Opinion of the European Central Bank of 11 May 2004 at the request of the Italian Ministry of Economic Affairs and Finance on a draft law on the protection of savings (CON/2004/16)
Date: 2004-05-11
Institutions: European Central Bank
Subjects: Italy, central bank, financial institution, financial stability, financial supervision, national law

EN

OPINION OF THE EUROPEAN CENTRAL BANK

of 11 May 2004

at the request of the Italian Ministry of Economic Affairs and Finance

on a draft law on the protection of savings

(CON/2004/16)

1. 

On 30 March 2004 the European Central Bank (ECB) received a request from the Italian Ministry

of  Economic  Affairs  and  Finance  for  an  opinion  on  a  draft  law  on  the  protection  of  savings

(hereinafter the ‘draft law’).

2. 

The ECB’s competence to deliver an opinion is based on 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 Central Bank
by  national  authorities  regarding  draft  legislative  provisions1,  as  the  draft  law  contains

(i)  provisions  concerning  a  national  central  bank  as  well  as;  (ii)  rules  applicable   to  financial

institutions  which  could  materially  influence  the  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.

3. 

The draft law was adopted by the Italian Government on 3 March 2004 and subsequently submitted

to the Parliament. It is currently being discussed by the competent committees of the Chamber of

Deputies,  which  prepared  a  new  draft  on  5  May  2004.  The  present  opinion  is  based  on  this  most

recent  text,  which  has  been  informally  sent  to  the  ECB  by  the  consulting  authority.  The  ECB

appreciates that the preparation of the draft law is a dynamic process where amendments may be

introduced at any time. It stands ready to comment on any such amendments to the extent possible.

This is particularly important where amendments fundamentally change draft legislation in areas in

which the ECB has a specific interest.

4. 

The draft law has two main aims:

The first aim is to strengthen the safeguards for the integrity of financial markets and institutions.

In  this  context,  it  revises  corporate  governance  mechanisms  regarding  listed  companies  such  as

those  relating  to  independent  directors  (Article  1),  statutory  auditing  (Article  2),  liability  of

company’s  administrators  (Article  3),  and  transparency  of  cross-border  complex  corporate

structures (Article 5). It also introduces provisions dealing with conflicts of interest with regard to

1

OJ L 189, 3.7.1998, p. 42.

                                                
companies that have recourse to capital markets, financial intermediaries and collective investment

vehicles  (Articles  6  to  8).  In  addition,  it  includes  provisions  dealing  with  the  protection  of

investors, notably with regard to the sale to retail investors of financial instruments initially placed

with  institutional  investors  (Article  9),  transparency  of  contractual  conditions  (Article  10),  and

criteria for the placement of financial products with retail investors (Article 11). Furthermore, the

draft  law  contains  provisions  concerning  the  implementation  of  the  ‘Market  Abuse  Directive’

(Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider
dealing and market manipulation (market abuse)2) and provides more stringent rules with regard to

auditing companies.

The second aim is to reform the institutional framework in Italy for the regulation and supervision

of financial markets and intermediaries. In particular, it envisages the allocation of regulatory and

supervisory tasks according to their objectives, thus refining and extending to all financial sectors a

model already partially adopted in the Italian framework. The central bank will be responsible for

the  safeguard  of  financial  stability  and  the  prudential  regulation  and  supervision  of  credit

institutions,  insurance  companies,  investment  firms  and  other  financial  intermediaries.  A  newly

established authority – the Authority for the Financial Markets (Autorità per  i  mercati finanziari,

AMeF)  –  will  be  responsible  for  conduct  of  business  regulation  and  supervision.  This  includes

consumer  protection  issues,  market  confidence,  the  transparency  and  fair  business  practices  of

financial  intermediaries,  and  more  generally  financial  markets’  transparency  and  corporate

disclosure practices. As a result of this approach, the current Italian supervisory authorities will be

reduced in number and reorganised. The insurance supervisory authority (Istituto per la  vigilanza

sulle assicurazioni private e di interesse collettivo) and the pension funds regulator (Commissione

di vigilanza sui fondi pensione)  will  be  dissolved  and  their  tasks  transferred  to  the  Banca  d’Italia

and the  AMeF. The  AMeF  will  take  over  the  competencies  and  responsibilities  of  the  current

financial markets regulator (Commissione Nazionale per  le Società e la  Borsa),  as  well  as  those

related to the transparency of banking activities currently belonging to the Banca d’Italia. The tasks

of the Italian Foreign Exchange Office (Ufficio   Italiano dei Cambi,  UIC) concerning  anti-money

laundering  policies  will  be  attributed  to  a  new  Agency  for  Financial  Investigation  (Agenzia  per

l’investigazione finanziaria ,  AIF),  whilst  those  concerning  the  management  of  the  Italian  official

foreign reserves, collection of data for the preparation of statistics on the balance of payments and

the fight against usury, will be transferred to the Banca d’Italia.

