WRITTEN QUESTION E-2787/98

by Ernesto Caccavale (UPE) to the Commission

(17 September 1998)

Subject: Alleged irregularities in connection with the merger of the Banco di Napoli and the Banca Nazionale del Lavoro

The Commission, to which the plan to restructure and privatize the Banco di Napoli was recently referred, is reported to have authorized the aid the Italian government proposed to provide on the grounds that it complied with the conditions and criteria laid down in the rules on the provision of aid to rescue and restructure failing undertakings. In the course of the same review, according to press reports, Mr Van Miert, the Commissioner responsible for competition policy, also examined the plan to merge the Banco di Napoli and the Banca Nazionale del Lavoro (BNL), which he approved, despite the fact that the timetable and arrangements for the merger were still very unclear. Judging from various further press reports, there are grounds for believing that the BNL, a publicly owned institution, is in an extremely unstable financial position, with a rate of return on capital some 1 % lower than that of the Banco di Napoli, which has an R.O.E of 7,6 %, huge balance sheet losses and major inefficiencies. Moreover, the planned merger is apparently subject to a whole series of conditions, including the requirement for the Banco di Napoli to transfer or close down, by the end of 1998, 18 branches in central and northern Italy and the Madrid branch. Naturally, the threat of impending redundancies has caused considerable alarm to bank employees, particularly in southern Italy, where unemployment is still a serious social problem.

1. Would the Commission ascertain whether the Italian Treasury Ministry's decision to merge the Banco di Napoli with the Banca Nazionale del Lavoro, which is still publicly owned, infringes Community rules on free competition, as no public bids were invited and other private banks, such as Ambroveneto, had made other - and more attractive - proposals to purchase the Banco di Napoli?

2. Would the Commission ascertain whether the above-mentioned merger in fact constitutes an indirect and covert form of state aid for the BNL in addition to the Lire 2,217 billion already officially earmarked for the rationalisation, restructuring and privatisation of the Banco di Napoli, which would seriously distort the credit market and the banking system?

3. Would the Commission indicate whether it agrees that the two banks' financial situation should be clarified and transparency ensured in relation to the relevant figures, including the projected balance sheet following the planned merger, in order to protect the rights of both banks' small savers and the Banco di Napoli's small shareholders, which might be jeopardised by this whole operation?

Answer given by Mr Van Miert on behalf of the Commission

(27 October 1998)

On 29 July 1998 the Commission approved the state aids for the Banco di Napoli foreseen by the law decree 27 March 1996 No 163, converted in the law No 588 of 19 November 1996, such as the capital injection subscribed by the Treasury, the cover of the Gestione ai Attività's (SGA) losses and fiscal aids. The estimated state aid goes from 2,217 billions up to 11,895 billions LIT. The authorisation is granted provided that Italy respects the Banco di Napoli engagement to sell or close, before the end of 1998, 18 branches located in the Northern and Central part of Italy - which are added to the 59 branches and 7 subsidiaries and representative offices abroad already closed - and the Madrid branch. The loans granted by Banca d'Italia in order to cover the subsidiary Isveimer liquidation costs were not considered state aid to Banco di Napoli provided that Banco di Napoli does not buy back Isveimer assets, unless it is impossible to sell them to other subjects or at better conditions within the liquidation. Italy must ensure the fulfilment of all the restructuring measures described in the restructuring plan presented to the Commission. These measures cannot be modified without the prior authorisation of the Commission. The Banco di Napoli cannot take advantage of the possibility to benefit from tax credits for the same amount of the fiscal losses covered by the Treasury recapitalization.

The Commission gave notice of its decision to third parties by press release on the same day. Furthermore the decision will be published in the Official journal.

1. Concerning the problem of the future merger between Banco di Napoli and BNL after the BNL privatisation, the Commission has observed that even if there are no certainties on its exact timing, the project will not put in danger either the future bank's nor the Banco di Napoli's viability. On the basis of the information about the BNL restructuring plan's results offered by the Italian authorities, the Commission has taken the view that the merger will not have negative effects on the new bank's viability - compared to the expected results for the Banco di Napoli - while a positive effect is expected in the long term. In this light it was possible to ascertain that, the two banks involved being complementary at the geographic and functional level, a merger could produce significant synergies at the personnel, general expenses and non-financial gain level.

The Commission has observed that, in any case, the sale of Banco di Napoli to the Istituto Nazionale Assicurazioni (INA)/BNL group, INA being the majority shareholder, will ensure the Banco's long term viability even if a regular merger between Bank and BNL will not be achieved. All this considered, the Commission has concluded that, if the two banks merge, the viability of the resulting bank will be assured and that there will not be any need for further state aids.

2. Concerning the BNL privatisation, the Commission has observed that this process has already started according to the Italian authorities engagements' foreseen by the 28 January 1998 prime ministerial decree which established the BNL sale through both a private placement, in order to form a stable group of shareholders, and a public offer. The Treasury has accepted the Banco Bilbao Vizcaya offer to buy the bank's 10 % stake. As the second part of the procedure is expected to take place in autumn 1998, the Treasury has already nominated the public offer's global co-ordinators and, in the light of the future market sale of at least its 50 % stake, has transformed the BNL saving shares into normal shares, thus reducing its stake from 85,5 % to 70 %.

The Commission has appreciated that the BNL privatisation excludes the risk of a shift of the Banco di Napoli's control from the private ownership (INA) to the public one (BNL) and reduces the need for more public resources in case of the restructuring plan's failure. On the contrary, according to the Commission, the BNL privatisation confirms the definitive shift of the Banco di Napoli's control into private hands.

3. Concerning the requested Commission investigation of the balance sheet transparency of the two banks involved, the Commission considers that it does not fall within its competence. For such problems, small shareholders and investors should address themselves to the national jurisdiction.