2009/178/EC: Commission Decision of 16 July 2008 on a State aid scheme implemented by Italy to remunerate current accounts held by Poste Italiane with the State Treasury (C 42/06 (ex NN 52/06)) (notified under document number C(2008) 3492) (Text with EEA relevance)
Date: 2008-07-16
Institutions: European Commission
Subjects: Italy, State aid, banking, control of State aid, exchange of information, financial services, post office financial services

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(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 16 July 2008

on a State aid scheme implemented by Italy to remunerate current accounts held by Poste Italiane
with the State Treasury (C 42/06 (ex NN 52/06))

(notified under document number C(2008) 3492)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2009/178/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
and in particular
Community,
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1) and having regard to
their comments,

(3)

(4)

Whereas:

(1)

(2)

1. PROCEDURE

By letter dated 30 December 2005, Associazione Bancaria
Italiana (ABI) complained to the Commission against
various measures which it alleged benefited the banking
activities of Poste Italiane SpA (PI). In particular, it claimed
that Italy paid an interest rate of around 4 % on funds
that were collected in postal current accounts and
deposited in a current account held with the State
Treasury, while the postal current accounts themselves
were remunerated at a rate of around 1 %. PI’s spread
between deposit and loan rates (2) was greater than the
‘market’ spread, and thus constituted State aid.

By letter dated 7 February 2006, the Commission put
several
Italian authorities. After
requesting an extension of the deadline for an answer,
Italy replied to the questions by letter dated 21 April

questions

to the

(1) OJ C 290, 29.11.2006, p. 8.
(2) The loan rate is the interest rate PI receives from the Treasury for the
funds deposited with the latter. The deposit rate is the interest rate PI
pays to postal current account holders.

2006. A meeting took place with the Italian authorities
and representatives of PI on 30 March 2006.

the Commission
By letter dated 26 September 2006,
informed Italy that
the
procedure laid down in Article 88(2) of the EC Treaty
in respect of the measure.

it had decided to initiate

The Commission’s Decision to initiate the procedure was
published in the Official Journal of the European Union (3).
The Commission invited interested parties to submit their
comments. The Italian authorities submitted comments by
letters of 31 October 2006 and 29 December 2006, and
ABI submitted comments by letter of 27 December 2006.
To give the Italian authorities an opportunity to reply the
Commission forwarded ABI’s comments, by letter of
15 January 2007. The Italian authorities commented by
letter dated 16 February 2007.

(5)

By letter of 21 February 2007 the Commission requested
additional
Italy replied by letters dated
30 March 2007, 2 April 2007 and 1 June 2007.

information.

(6) On 28 June 2007 and 24 October 2007, two meetings
were held with the Italian authorities and representatives
of PI. Following the latter meeting the Commission
of
requested
25 October
on
27 November 2007.

information,
to which

additional
2007,

letter
replied

by
Italy

(3) See footnote 1.

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(7)

(8)

(9)

Italy sent supplementary information on 29 February 2008, and a meeting between the Italian
authorities and the Commission took place on 4 March 2008.

The Commission requested further information on 5 March 2008 and 3 April 2008, and Italy replied
respectively on 7 March 2008 and 23 April 2008.

2. THE BUSINESS OF PI AND BANCOPOSTA – THE RELEVANT MARKETS

PI is the universal postal service provider in Italy, which performs a universal postal service obli­
gation (4) imposed by the Italian legislation governing the universal postal service (5). The service of
general economic interest with which PI is entrusted does not include financial services.

(10) Besides providing the universal postal service, PI offers integrated communication,

logistic and
financial products and services throughout Italy. The main figures for 2006 are the following (6):

Total staff (annual average)

Regional areas

Branches

Post offices

MAIN FINANCIAL FIGURES OF POSTE ITALIANE GROUP

Total revenue

Sales and service revenues

of which:
— from postal services
— from financial services
— from insurance services
— from other services

Other revenue

Net profit

POSTAL SERVICES

Products and services

Mail (standard, priority, registered, insured, legal documents, other recorded mail)

Commercial mail (Postatarget, catalogues, unaddressed mail, etc.)

Periodicals (printed, gifts, books etc.)

Telegrams, fax, telex

Express delivery (Poste Italiane and SDA)

Parcels

POSTAL SAVINGS

Savings books, savings certificates and postal current accounts: total

Life assurance policies: policies written

Conto Bancoposta: number of current accounts

Carta Postepay: number of cards issued

151 470

9

140

13 893

EUR million

17 055,6

15 932,2

5 339,4

4 382,5

5 993,6

216,7

1 123,3

675,7

volumes (number of items)

3 522 792 200

1 887 699 700

1 216 045 800

17 442 800

46 284 600

16 052 000

EUR 282 408 million

EUR 5 989 million

4 880 000

2 801 000

(4) The universal service comprises the conveyance of items of correspondence and addressed printed matter weighing up

to 2 kg and postal packages up to 20 kg, and services relating to registered items and insured items.

(5) Legislative Order No 261 of 22 July 1999, published in GURI No 182 of 5.8.1999, and Ministry of Communications

Order of 17 April 2000, published in GURI No 102 of 4.5.2000.

(6) Source: PI’s website, February 2008.

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(11) According to the annual report, postal services accounted for 33,5 % of the group’s total turnover in
2006, financial activities accounted for 27,5 %, and insurance business for 37,6 %. Financial services
contributed 82 % to the operating profit of the PI group, and insurances services 18,7 %. Postal
services showed an operating loss of EUR 4 million.

(12) PI’s banking activities are operated through a fully integrated division called Bancoposta.

(13) Before December 2003, PI was wholly owned by the Italian State. In December 2003, the State
transferred 35 % of the share capital in PI to Cassa Depositi e Prestiti (‘Deposits and Loans Fund’ –
‘CDP’). CDP had been a State agency until late 2003, when it was converted into a limited company
(SpA). Since then, although 30 % of its share capital has been transferred to 65 banking foun­
dations (7), CDP has remained under the control of the State.

(14) PI is controlled by the State.

2.1. Postal services

(15) According to a recent study (8), before the implementation of the first Postal Directive (9) the Italian
postal market was relatively open. Operators other than PI were already free to distribute direct mail
and hybrid mail. Some local mail operators were delivering letters as subcontractors to PI. After the
implementation of the Directive, the delivery of hybrid mail became part of the reserved area, and the
subcontracting relationships were ended. Outgoing and incoming international mail falls entirely
within the area reserved to PI. Since 1 January 2003 Italian legislation has incorporated the second
Postal Directive, which provides for the full opening of the EU postal market to competition by
1 January 2009: it limits the reserved area to letters up to 100 g and three times the basic tariff for
priority mail (10). From 1 January 2006, the reserved area is limited to letters up to 50 g and 2,5 times
the basic tariff for priority mail (11). The postal market is now relatively open to competition de jure,
since the delivery of direct mail is liberalised. The entry regulations are not regarded as severe (12).

(16) On 19 October 2006, the Commission proposed a new Postal Directive completing the single market
for Community postal services. That Directive entered into force on 27 February 2008: it provides for
the abolition of legal monopolies in postal services by 31 December 2010, though some Member
States are permitted to extend the deadline to December 2012 (13).

(7) Under Article 5 of Decree-law No 269 of 30 September 2003, converted into statute by an Act of 24 November
2003, the shares in CDP were assigned to the State. Foundations and other public or private parties may hold shares
which together must not amount to more than a minority of the whole.