The draft law also foresees that responsibility for competition policy in the banking sector will be

transferred  from  the  Banca  d’Italia  to  the  Italian  competition  authority  (Autorità  Garante  della

Concorrenza e del Mercato, AGCM). The Banca d’Italia will be consulted with regard to measures

concerning  the  financial  institutions  under  its  responsibility.  In  addition,  mergers  and  acquisition

giving  rise  to  a  dominant  position  may  also  be  authorised  if  the  Banca  d’Italia  deems  them

necessary for the stability of the institution concerned (Article 59).

2

OJ L 96, 12.4.2003, p. 16.

2

                                                
5. 

The ECB welcomes the reinforcement of specific safeguards for the integrity of financial markets.

This is in line with the concerns which have emerged at the international and European Union (EU)

levels as a result of recent corporate failures in the U.S. and in Europe. In particular, the draft law

addresses  current  shortcomings  with  respect  to  corporate  governance,  financial  disclosure,  the

monitoring role of financial and reputational intermediaries, and the control of offshore structures.

The  ECB  considers  that  the  arrangements  envisaged  in  the  draft  law  are  likely  to  help  to  build  a

better  system  of  checks  and  balances  on  corporate  behaviour  against  the  background  of  recent

cases.

Recent  corporate  failures  have  shown  how  internal  and  external  control  mechanisms  may  be

ineffective  where  complex  multinational  groups  span  a  number  of  countries  and  operate  through

offshore  centres.  Given  the  increasing  integration  and  interlinkages  of  EU  financial  markets,  the

ECB  considers  that  legislative  responses  should  be  coordinated  at  the  EU  level,  as  purely

nationally-based safeguards for market integrity might be more easily circumvented. The European

Commission  has  already  taken  various  initiatives.  It  recently  proposed  an  Action  Plan  on
Modernising Company Law and Enhancing Corporate Governance in the European Union3.  The

Action  Plan  suggests  enhancing  disclosure  of  corporate  governance  structures  and  practices,

strengthening  shareholders’  rights  and 

introducing  several  requirements  concerning 

the

organisation  of  company  boards.  A  greater  role  for  independent  non-executive  and  supervisory

directors is envisaged, and minimum standards for their nomination and remuneration and for audit

committees are set out. Other measures have also been adopted to increase investors’ confidence in

European capital markets, such as the new proposal for a directive of the European Parliament and

of  the  Council  on  statutory  audit  of  annual  accounts  and  consolidated  accounts  and  amending

Council  Directives  78/660/EEC  and  83/349/EEC.  The  Market  Abuse  Directive  is  also  to  be

mentioned. The ECB notes that the draft law takes into account these various initiatives developing

at  the  EU  level.  Moreover,  the  draft  law  introduces  some  innovative  tools  aimed  at  tackling  the

failures  in  internal  and  external  controls  regarding  the  behaviour  of  managers  and  controlling

shareholders  and  at  limiting  the  potential  for  conflicts  of  interest.  It  would  seem  appropriate  that

also in these areas enhanced coordination is sought at the EU level.

The  ECB  also  welcomes  the  fact  that  the  proposed  institutional  framework  is  oriented  towards

recognising the essential role of the central bank in promoting the safety and soundness of financial

institutions and the stability of the financial system as a whole. It understands that, after a thorough

debate,  a  wide  consensus  has  emerged  to  confirm  the  attribution  of  responsibility  for  prudential

supervision  to  the  Banca  d’Italia  and  to  extend  the  scope  of  such  supervision  to  all  financial

intermediaries.  The  ECB  sees  a  number  of  advantages  in  this  choice.  First,  the  chosen  approach

recognises  that  the  nature  and  scope  of  systemic  risk  is  widening  due  to  the  closer  links  between

credit  institutions,  insurance  companies,  investment  firms  and  pension  funds.  The  traditional

borders  between  the  banking,  insurance  and  securities  segments  of  the  financial  system  are

3

European Commission Communication, 21 May 2003.

