of  the Decr ee- Law, amending Article 150-bis(2) of Legislative Decree 
No 385 of 1 September 1993, in conjunction with Article 2544(2)  of the Civil Code) or - alternatively - up to one third 
of the directors in case the one-tier  governance system applies (Article 1( 1)(d)(1) of the Decree- Law, amending 
Article 150-bis(2) of Legislat ive Decree No 385 of 1 September 1993, in co njunction with Article 2544(3) of the Civil 
Code). 
5  Amendments made by the Chamber of Deputies in the process of conversion exclude the power of the Banca d’Italia 
to limit the right to redeem shares in case of death of the shareholder. 
6  See Title IV, Section I of the Gui de to consultation of the European Central Bank by national authorities regarding 
draft legislative provisions, which is available from the ECB’s website.   
7 See ECB Opinion CON/2012/64. 
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3 urgency in view of the short deadline for conver sion. This situation is unfortunate and the ECB 
would like to emphasise to the Ministry the need for proper consultation. 
 
3.  General observations 
3.1 The ECB welcomes the proposed reform of popolari banks as an essential step towards 
addressing shortcomings regarding their governance, and supports  the Italian authorities in giving 
this reform permanent effect without delays. 
3.2 The ECB understands that the Decree-Law addr esses certain rigid feat ures of the governance 
framework of popolari banks with the aim of: (i) enhancing the effective monitoring power of the 
shareholders vis–à–vis the management; (ii) increasing the banks’ capital-raising capacity; 
(iii) reducing the risk of concentration of power in a minority group of shareholders, and; 
(iv) providing opportunities to look for synergies and economies of scale, resulting in efficiency 
gains within the banking segment, for instance through mergers and acquisitions. 
3.3 The ECB notes that popolari banks with as sets above EUR 8 billion represent a significant 
proportion of the popolari segment in terms of loan amounts, number of branches and number of 
employees. Therefore, the threshold set for mandatory conversion seems to be expedient for the 
achievement of the objectives of the Decree-Law for a significant part of the popolari segment of 
the Italian banking sector. The ECB understands that the asset size criterion is coherent with the 
current distinctions between popolari banks with a wide territorial and operational outreach, having 
a business model similar to the one adopted by commercial banks, and those with a cooperative and mutual banking model. In light of this, the ECB welcomes the Decree-Law, which realigns the 
company and governance structure of larger popolari banks with t hose of their commercial peers 
while not prejudicing the ability of popolari banks to finance the local regional economy.  
3.4  As far as popolari banks with assets of EUR 8 billion or less are concer ned, the ECB would like to 
emphasise the importance of measures aimed at  strengthening their governance structures. A 
more appropriate structure could help enhance thei r risk management capabilities, their internal 
capital generation ability as well as their potentia l for attracting additional capital, and their 
competence to withstand financial and economic cr ises of significant magnitude. This would enable 
popolari banks to continue to provide credit to  the regional and local economies even during 
difficult times. 
3.5 Given the importance of the Decree-Law in addr essing one of the vulnerabilities of the Italian 
banking sector, the ECB strongly supports the essent ial elements of the proposed reform which it 
feels should not be substantially  amended. The ECB, furthermore , advocates for its timely 
implementation. 
 4. Supervisory implications for larger popolari banks 
4.1 The ECB notes that most of the popolari ba nks with assets above EUR 8 billion are directly 
supervised by the ECB. Against this backdrop,  the ECB welcomes the Decree-Law, which is 
intended to reshape the governance structure of popolari banks with a wider territorial and 
operational outreach. 
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4 4.2 Under the current prudential regulatory framew ork, both strong governance arrangements and a 
solid capital structure are crucial concerns for th e banking supervisor. To this end, the ECB notes 
that the transformation of  the biggest popolari banks into join t-stock companies w ould facilitate their 
ability to raise capital and enhance the shareholde rs’ control over the management. In addition, this 
could make it easier for the capital instruments iss ued to be included as part of the fulfilment of the 
Common Equity Tier 1 requirements. Under R egulation (EU) No 575/2013 of the European 
Parliament and of the Council8, as supplemented by Commission delegated Regulation (EU) 
No 241/20149, for capital instruments to qualify as Common Equity Tier 1 a number of conditions, 
in addition to those applicable to capital instrum ents issued by joint stock companies, have to be 
met. 
4.3 The transformations envis aged by the Decree-Law will lead to substantial changes, particularly with 
regard to the capital structure and the gover nance arrangements of th e credit institutions 
undergoing such transformation. To that end, t he ECB notes that, pursuant to  Article 9(1), 
subparagraph 2, Article 4(1)(e) and Article 4(3) of Council Regulation (EU) No 1024/201310, and 
Article 104(1)(b) of Directiv e 2013/36/EU of the European Parliament and of the Council11, the ECB 
shall have all the powers of the competent and designated authorities under the applicable Union 
law to ensure compliance with requirements re garding robust governance arrangements with 
regard to significant institutions. These pow ers include assessing whether such arrangements 
would jeopardise the safety and the soundness of the credit institution in question, and whether the 
changes to its governance structure are consist ent with the credit institution’s sound and prudent 
management and with SSM standards. 
4.4 Moreover, the ECB welcomes the fact that Decr ee-Law explicitly confer s upon the Banca d’Italia 
the capacity to limit the shareholders’ redemp tion rights should the exercise thereof cause the 
banks’ own funds to be reduced, as this explicit conferral will facilit ate the exercise of the powers of 
the supervisory authority. In light  of the competences conferred on the ECB by Article 4(1)(d) and 
the second subparagraph of Article 9(1) of Regulation (EU) No 1024/2013, i.e. to ensure 
compliance with own funds requirements, the ECB notes  that, for significant institutions, it is for the 
ECB alone to assess in each case whether such lim itation of the shareholders’ redemption rights is 
necessary. Finally, it is understood t hat the Decree-Law is without pr ejudice to other supervisory,  
 
 
  
                                                 
8  Regulation (EU) No 575/2013 of the European Par liament and of the Council of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 
27.6.2013, p. 1).  
9  Commission delegated Regulation (EU) No  241/2014 (OJ L 74, 14.3.2014, p. 8). 
10  Council Regulation (EU) No 1024/2013 conferring specific  tasks on the European Central Bank concerning policies 
relating to the prudential supervision of credi t institutions (OJ L 287, 29.10.2013, p. 63). 
11  Directive 2013/36/EU of the European Parliament and of the C ouncil of 26 June 2013 on access to the activity of 
credit institutions and t he prudential supervision of credit inst itutions and investment firms, amending 
Directive 2002/87/EC and repealing Directives 2006/ 48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
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5 enforcement and sanctioning powers conferred on the ECB. This does not prejudice the Banca 
d’Italia’s regulatory powers under the Decree-Law. 
 
This opinion will be published on the ECB’s website. 
  
Done at Frankfurt am Main, 25 March 2015.  
 
[signed] 
 
The President of the ECB 
Mario DRAGHI