(8) ECORYS-NEI, Development of Competition in the European Postal Sector, July 2005.
(9) Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the
development of the internal market of Community postal services and the improvement of quality of service
(OJ L 15, 21.1.1998, p. 14).

(10) Directive 2002/39/EC of the European Parliament and of the Council of 10 June 2002 amending Directive 97/67/EC
with regard to the further opening to competition of Community postal services (OJ L 176, 5.7.2002, p. 21).

(11) Legislative Order No 383 of 23 December 2003, published in GURI No 22 of 28.1.2004.
(12) See footnote 8.
(13) Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 amending Directive
97/67/EC with regard to the full accomplishment of the internal market of Community postal services (OJ L 52,
27.2.2008, p. 3).

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2.2. Financial services

(17) Presidential Order No 144 of 14 March 2001 lays down rules governing the banking and financial
services that can be provided by PI; this business is carried on by Bancoposta. The services comprise:
collecting savings from the public in all forms; provision of payment services; foreign exchange
intermediation; promotion and placement of loans granted by banks and other authorised interme­
diaries; performance of some investment services (trading on account of third parties and placement
and collection of orders, thus excluding trading on own account and individual portfolio management,
at least until 2007). PI is expressly prevented from engaging in financing.

(18) Bancoposta can be considered as a deposit institution and a financial intermediary. While it is not a
bank, it uses PI’s numerous post-office outlets for its own operations and to offer banking and other
financial products.

(19) The 13 893 counters, at least one per municipality on average, make PI the biggest banking network
in Italy, and should be regarded as an asset rather than a liability: most of their cost is covered by
these financial services, and they are not considered a burden on the universal service provider (14).

(20) The rating agency Fitch notes in a report published in 2004 that PI/Bancoposta has ‘a capacity to
reach the overall [Italian] population that cannot be matched by domestic banks for the foreseeable
future’ (15). Moreover, Fitch considers that PI has put ‘the development of financial services at the heart
of [its] strategy’.

(21) PI offers a wide range of financial services competing with those offered by the banking system:

— services of direct and indirect collection of savings and lending,

— payment services,

— placement of financial and investment products.

(22) PI collects deposits directly via postal current accounts. Annual averages of total deposits in postal

current accounts in the period 1995-2006 are shown in Table 1:

Table 1

(EUR billion)

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Average deposits

[…] (*)

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(*) Business secret.

(23)

launched the ‘Conto BancoPosta’ or BancoPosta account, a postal current account
In 2001, PI
comparable to an ordinary bank account. Before the launch of the BancoPosta account, the postal
current account was not an adequate retail instrument, because of the lack of associated services (such
as credit and debit cards); postal current accounts were intended mainly for the public administration
and companies writing large numbers of invoices (national utilities).

(14) Study by PriceWaterhouseCoopers, The Impact on Universal Service of the Full Market Accomplishment of the Postal Internal

Market in 2009, Final Report, May 2006.

(15) FitchRatings, special report, The European Regulated Mail Sector: Tomorrow’s deliveries, 9 July 2004.

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(24)

Italy indicates that, over the period 2000-2007, the share of the Italian market for current accounts
held by the postal current account was as follows:

Accounting date

Market share

31 December 2000

31 December 2001

31 December 2002

31 December 2003

31 December 2004

31 December 2005

31 December 2006

31 December 2007

[3 – 8] %

[3 – 8] %

[3 – 8] %

[3 – 8] %

[3 – 8] %

[3 – 8] %

[3 – 8] %

[3 – 8] %

(25) ABI states that PI’s direct fund-raising has increased faster than that of its banking competitors.
Between 1999 and 2004, direct bank fund-raising increased by 36 %, as against 94 % for postal
current accounts (16). ABI argues that the growth of direct deposit-taking by PI significantly eroded
fund-raising by banks: in 1999, postal accounts accounted for 2,2 % of direct fund-raising by banks
and post office combined; by 2004 the share had risen to 3,1 %. ABI considers that this growth is due
mainly to the attractive terms PI offers its account holders for equal services. For instance, the average
deposit rate for current accounts with banks is somewhere around 0,6 %-0,7 %, while PI was offering
1 % in early 2005.

(26)

In addition to direct collection via postal current accounts, PI also raises funds indirectly via the
placement of postal savings books and savings certificates on behalf of CDP.

(27)

In the last few years, PI has significantly broadened the range of its payment services to customers,
adding to the traditional postal
instruments (current account deposit receipts and postal money
orders) a series of instruments that were formerly offered only by banks (debit and credit cards,
credit transfers, standing debit orders for utility bills) (17).

(28)

Finally, PI provides placement services for:

— bonds issued by banks and CDP,

— insurance policies written by Poste Vita (18),

— investment funds managed by the asset management company Bancoposta Fondi SGR (19),

— loans granted by third parties: personal loans and mortgages are sold on behalf of banks.

(16) ABI calculates the 94 % increase on the basis of PI’s annual balance sheets. According to ABI, postal current accounts

represented 4,6 % of total bank and postal current accounts in 1999 and 6,2 % in 2004.

(17) In some cases, such as debit cards and standing debit orders, the service is provided by PI itself; in other cases, PI

distributes third-party products (such as credit cards, which it distributes on behalf of banks).

(18) Poste Vita SpA is a wholly owned subsidiary of PI.
(19) Bancoposta Fondi SGR is a wholly owned subsidiary of PI.

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3. THE MEASURES UNDER ASSESSMENT

(29) The relations between PI and the Treasury following the Order of 5 December 2003 (20) are illustrated

in Figure 1:

Figure 1

(30) The measure under assessment here is Act No 266 of 23 December 2005 (21) (the 2006 Finance Act),
implemented by an agreement [convenzione] between PI and the Ministry of Economic Affairs and
Finance dated 23 February 2006 (the Agreement).

(31) The 2006 Finance Act states that PI and the Ministry of Economic Affairs and Finance are to
determine the market parameters and the methods of calculation of the interest rate to be paid on
the funds deposited in postal current accounts and held with the Treasury; it also provides that the
interest payable by the Ministry for 2005 is to be reduced by EUR 150 million.

(32) The Agreement defines the practical mechanism for calculating the interest rates for a three-year
period; it entered into force on 4 April 2006 (22), with retrospective effect from 1 January 2005. It
is to expire on 4 April 2009. The yearly interest rate is essentially the weighted average of the annual
average yields of 30-year multiannual Treasury bonds (BTPs) (23) (80 %), 10-year multiannual Treasury
bonds (10 %) and 12-month ordinary Treasury bills (BOTs) (24) (10 %). The average annual yields on
the government securities referred to in the Agreement are obtained by calculating the simple
arithmetic average of the 24 quotation values noted on the first and 15th of each month by MTS
SpA, the company managing the electronic platform for dealings in Italian government bonds and
other fixed-term securities. The fact that the parameters are updated every 15 days means that the
yields are variable and fluctuating.
In the event of a shift in the rates curve that changes the
relationship between long- and short-term rates, PI may request a review of the basket. Either
party may withdraw from the Agreement, giving the other party notice at least six months before
31 December any year.

(33) The application of the methodology in the Agreement has led to the following results:

Interest rate (%)

Interest payable (EUR million)

2005

3,90

1 336 (1)

2006

4,25

1 516

2007

4,70

1 012

(1) The interest paid for 2004 was EUR 1 356 billion. If the legislation that applied in 2004 had been applied again in 2005, the

interest payable would have been at least EUR 150 million higher.

(20) Published in GURI No 288 of 12.12.2003.
(21) Published in GURI No 302 of 29.12.2005, Ordinary Supplement to the GURI No 211. The Act has retrospective

effect from 1 January 2005.