3

                                                
increasingly blurred, as demonstrated by the emergence of hybrid financial products, the increased

use  of  risk  transfer  instruments  and  distribution  agreements  between  the  three  sectors,  and  the

growing role of financial conglomerates. These developments suggest that the integration of micro-

and macro-prudential supervisory tools might provide a more effective monitoring of systemic risk,

thus contributing to financial stability. Second, the approach acknowledges the growing importance

of financial groups that combine different types of financial services. This calls for some degree of

coordination  between  the  supervisory  policies  and  regulation  in  all  sectors  of  financial  activity  in

order to address the specific prudential concerns with regard to such groups and ensure an overall

level playing field between competing intermediaries. Entrusting one authority with responsibilities

for  prudential  supervision  over  the  whole  range  of  financial  intermediaries  is  considered  an

appropriate method of addressing the challenges of financial conglomeration.  Third, the attribution

of extensive supervisory responsibilities of both a micro and macro-prudential nature to the central

bank  is  appropriate  in  view  of  the  changes  triggered  by  the  introduction  of  the  euro  and  the

synergies  that  are  achieved  between  the  exercise  of  central  banking  and  supervisory  functions,

notably with regard to the assessment of risks for the financial system as a whole. At the same time,

it should be noted that financial stability and investor protection are complementary objectives and

must be pursued consistently by the authorities to which they are entrusted.

6.  Within the above framework, it is essential to ensure that the reform and its actual implementation

respect  provisions  of  the  Treaty  establishing  the  European  Community  concerning  central  bank

independence  and  that  due  attention  is  paid  to  ensuring  the  operational  independence  of

supervisory authorities.

Central bank independence

7. 

The  ECB  notes  that  Article  24  of  the  draft  law  provides  that  the  Governor  shall  have  a  non-

renewable  eight-year  term  of  office  and  that  he  may  be  dismissed  only  in  accordance  with

Article 14.2 of the Statute of the European System of Central Banks and of the European Central

Bank  (hereinafter  the  ‘ESCB  Statute’).  The  proposed  article  is  in  compliance  with  Treaty

requirements.

8. 

The ECB also notes that the draft law is silent concerning the future status of the existing Governor

of the Banca d’Italia. In this context it would like to point out that in order to protect the personal

independence  of  the  governors  of  the  national  central  banks,  any  reorganisation  of  such  a  bank

affecting the term of office of its governor should foresee that the existing Governor can continue

to  perform  his  duties  until  the  end  of  the  term  of  office  he  has  been  appointed  for.  The  ECB

understands that the case of the Governor of the Banca d’Italia is exceptional in that he has been

appointed for an indefinite term of office without any compulsory retirement age. For this case the

draft  law  should  provide  for  a  transitional  regime  which  is  compatible  with  Article  14.2  of  the

ESCB  Statute.  The  present  formulation  of  Article  74(5)  amounts  to  an  ex  lege  revocation  of  the

appointment  of  the  incumbent  governor,  without  observing  the  abovementioned  provision  of  the

Statute. As regards the appointment procedure, an additional guarantee of independence lies in the

4

power  of  appointment  by  the  Board  of  Directors  of  the  Bank,  and  not  merely  in  the  power  of

nomination. The appointment is then approved at the political level.

9. 

The  ECB  notes  that  according  to  Article  72(9)  of  the  draft  law  the  assets  and  real  estate  of  the

Banca d’Italia that are instrumental for the exercise of the tasks transferred to the  AMeF  may  be

acquired by the State Property Agency in order to be assigned or leased to the  AmeF.  The  ECB

welcomes the fact that such a transfer has to be made in accordance with an agreement between the

parties  concerned  and  that,  according  to  Article  72(10),  will  be  applied  with  due  attention  to  the

obligations arising from the Banca  d’Italia’s membership of the ESCB. Moreover, the ECB notes

that the UIC is an instrumental entity of the Banca d’Italia. Article 71 assigns to the new AIF assets

currently belonging to the UIC, and thus to the Banca d’Italia. In order to comply with Article 108

of the Treaty it is also necessary that this transfer only take place with the agreement of the Banca

d’Italia.

Operational independence of supervisory authorities

10.  Operational  independence  of  supervisory  bodies  vis-à-vis  the  political  authorities  is  an  essential

and  internationally  recognised  standard  for  supervision  of  financial  markets.  In  this  respect,  the

ECB notes that a previous version of the draft law provided for extensive powers of oversight of

supervisory  activities  to  be  held  by  the  Interdepartmental  Committee  for  Credit  and  Savings

(Comitato  interministeriale per  il credito  e  il  risparmio,  CICR),  which  could  give  rise  to  some

concerns  regarding  the  appropriate  safeguard  of  the  operational  independence  of  supervisory

authorities.  The  ECB  welcomes  the  fact  that  the  latest  version  of  the  draft  law,  on  which  this

opinion  is  based,  no  longer  provides  for  such  a  role  for  the  CICR,  but  rather  reverts  to  the

framework currently in place.

11. 

In  accordance  with  Article  18,  the  supervisory  authorities  and  the  AGCM,  while  respecting  each

other’s independence, will be under the obligation to exercise their competencies in a coordinated

manner, namely through a coordination committee, so that the risk of overlaps and duplications of

responsibilities  over  the  financial  industry  is  mitigated  to  the  extent  possible.  The  ECB  fully

recognises the need for coordination and welcomes the fact that this provision is consistent with the

responsibility and independence of each authority in the exercise of its supervisory functions.

12.  Finally,  the  ECB  notes  that  a  number  of  provisions  in  the  draft  law  specifically  refer  to  the

transparency  and  accountability  of  the  Banca  d’Italia  and  the  AMeF  as  regards  their  supervisory

activities. In  particular,  in  accordance  with  Article  17,  the  authorities  shall  deliver  a  yearly  report

on the results of their supervisory activity to the Presidents of the Parliamentary Chambers and to a

newly instituted Parliamentary Commission for the protection of savings and the financial markets

(Commissione per la  tutela del  risparmio e  i  mercati  finanziari),  together  with  any  opinion  or

recommendation on regulatory intervention. Such reports, opinions and recommendations are also

transmitted  to  the  Government  which,  in  turn,  may  adopt  any  initiative  falling  under  its

competence.  The  ECB  considers  such  provisions  consistent  with 

the 

transparency  and

5

accountability  requirements,  that  are  the  natural  complement  of  the  operational  independence  of

supervisory authorities.

Further aspects relating to the institutional framework for financial supervision and regulation

13.  The ECB also notes that Article 41(2) of the draft law attributes to the  AMeF the right to ask the

Banca  d’Italia  to  propose  to  the  Treasury  Minister  the  initiation  of  a  special  administration

procedure  or  compulsory  administrative  liquidation  concerning  a  bank  (Articles  70  and  80  of  the

Banking  Law),  and  to  adopt  supervisory  measures,  such  as  provisional  management  (Article  76)

and  special  measures  (Articles  78  and  79).  It  is  understood  that  this  provision  could  apply  in

extreme cases, in which the violation of conduct of business and transparency regulations suggests

the exit from the market of an otherwise solvent entity.  Close  ex  ante  coordination  of  the  AMeF

with  the  Banca  d’Italia,  which  is  generally  warranted,  is  particularly  required  with  regard  to  such

measures,  as  the  Banca  d’Italia  is  entrusted  not  only  with  the  responsibility  of  preserving  the

solvency  and  liquidity  of  the  bank  concerned  but  also  with  safeguarding  the  stability  of  the

financial system as a whole. If such coordination was lacking, the activation of such a measure by

the AMeF could trigger a serious instability.  The  ECB  welcomes  the  proposed  procedure,  which

ensures adequate coordination between the AMeF and the Banca d’Italia.

14.  Finally, in transferring the responsibilities for the enforcement of competition policy in the banking

sector from the Banca d’Italia to the AGCM the draft law introduces procedures aimed at ensuring

a smooth interplay between the measures taken by the two authorities. While  coordination  is  highly

needed to avoid an overly complex framework for supervised entities, it would seem appropriate to

maintain  a  clear  distinction  between  procedures  that  are  pursuing  distinct  public  interests,  taking

due  account  of  the  importance  that  the  Italian  legal  system  assigns  to  the  stability  of  financial

intermediaries and of the financial system as a whole. In particular, the requirement to notify also

to  the  AGCM  the  mergers  and  acquisitions  as  foreseen  by  the  regulatory  framework  for  banking

supervision  and  to  incorporate  the  assessment  for  supervisory  and  competition  purposes  into  a

single  act  by  the  AGCM  might  raise  delicate  issues.  The  procedure  foreseen  in  the  Directive

2000/12/EC  aims  at  ascertaining  the  compatibility  of  the  acquisition  of  qualifying  holdings  in  a

credit  institution  with  the  sound  and  prudent  management  and  may  require  access  to  information

that  are  not  directly  relevant  for  competition  policy  purposes.  It  would  seem  appropriate  that

national  measures  implementing  these  Community  provisions  and  defining  the  criteria  for  the

fulfilment of the related responsibilities should refer only to the authority entrusted with prudential

supervisory tasks. Some separation between the two procedures seems warranted also for practical

reasons, as the thresholds for communication and the notion on control are not entirely overlapping

in Community legislation. Such procedural separation may be compatible with establishing ex ante,

as the draft law foresees, criteria to be used regarding the clearance of mergers and acquisitions by

both  authorities.  The  ECB  would  welcome  such  ex  ante  criteria  as  a  tool  to  enhance  the

transparency and objectivity of such clearance decisions by either of the two authorities concerned.

6

15.  This opinion will be published on the ECB’s website.

Done at Frankfurt am Main, 11 May 2004.

[signed]

The President of the ECB

Jean-Claude TRICHET

7