(22) The Agreement was approved by a ministerial order of 3 April 2006.
(23) Buoni del tesoro poliennali.
(24) Buoni ordinari del Tesoro.

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(34) The interest for 2005 was paid in 2006, and the interest
for 2006 was paid in 2007. Italy states that the interest
for 2007 has not yet been paid.

(38) The Commission doubted whether the scheme for deter­
mining the interest rate to be applied to the funds from
current accounts deposited with the Treasury from 2005
onward provided an appropriate market reference.

(35)

It was a requirement that funds collected in postal current
accounts be deposited with the Ministry of Economic
Affairs and Finance/Treasury (the Obligation) (25).

funds

customers

collected from private

(36) By Act No 296 of 27 December 2006 (the 2007 Finance
Act) (26)
remuneration
Italy amended the scheme of
provided for in the 2006 Finance Act. Under the new
(funds
Act,
collected via postal current accounts not held by the
public administration) are to be invested by PI in euro
area government bonds (27). The new Act removes the
restriction on use by PI only in the case of
funds
collected from private customers. The Act provides that
the new arrangements are to be introduced in stages by
31 December 2007. Funds deriving from customers other
than private customers (about 25 %-30 % of the whole)
are to be invested in the same way as before.

(39) The Commission was of

the view that

to establish a
market rate it would as a general rule be necessary to
consider the interest rate that a private borrower would
be prepared to pay PI for the funds deposited, in the light
their nature and volume. The rate defined by the
of
Agreement might not be a market rate.
In particular,
PI’s deposit with the Treasury was in a current account.
The Treasury, and not PI, covered the liquidity risk asso­
ciated with the funds deposited. The money collected and
paid into the current account was used to finance
ordinary budgetary needs.
if
system of
the Treasury had to replace the present
collection via PI,
it
that
would use would consist essentially of long-term securit­
ies. Although Italy insisted that the recent growth in the
funds collected in postal current accounts showed that the
resources available to the Treasury were stable, the level of
funding provided to CDP and the Treasury over the years
had in fact varied greatly.

the alternative financing tool

It was not clear whether,

4. GROUNDS FOR INITIATING THE PROCEDURE

(37)

initiated these proceedings,

In the decision that
in
September 2006, the Commission said that in order to
assess whether any advantage was being conferred on PI it
might in theory be important to consider the components
making up the positive margin enjoyed by PI as a result of
the difference between the loan rate and the deposit
rate (28). But the decision itself formally concluded that
in the present case any advantage could derive only
from the loan rate.

(25) The postal current account service is governed essentially by an Act
of 1917, published in GURI No 219 of 6.9.1917, amended by
Legislative Order No 822 of 22 November 1945, published in
GURI No 12 of 15.1.1946. Until 2003 that legislation provided
funds collected via postal current accounts were to be
that
deposited in an account with CDP bearing an interest rate equal
to the average annual yield received by CDP on the capital managed
by it, less 15 basis points. Under the Order of 5 December 2003
CDP has been succeeded in the relationships arising out of the
postal current account service by the Treasury. The deposit obli­
gation is laid down in Article 14 of the 1917 Act.

(26) Published in GURI No 299 of 27.12.2006.
(27) According to the Italian authorities, the funds collected in postal
accounts belonging to private customers account for around 70 %-
75 % of the total funds collected in postal accounts.

(28) See footnote 2.

(40)

In addition, given the specific position of PI, which was
obliged by law to deposit with the State the money
collected in its customers’ current accounts,
it was
possible that no standard of comparison would be
available on the market. Under such circumstances, the
Commission would have to establish the cost of operating
this account for PI (which should be possible with an
efficient
and add a
reasonable margin. This sum would indicate an ad hoc
‘market’ rate. Such an approach would also be justified if
the Commission were to consider that PI was acting
merely as a conduit
the State
to collect
through its widely spread post offices.

accountancy system)

analytical

funds

for

(41)

If it should prove that the 2006 Finance Act and the
Agreement had engendered State aid,
the Commission
was of the view that such aid was new, unlawful and
incompatible.

5. COMMENTS FROM INTERESTED PARTIES

(42)

In its letter of 27 December 2006, ABI’s main comments
are as follows.

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(43) ABI observes that the funds deposited with the Treasury
represent a debt which the Treasury honours in the year
following the deposit. As the Commission pointed out in
the decision initiating the procedure,
the liquidity risk
associated with the deposited funds is covered by the
Treasury, and not by PI. This means that if the funds
transferred were
comparison with the
preceding year, the Treasury would have to remunerate
Bancoposta at the rate fixed by the Agreement and return
to PI the difference between the amounts deposited.

to fall by

the new BancoPosta account was launched. Before 2001,
the retail postal current account could not be considered a
substitute for bank current accounts, because of the lack
of adequate associated services (such as debit and credit
cards), and was used mainly by public administration and
companies writing large numbers of
invoices (national
the increase in the funds
utilities). According to Italy,
since 2001 is
collected in postal current accounts
consistent with the fact
the product had been
launched recently.

that

(44) According to ABI, the funds collected in the Treasury
term. Moreover,

account have to be considered short
they are used to finance ordinary budget needs.

(45) Under the Ministerial Order of 5 December 2003, CDP
opened two current accounts with the Treasury bearing a
floating six-monthly interest rate equal
to the simple
arithmetic mean of the gross six-month interest rate on
the
ordinary Treasury bills (BOTs) and the value of
monthly Rendistato index (29).

(46)

In order to assess whether the remuneration given to PI
for the funds deposited with the Treasury constitutes State
aid, according to ABI, the interest rate paid to PI should
be compared to the interest rate on short-term ordinary
Treasury bills (12 months). In January 2005, the yield on
a 12-month ordinary Treasury bill was 2,21 %, which was
1,69 % lower than the remuneration given to PI.

6. COMMENTS FROM ITALY

(47)

In its letters of 31 October 2006, 29 December 2006,
16 February 2007, 30 March 2007, 2 April 2007, 1 June
2007, 27 November 2007, 29 February 2008, 7 March
2008, and 23 April 2008, Italy’s main comments are as
follows.

(48) The Finance Act and the Agreement specify that

the
interest payable to PI has to be set according to market
any
parameters. The
advantage on PI.

rate does not

interest

confer

(50) Before 2001,

the variations in the amounts of

funds
deposited – including the significant reduction in the
in particular between 1996
second half of the 1990s,
and 1997 – were influenced by Act No 662 of
23 December 1996, which imposed the closure of the
accounts that the Treasury had been using to pay State
pensions; this led to a reduction of some EUR 11 billion
in the deposits held on 1 January 1997. Between 1997
and 1999 several factors contributed to the decrease in
the amounts of funds deposited. The Italian authorities
argue that it is difficult to identify precisely the causes
these variations, owing partly to the nature of PI
of
(which at that time was a public commercial institution)
and to outside political factors. Since PI was converted
into public limited company form in 1998,
the net
amounts deposited have been growing regularly and
steadily.

6.2. Nature of the Agreement

(51) The Italian authorities argue that the Agreement between
the Treasury and PI regulates a long-term instrument in a
transparent fashion. The Agreement is not unlimited in
time, but is for a three-year duration, and allows either
party to revoke it
if market conditions no longer
guarantee consistency with the mechanism for calculating
the remuneration of the deposit. These clauses aim at
protecting both parties from the risk that, during the
or
three-year
changes in the characteristics of deposits might arise
and might affect the remuneration mechanism.

particular market

conditions

period,

6.1. Variation in the amounts deposited in postal
current accounts

(49) According to Italy, postal current accounts can be
compared with bank current accounts from 2001, when

(29) Since 1 October 1995 the Rendistato index has shown the average
gross yield on multiannual Treasury bonds
to
taxation and having a residual maturity of more than one year
(source: Banca d’Italia).

(BTPs) subject

the choice of the
(52) According to the Italian authorities,
in the Agreement
floating interest
rate provided for
In
meets the need for a rate in line with the market.
particular, the variable return is fair to both parties:
it
guarantees the Treasury that its financing costs will be

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in line with the cost of its own medium-to-long-term
is
debt, and it provides PI with a remuneration that
market oriented and consistent with the deposits
it
collects. The decision to align the mechanism on the
market was taken in adverse market conditions, when
the returns obtained under
the Agreement, 3,9 % in
2005 and 4,25 % in 2006, were lower than the fixed
rate of 4,35 % received by PI in previous years.

(53)

active

time horizon. This

Italy observes that since 2007 PI has begun actively
managing its own liquidity, very prudently, on the basis
of fixed interest rates guaranteeing it a definite return over
a predetermined
funds
from the passive management
management differs
provided for in the Agreement because it allows PI to
build a portfolio based on definite returns and to
allocate assets in line with the company’s objectives,
while taking on additional risks in the light of evaluated
and approved risk scenarios. Since PI has had the possi­
bility
funds management
arrangements, it has adopted financial strategies designed
to improve yields, and has obtained returns higher than
those offered by the Agreement.

implementing

active

of

6.3. Changes in the Obligation

(54) The Italian authorities have informed the Commission that
the Obligation requiring PI to deposit the money deriving
from its postal current accounts with the Treasury has
been terminated. The 2007 Finance Act amends the
scheme in the 2006 Finance Act and provides that the
funds collected by PI from private customers are to be
invested in euro area government bonds. The new
arrangements are to be completed by 31 December
2007.
Italy considers that this change takes the funds
raised by PI outside the rules on State aid, because the
remuneration received is not paid by the State.

(55) This change in the legislation is in response to the
Treasury’s demand that PI be given greater financial inde­
pendence, which has become necessary by reason of its
economic and financial results and the size it has reached.
The shift towards greater independence, which began in
1998, when PI was converted into a public limited
company, was marked by the launch of the BancoPosta
retail postal current account in 2001, and taken further in
2005 and 2006, when the fixed rate of interest on the
funds deposited with the Treasury was abandoned and
replaced by the market-oriented mechanism provided for
in the Agreement, and again in 2007, when the Obli­

gation was removed, at least in respect of funds from
private customers.

(56)

Italy points out that the gradual increase in PI’s financial
independence does not mean that the use of the funds is
no longer subject to restriction. Moreover, at the time of
the conclusion of
the Treasury was
the Agreement,
obliged to take account of the legal obligations on PI,
and could not anticipate possible legal changes, which
fell outside its competence.

6.4. Stability of the funds collected

(57)

the volatility of

the stable component

In order to demonstrate that
the funds collected are
substantially stable over time, Italy points out that the
standard deviation divided by the average of the deposit
balances, which is a measure of
the
deposit with the Treasury, diminished from 8 % in 2002
to 5 % in 2005; that the weight in average total deposits
in the deposits, which Italy
of
defines for any one year as the minimum amount of
deposits in that year, rose over the same period from
83,8 % to 89,5 %; and that the weight in average total
the
deposits of
difference
the
minimum deposits in the particular year, fell over the
same period from 16,2 % to 10,5 %.

the volatile component, defined as
and

between the

deposits

average

(58)

Italy has sent the Commission the conclusions of models
of two kinds: PI’s internal statistical models, and a model
elaborated by PI in collaboration with the consultant […],
which is aimed at identifying the prudential trend of funds
collected in postal current accounts.

(59)

In order to define mechanisms for the management of
interest risk, the banking supervision authorities them­
selves recommend the use of models aimed at quantifying
the prudential trends of the funds collected and the beha­
vioural lifetime of funds collected in current accounts (30).

(30) The prudential

trend of

the funds collected differs from their
expected trend: the prudential trend is based on a conservative
prediction (at a 99 % confidence level) of the minimum level of
deposits in the years to come, in the light of the historic pattern of
in- and outflows of deposits (the ‘value at risk’ or ‘VaR’ method), or,
alternatively, on the assumption that the existing funds will be
entirely withdrawn within a timespan of 10 years (the ‘linear
model’). The expected trend, on the other hand, is an estimate of
how the funds deposited will develop based on a variety of macro­
economic scenarios and normal commercial policies.

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averages, without

(60) The internal models are based on an analysis of the daily
deviation of the amounts of funds collected as compared
with the
referring to probability
scenarios, but simply analysing the historical trends in
the volume of current accounts. These models show
that the daily series for the deposit with the Treasury
has registered an upward trend since the launch of the
retail current account (which now accounts for 75 % of
the total funds collected in postal current accounts). The
minimum level in a year (i.e. the stable component in the
deposits) also displays an upward trend, and represents
90 % of average total deposits (from 85 % in 2002 to
the internal models confirm
92 % in 2006). Likewise,
in the deposits,
that
in
defined as the difference between the average level
concerned and the minimum or
the
stable
component
in that year, which in recent years has
accounted for only about 10 % of the balance.

there is a volatile component

year

(61) The […] model, which Italy considers to be very conser­
vative, shows that the ‘behavioural lifetime’ (durata compor­
tamentale) of the total number of postal current accounts
is different from the lifetime of a single postal current
account. Some customers may indeed decide to close
their account from one day to the next, but the effect
on the overall funds collected by PI is marginal, because
the number of customers’ current accounts is high, the
average deposit on these accounts
is low, and new
deposits arrive to replace the deposits withdrawn. The
type of prudential model developed by […] is used by
the active management of
several
liquidity,
lifetime
in order to determine the behavioural
of their current accounts, and then to reflect this beha­
vioural
lifetime in a corresponding investment portfolio
that takes account of their requirements in terms of asset-
liability management (ALM).

Italian banks

for

lifetime of

(62) This model has been used by PI in order to identify the
behavioural
the funds collected in postal
current accounts (retail customers (31) both in the period
2005-2006, when PI was obliged to deposit the funds
collected in postal current accounts with the Treasury
(passive fund management), and in the period from
1 January 2007, when PI began to invest
the funds
collected from private customers in euro area government
bonds (active fund management).

6.4.1. Passive fund management

(63) According to Italy,

lifetime of

in the specific context of passive
management of PI’s liquidity, the […] model defines the
criteria for identifying the behavioural
the
funds collected in postal current accounts. The model
seeks to quantify the lifetime of the stable and volatile
components of
the deposits identified by the internal
models, on the basis of an analysis of the historical vola­
tility of postal current accounts and on the probable
behaviour of the account holders. In one variant of the
model (namely the ‘value at risk’ or ‘VaR’ model, using a
10-year cut-off point), it indicates that approximately two
thirds (32) of the funds have a very long life (which is
considered to be the minimum level below which it is
very unlikely that the amount of deposits will drop in 10
years), and one third has a life varying from 0 to 10 years
(meaning that these deposits may have been withdrawn
within 10 years). With this deposit profile,
the corre­
investment portfolio will have an
sponding (mirroring)
average life (33) of 4,1 years and a Macauley duration (34)
of 3,2 years. In an alternative variant (the linear depre­
ciation model, using a 10-year cut-off point), the corre­
sponding investment portfolio will have an average life of
4,9 years and a Macauley duration of 3,8 years (35).

6.4.2. Active fund management

(64) According to Italy,

in the specific context of active
management of PI’s liquidity, the […] model helps PI to
determine the optimal asset allocation. On the basis of
very prudential hypotheses,
is
reasonable for PI to adopt an asset allocation with an
average life of four to five years.

indicates

that

it

it

(65)

From 2007 onward, even though the model identified an
almost unlimited lifetime for approximately two thirds of
the deposits and a 0-10-year lifetime for the remainder, PI
[…] years
decided to work with an average life of

(32) In the letter of 27 November 2007 the Italian authorities explain
that, according to the […] model, two thirds of the funds collected
in postal current accounts have an almost unlimited lifetime and
one third a lifetime varying from 0 to 10 years. In the same letter
they also say that the model has identified an almost unlimited
lifetime for 70 % of the funds collected and a lifetime varying
from 0 to 10 years for the remainder. Still referring to the […]
the note on the […] study submitted by Italy to the
model,
Commission in the letter of 29 February 2008 indicates that the
funds collected by PI that have an almost unlimited lifetime account
for […] of the total.

(33) ‘A period before the principal of a debt security (bond, debenture,

note) is scheduled to be repaid’ (source:
BusinessDictionary.com website:
com/definition/average-life.html).

http://www.businessdictionary.

(31) In 2006, deposits in postal current accounts owned by private
persons (i.e. excluding public administration) amounted to EUR
[…], of which EUR […] belonged to retail customers and EUR
[…] to undertakings.

(34) Or the weighted average of capital and interest.
(35) In the letters sent by the Italian authorities, the terms durata media
(average life) and durata (duration) are often used interchangeably,
although they can refer to different concepts. This has no impact on
the assessment made in this Decision.

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because of market conditions at the time (36). The spread
between five-year securities and 30-year securities is only
20 basis points (bp), and for this reason PI prefers to
invest in a portfolio having a shorter average life than
the one generated by the […] model: otherwise the
higher risk carried by 30-year bonds would not be remun­
erated. In its letter of 28 February 2008, […] adds that
the results of
to develop
investment strategies having a longer average life than
the one adopted so far (a maximum 10-year lifetime).

the model would allow PI

6.5. Costs of management of postal current accounts

(66) Regarding the description of the annual costs of collecting
and depositing funds stemming from the current accounts
as determined by PI’s
analytical
customers,
of PI
accounting system,
accounting
the
Italy states
system makes it possible to determine the total cost of
PI’s financial business, but not the costs for each single
product; Italy observes that the percentage margins earned
by PI/Bancoposta are smaller than those earned in the
banking sector.

that

6.6. The conformity with market criteria of the
remuneration given to PI by the Treasury

(67) The loan rate, which is essentially a long-term rate, is in
line with the market, because the funds collected are by
their nature long term. This is for the following reasons:

the funds deposited with the Treasury
average of
increased by 40 % over the period 2002-2005; the
part of
these funds having a seasonal nature is
about 10 %),

— Italy considers that the Obligation penalises PI in its
asset allocation, because it prevents PI from managing
the funds in an active and potentially more advan­
tageous fashion. In the absence of the Obligation, PI
could have allocated its assets
in line with the
prudential characteristics and role of the company,
by investing 10 % of
liquidity in short-term
its
bonds and 90 % in long-term bonds. The Obligation
gives the Treasury a source of financing with charac­
teristics similar to those of a long-term investment,

— in addition to the letters from […] and […], which
reached the Commission in April 2006, before the
initiating decision, three private banks have written
the remuneration mechanism does
to confirm that
not confer any advantage on PI (see recital 73).

— the Obligation is unlimited in time; Italy points out
that PI has no (possibly more rewarding) outlet for the
use of the money collected from its customers’ current
accounts other than the account with the Treasury,

(68) On the question whether PI’s remuneration is in line with
the
market criteria,
conformity of
(see
above); a comparison with the situation of La Banque
Postale in France; the opinion of the PI’s auditors; and
the reference to market rates.

Italy highlights four main issues:
rates
the loan rate with market

— Italy considers that the increase over time of the funds
collected in postal current accounts confirms the
(the
stability of

the resources for the Treasury (37)

(36) Letter from the Italian authorities of 27 November 2007, ref.

A/39763.

(37) Before 11 December 2003, and the conversion of CDP into the
private limited company CDP SpA, part of the money collected in
postal current accounts was paid to CDP. For reasons that were
primarily a matter of accounting, according to the Italian auth­
orities, part of the funds collected went into an account with the
Treasury (known as the ‘free’ account), while the remainder went
into three other accounts earmarked by CDP for loans to local
government. These three accounts were used for
the loans
service; the part of the funds collected that was not used for the
granting of loans but which remained at CDP’s disposal also went
into the account with the Treasury. Since 11 December 2003 all
the money in the earmarked accounts has been transferred to the
Treasury, and added to the current account already in existence.

6.6.1. Comparison with La Banque Postale

(69) According to Italy, a comparison with the situation of La
Banque Postale in France shows that La Banque Postale
follows an asset-liability management or ALM strategy
that uses a statistical model of a kind similar to that
used by PI. The model
identifies the stable and volatile
components in the funds collected in postal current
is invested in OECD
accounts. The stable component
government bonds,
in
short-term instruments.

and the volatile

component

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(70) On the basis of this ALM strategy, La Banque Postale
achieved a yield of 4,4 % in 2005, as compared with a
return under the Agreement of 3,9 %. In Italy’s view La
Banque Postale provides a practical example that shows
that returns higher than those of the PI mechanism can be
achieved by prudential management and by applying an
average life of five years.

(71) A study conducted by […], entitled […] (hereinafter ‘the
[…] study’ or ‘the study’), puts forward similar arguments
for the comparability of the two enterprises. It says that in
2001 La Banque Postale
fund
management strategy similar to PI’s,
investing the 90 %
stable component of its deposits in OECD government
spread over a 10-year period, and produced
bonds
the Treasury mechanism.
yields
exceeding those of
Using the same prudential
investment constraints as PI,
La Banque Postale achieved an average yield of about
4,45 % in the period 2004-2005.

launched an active

6.6.2. Auditors’ opinion

(72) PI’s auditors agree that on the basis of their volatility and
the funds collected in postal current

growth rates,
accounts are of a stable nature.

6.6.3. Letters from private banks and consultants

(73)

Italy has provided the Commission with letters sent by
private banks and consultants stating that
the returns
achieved by PI on the funds collected in current postal
accounts and deposited with the Treasury are similar to
market returns that PI could have achieved by implemen­
ting an appropriate investment and risk management
strategy.

[…]

compares

in terms of maturities and credit profile. As an
example,
achieved
according to the methodology of
the Agreement
with the yield returned by the class I portfolio of
Poste Vita SpA (which is controlled by PI), managed
by […].

the outcome

— Letter from […], 2 October 2006: on the basis of the
data provided by PI (38), […] takes the view that it is
perfectly reasonable for PI to link 10 % of the funds to
short-term parameters and 90 % to long-term para­
meters. If PI was not required by law to deposit the
funds with the Treasury, the short-term interest rate it
would have to pay on the market in order to receive
the remuneration provided by the Treasury (in a
constant maturity swap) would be the six-month
Euribor rate plus a spread of 0,43 % (39); […] is of
the view that this is a yield perfectly consistent with
what
achieved by the management of
government or high-grade corporate fixed-rate securit­
ies. […] concludes, therefore, that the yield obtained
by PI under the Finance Act and the Agreement would
be achievable in financial markets with a comparable
risk profile.

can be

— Letter from […], 4 October 2006: […] believes that
by diversifying its investments, though preserving a
portfolio
possibly
corporate securities with a rating of AA- or higher
(no more than 20 %), PI could achieve annualised
returns in line with the remuneration obtained in
2005 and 2006 on the basis of the rates in the basket.

sovereign

securities

and

of

— Letter from […], 4 October 2006: […] states that in
the absence of
the constraint on use, PI could
implement an appropriate ALM strategy aimed at
minimising market and liquidity risk. PI’s asset allo­
cation strategy should take into account the projected
duration profiles of
the deposits on the basis of
historical series and reasonable assumptions in order
to establish the most appropriate investment strategy

— Letter from […], 20 January 2006: The bank takes the
view that in 2005, on the funds from postal current
accounts, PI could have obtained a return of 4 %,
which is in line with the result achieved on Poste
Vita class I funds of EUR 6 billion. This 4 % result
is comparable to the 3,9 % paid to PI under the
Agreement.

(38) According to which at least 90 % of the deposit with the Treasury
can be considered stable, while the remainder, although not usually
subject
should on the basis of prudential
to withdrawal,
assumptions be considered volatile.

(39) The Italian authorities indicate that the spread to be applied to the
six-month Euribor rate is about 1 % at the end of 2005, 0,4 % at
the end of 2006 and 0,3 % at the end of October 2007.

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— Letter from […], 13 January 2006: […] is of

confirms

the
opinion that
the funds collected in postal current
accounts can be considered permanent, because the
Obligation is unlimited in time and because the
the
upward trend in average deposits
if the
stability of these resources for the Treasury;
Treasury were to replace this particular
technical
form of collection, it would issue long-term debt sec­
seems
urities; given the cost of
the
reasonable that
funds collected in PI’s current accounts should be
calculated on the basis of the return on long-term
government bonds. […] compares the returns under
the Agreement with the returns from the financial
business of Poste Vita SpA. Over the period 2002-
2005, the return on the activities of Poste Vita is
not significantly different from the return determined
by the Agreement mechanism.

remuneration of

the rate of

replacement,

it

class I life assurance policies are products that can be
considered comparable to postal current accounts, and
that the average return from the management of these
products (e.g. Posta Più) was 4,68 % over the period
2002-2006, which is in line with the average rate under
the agreement of 4,55 %.

in

reality

(75) The Italian authorities argue that postal current accounts
and life assurance policies are comparable products from
the point of view of financial management because postal
accounts, though formally they are short-term products,
to medium-term financial
are
instruments with guaranteed capital and minimum rate
of interest. Life assurance policies are in substance capi­
talisation products, which also have a guaranteed capital
to long-term
and minimum interest rate, a medium-
maturity (usually 10 years),
and the possibility of
redemption at any time without penalty.

similar

6.6.4. Comparison with the returns achieved on Poste Vita

products

(74) The Italian authorities consider that

the remuneration
obtained by PI on the funds deposited with the Treasury
is in line with the remuneration obtained on the funds
invested by Poste Vita. In particular, they contend that

(76) The comparison between the remuneration paid to PI
over
remuneration
obtained by Posta Più over the same period is shown in
Table 2.

the period 2002-2006 and the

Table 2

Year

Posta Più portfolio
return (gross)

Agreement rate

Difference

Average financial life

2002

2003

2004

2005

2006

Average

6,38 %

5,11 %

4,13 %

4,00 %

3,77 %

4,68 %

5,25 %

4,69 %

4,64 %

3,90 %

4,25 %

4,55 %

1,13 %

0,42 %

– 0,51 %

0,10 %

– 0,48 %

0,13 %

3,78

2,66

2,53

3,62

3,15

3,148

6.6.5. Comparison with the Treasury’s cost of funding

(77) The Italian authorities argue that indexing the return on the deposit with the Treasury to parameters
linked to the Italian public debt is the only mechanism which would not penalise the Treasury and
which is consistent with Treasury’s character as an issuer, taking account of the Obligation to deposit
the funds with the Treasury.

(78) Moreover, the Agreement gives PI a remuneration linked to long-term rates, which is in line with the
nature of the funds collected. The Agreement also protects the Treasury against adverse market
conditions, which could make the cost of this form of debt diverge from its own traditional cost
of funding.

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(79) The Italian authorities compare the rate provided for in the Agreement with the cost of funding

calculated on the following basis:

— the funds are raised through the issue of multiannual Treasury bonds at 5, 10, 15 and 30 years,

— the period under consideration is 2001-2006,

— the weighted average of the issues referred to is calculated taking into account the weight and the

cost of all the outstanding issues in the period.

Table 3

Year

5 years

10 years

15 years

30 years

Agreement rate

Average

2001

2002

2003

2004

2005

2006

4,59 %

4,58 %

4,15 %

3,95 %

3,68 %

3,47 %

5,13 %

5,09 %

4,81 %

4,66 %

4,43 %

4,35 %

5,46 %

4,96 %

4,85 %

4,64 %

4,54 %

5,80 %

5,73 %

5,44 %

5,35 %

5,19 %

5,06 %

5,25 %

4,69 %

4,64 %

3,90 %

4,25 %

5,04 %

5,03 %

4,71 %

4,56 %

4,31 %

4,21 %

(80) On the basis of the results Italy concludes that in the five years under consideration the cost of the
Treasury’s medium- and long-term debt was in line with the return obtained under the Agreement.

(81) Moreover, (i) the rate of the remuneration is indexed to parameters linked to Italy’s public debt
(government securities), which are the most appropriate reference for the Treasury’s debts; (ii) the
stability of the funding, verified by statistical models, and the Obligation imposed on PI make the
duration of the investment for the most part permanent (without considering the specific precautions,
such as the possibility of early withdrawal or the three-year term of the relationship, that protect the
Treasury from unforeseen changes in the market); and (iii) the liquidity risk assumed by the Treasury is
limited, given the proven stability of the postal funds, and is reflected in the linking of 10 % of such
funding to a short-term parameter.

(82) Regarding the long-term element of the loan rate (90 %, comprising 10 % linked to the yield on 10-
year government securities and 80 % linked to the yield on 30-year government securities), Italy
considers that the Obligation on PI, which is a ‘parametric investment’ (investimento di tipo parametrico)
remunerated at a loan rate defined by reference to a weighted average of the yield on government
securities, is different from the obligation introduced in the 2007 Finance Act to invest directly in
government securities freely selected and freely managed, which are ‘direct investments’ (investimenti
diretti). In particular, the ‘parametric investment’ provided for in the Agreement earns a return that is
variable and not manageable, and thus passively exposed to the fluctuation of the market. The
‘parametric investment’
is more rigid than direct investment in the event of market movements,
and is tied for a maximum of 12 months (since the Agreement can be revoked by either party,
subject to six months’ notice), and its remuneration incorporates an ad hoc premium to compensate
for the constraints on the investment itself. The premium, which Italy assesses at 0,25-0,50 percentage
points, is in line with the average yield difference between 30-year multiannual Treasury bonds and
10-year multiannual Treasury bonds at historical lows (0,20-0,40 percentage points).

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(83) The premium can be considered an ex post remuneration
which compensates PI for the Obligation and the impos­
sibility of managing its funds actively, and is a reasonable
payment on the part of the Treasury, which is acting like
a private borrower, taking into consideration the clauses
in the Agreement protecting the Treasury against adverse
market conditions (the possibility of
the
three-year lifetime of the Agreement, and the fortnightly
updating of the parameters).

termination,

— The deposit

at

the Treasury

cannot be
considered a short-term risk-free asset,
in
view of PI’s permanent obligation to keep its
money with the Treasury. The yield on the
long-term obligation by
deposit reflects that
paying for the implicit long-term risk of the
Italian Republic, which is estimated in an
extra return of 0,30 % (equal to the market
spread paid by long-term government bonds
over money market rates).

6.7. Comparison with alternative investment stra­
tegies (active management of funds)

(84) The Italian authorities have sent the Commission the […]
the remuneration
in the Agreement does not confer any

study in order to demonstrate that
provided for
advantage on PI.

— PI is prevented from engaging in active fund
management
quantitative
strategies
analysis conducted by […] is aimed at estab­
lishing the burdens this imposes).

(the

(85) The […] study examines the following aspects.

(ii) A comparison of PI’s interest margin with the interest

margin of comparable private-sector banks:

(i) The reasons why the remuneration paid by the

Treasury to PI on the deposit is a fair one:

— The investigation conducted by […] into the PI
deposit base, which the […] study takes as given,
reaches the conclusion that, after deduction of a
component that is theoretically more volatile, the
expected duration of the deposits is extremely long
and virtually infinite. Similar approaches are ordi­
narily taken in the banking system.

— The features of

the deposit base in terms of

duration are transferred to the Treasury by law.

— The indexation of the payments by the Treasury
reflect that approach, with 10 % being based on
12-month ordinary Treasury bills
(the most
volatile component), 10 % on 10-year multiannual
Treasury bonds (the component which on more
conservative assumptions might potentially fall
over time), and n 80 % on 30-year multiannual
Treasury bonds.

— The relationship is based on a long-term Obli­

gation on PI and the Treasury.

— The constraints on PI as depositor incorporate

implicit costs and burdens:

— The cost to PI of collecting deposits from retail
retail
the

in line with the cost of
as
private-sector

customers
deposits
Commission has acknowledged.

banks,

is
to

— In fact the interest margin achieved by private-
sector banks on the component deriving from
deposits with their own networks is significantly
higher that PI’s (4,7 % in 2006, as opposed to
3,75 % for PI, and 4,6 % in 2005, as opposed to
3 %). In […]’s view these figures are proof that
there is no State aid to PI.

(iii) A comparison of PI’s tenor mismatch with those of its

private-sector peers:

— According to the […] model, PI’s deposit base has
a ‘virtually infinite’ behavioural
lifetime, which it
prudentially estimates at least 60,8 % of the total
(by the VaR method with a 10-year cut-off point).
Under the Agreement, PI uses the proceeds of its
deposit base to fund a long-term instrument, the
deposit with the Treasury. To ascertain the
behaviour of private-sector banks, an analysis
was
accounts of banks
the
specialised in funding the public sector, such as
Dexia and Depfa, which were found to behave in
the same way. These banks collect about 50 % of

carried out of

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the

rest

financing

transactions with

to long-term
their requirements on a medium-
term from
basis,
short
repurchase
European
Central Bank and deposits from financial interme­
diaries, and invest their funding in loans to public
authorities, usually with maturities of from 10 to
50 years.

the

(iv) A quantitative analysis aimed at proving the benefit of

active asset management:

euro area

— Starting in March 2007, PI invested in a portfolio
government bonds, which it
of
completed in December 2007, upon receipt of
the residual portion of
from the
Treasury.

the deposit

the

company, were

— Investment decisions made by PI, as well as taking
account of the legal constraints and target yields
also based on the
for
conditions and opportunities the market offered.
At
the beginning of 2008 the portfolio incor­
porated significant capital gains. The deposit held
with the Treasury produced only current market
yields, without any possibility of capital gains or
losses, being tied to floating rates.

— In order to carry out a comparison that might
confirm the superior profitability of active fund
management over the yield under the Agreement,
the data considered must relate to a longer period,
having regard to the volatility of capital gains or
losses. Leaving aside the higher overall yield
currently achieved by PI’s portfolio,
the quanti­
tative analysis is aimed at proving that skilful
fund management
produce
can
higher returns over the longer term.

consistently

— The analysis is made up of two components, one
looking at past performance (first
two items
below) and the second at the future (third item
below):

— […] retrospectively adopts two strategies for
the management of the funds on PI’s deposit
portfolio, one involving a duration similar to
that of the portfolio of the […] study carried
out by the VaR method (the ‘benchmark

the

last 10 years under

portfolio’) and the other using the criteria and
investment constraints currently adopted by PI
(the ‘tactical strategy’) (40), based on automatic
quantitative models (41). The return obtained
tactical
for
strategy has been higher
than the return
under the Agreement in the same period by
annum (though
approximately 1,62 % per
transaction costs).
this takes no account of
the two-year
the return obtained over
But
period 2005-2006, at 2,45 %,
is lower than
the return under the Agreement, which was
4,14 %.

the

— The case of La Banque Postale is referred to

(see recital 69 above).

— Lastly,

certain

identified

in the near

has
solutions which

[…]
fund
management
PI might
aimed at
implement
obtaining returns higher than those offered
by passive investment in government bonds,
but without adding significant
incremental
risks. The study provides a detailed description
of these strategies. Briefly, they are:

future,

— […],

— […],

— […],

— […].

In order to compare the performance of a fully indexed
portfolio (the deposit with the Treasury) and a portfolio in
which the funds are actively managed (first item above)
Italy says that a significant timespan has to be considered
– 10 years – including at least a full economic cycle. This
is why the […] study compares the return provided for in
the agreement with the returns deriving from alternative
strategies over a period of 10 years rather than a shorter
one. Shorter periods of analysis may take only certain
phases of the economic cycle into consideration. When
interest rates rise,
fixed-rate portfolios tend to under­
perform as compared to floating-rate portfolios; when
interest rates are falling the situation is reversed. During

(40) Both strategies are described in more detail in recital 208(ii).
(41) The model
is automatic in the sense that

investments are im­
the market parameters

plemented automatically in the light of
and expected developments.

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rates
the period from 2005 to mid-2007 interest
increased, and alternative investment strategies based on
fixed interest rates,
led to
capital
losses and generated a return lower than that
provided for in the Agreement.

like the ones used by […],

Over a 10-year period, according to the Italian authorities,
investment portfolios based on floating rates can be
compared to investment portfolios based on fixed rates,
tend to offset one
because capital gains and losses
another. Over a 10-year period, returns on fixed-rate port­
folios are substantially in line with returns on floating-rate
portfolios. Active fund management clearly produces a
better return than the passive (parametric) management
provided for in the Agreement (for example, the yield
on the benchmark proposed by […], which has an
average life of
is in line with the return
under the Agreement, which has an average life that is
much longer).

five years,

the Italian authorities contend that

Furthermore,
the
Commission should distinguish between risk in the
short term and risk in the longer term. The value of
fixed-rate securities with a maturity of 10 years can
vary a great deal in the short term, but over the entire
10-year period fixed-rate bonds give a rate of return that
being fixed is very reliable. All
in all, over a 10-year
period returns on fixed-rate portfolios tend to be in line
with the returns on floating-rate portfolios, though the
floating-rate portfolios are more risky, because they are
subject to annual variations in interest rates.

True alternative investment management which maintains
a measure of flexibility and makes use of all the financial
instruments available on the market increases the possi­
bility of obtaining results superior to those of a static
portfolio such as the one provided for in the Agreement.

[…]

When the Agreement was concluded with the Treasury,
Italy points out, the future trend in interest rates and the
duration of the agreement were not known. The option
for
rational,
according to Italy, because it was fair and reasonable for
both parties, PI and the Treasury.

variable parameters was

economically

to the lifetime of

Italy
As regards the trade-off between risk and return,
considers that the postal current account deposit with
the Treasury inevitably has a risk-return ratio less
favourable than government bonds with a fixed rate and
a lifetime of 1 to 10 years. According to Italy, securities
with floating rates always have a volatility in terms of
fixed-rate securities,
price that
than that of
is lower
which is directly proportional
the
security. However, the concept of price volatility must
not be confused with the concept of the volatility of
returns: from a point of return, the Agreement may be
riskier than a fixed interest-rate portfolio in terms of its
impact on PI’s interest margin (if interest rates are falling,
floating-rate portfolios are riskier than fixed-rate port­
folios, because they are not protected against repricing
reduce PI’s margin). A floating-rate
risks, and thus
instrument, therefore, has low price volatility and high
return volatility. Moreover, the techniques used by PI to
monitor the risks of managing postal current accounts,
which are based on Basel II principles, assess the impact
of interest rate variations on expected cash flows. This
analysis, carried out over a 12-year period, shows that
the highest risk derives from bonds expiring within the
next 12 months (because they bear refinancing risk) and
from some floating-rate bonds, and not from long-term
fixed-rate bonds. Active management would allow PI to
pursue a policy of yield enhancement consistent with the
current market scenario and to modify its portfolio in the
light of its return maximisation strategies.

According to the Italian authorities, the Agreement was
based on floating rates because of the need to protect the
interests of both sides: PI wanted a fair remuneration in
line with the market, and the Treasury wanted the cost of
financing to be in line with the cost of its own medium-
to long-term debt.

Italy contends that
if PI were to build a portfolio of
infinite duration, it would consist of 60 % 30-year euro
government securities and 50-year OAT bonds, and 40 %
multiannual Treasury bonds with durations of 0-10 years.
This highly theoretical and unlikely portfolio would have
produced a return of 3,6 % in 2005, 3,65 % in 2006 and
3,7 % in 2007. Its return volatility would be very low, but
because of its very long lifetime its risk exposure would
be substantial.

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credit

(86) The […] study also indicates that the Obligation generates
for PI by limiting the
opportunity costs and risks
spectrum of
its investment options. The deposit with
the Treasury was linked exclusively to the credit risk of
the Italian Republic, preventing PI from seeking diversified
investment opportunities in the euro government bond
the
market. The
compounded by
risk was
liquidity risk, owing to the long-term nature of
the
deposit and the absence of early redemption rights. The
opportunity costs associated with the impossibility of
investing in a diversified portfolio of assets on the basis
of credit risks are currently estimated to be in the region
of 1 %-1,50 % per year, if AA European financial names
in the bond market are considered, and in the region of
0,60 %-1 % per year, if AA European corporate names in
the bond market are considered. The limitation on active
management of a portfolio is difficult to evaluate: the
example of La Poste, and active management of
the
trading system type investing in euro government securit­
ies, show that returns can be obtained that are higher
than the return on the deposit with the Treasury.

(87) The Italian authorities justify the comparison between the
Agreement mechanism (based on floating interest rates)
and the automatic quantitative models used by […] aimed
at proving the benefit of active management (based on
fixed interest rates) by saying that the usual practice of
market operators trading in bonds, and of PI since 2007,
calls for investment in fixed-interest securities. They add
that the comparison has to be made not between securit­
ies with floating rates and securities with fixed rates, but
rather
passive
management of funds.

active management

between

and

(88)

the view that

Italy takes
Finally,
mechanism provided for
applies
component of
accounts, makes a proper estimate of the real
risk borne by the Treasury.

the remuneration
in the Agreement, which
volatile
the funds collected in postal current
liquidity

short-term interest

rates

the

to

on 12-month ordinary Treasury bills was 2,21 %,
1,69 % below the rate determined by the Agreement.
The partiality of ABI’s analysis is confirmed, according
to Italy, by the fact that in February 2007 the yield on
a 12-month ordinary Treasury bill was around 3,9 %, and
the difference between that and the average of
the
Agreement basket, which was about 4,5 % at that time,
was -0,60 %, almost one third of the difference indicated
by ABI.

(91) As regards the comparison made by ABI with the re­
muneration obtained by CDP on its funds deposited
with the State (a floating six-month rate equal to the
simple arithmetic mean of
the yield on six-month
ordinary Treasury bills and the monthly Rendistato
index), Italy contends that CDP cannot be compared to
structure,
PI, being a different company in term of
business,
and
the monthly
investment
Rendistato index represents a medium-
to long-term
rate, ABI contradicts itself when it argues that PI’s funds
deposited with the Treasury should be remunerated
according to short-term parameters.

operations,
Secondly,

objectives,
policies.

organisation

since

(92)

Italy also observes that
the funds collected in postal
current accounts are unique in the market, and that it is
difficult to identify any single substitute. But the stability
of the funds collected allows them to be to be deemed
equivalent
for
collecting funds, and renders the comparison with short-
term 12-month bills irrelevant.

in practice to a longer-term instrument

7. ASSESSMENT OF THE MEASURES

(93) The measure to be assessed is the scheme established by
the 2006 Finance Act and the Agreement defining the
loan rate paid by the Treasury for the deposits made by
PI.

Criticisms of ABI’s comments

(89) According to Italy, the rate on postal current accounts
cannot be indexed to short-term parameters (such as the
yield on 12-month ordinary Treasury bills) because of the
stability of the funds collected.

(94)

In order to ascertain whether a measure constitutes State
aid within the meaning of Article 87(1), the Commission
has to assess whether the scheme:

— is granted by the State or through State resources,

(90) Taking 2005 as the reference year, as ABI did, leads to a
misleading analysis, because 2005 was the year when
short-term interest rates were at their lowest: the yield

— confers an economic advantage,

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— is capable of distorting competition by favouring
the production of certain

certain undertakings or
goods,

7.3. Effect on trade between Member States and
distortion of competition

(102) Article 87(1) prohibits aid which affects trade between
Member States and which distorts or threatens to distort
competition.

— affects trade between Member States.

7.1. Use of State resources

(95)

In order to constitute State aid, advantages must be
ascribable to the State and be granted directly or indirectly
through State resources.

(96) The remuneration is paid by the Ministry of Economic
and

specific Acts,

orders

Affairs/Treasury,
agreements applicable to PI.

under

(97) The two cumulative conditions referred to above are
is paid out of

therefore met. The interest paid to PI
State resources.

7.2. Selectivity

(98) Article 87(1) prohibits aid which ‘favours certain under­
takings or the production of certain goods’, that is to say
selective aid.

(99) Not all undertakings can maintain a remunerated current
account with the Treasury, though in theory, considering
the nature and economy of the system, they might benefit
from such an arrangement.
Italy has not
demonstrated that the very limited number of operators
benefiting from such accounts is justified by the nature
and economy of the system.

In any case,

(100) Moreover, the 2006 Finance Act and the Agreement apply

to PI only.

(101) Consequently, the loan rates paid to PI are selective.

(103) In its

of

two

those

conditions,

to establish that

the
assessment
Commission is required, not
the aid
has a real effect on trade between Member States and
that competition is actually being distorted, but only to
examine whether that aid is liable to affect such trade and
distort competition (42). When aid granted by a Member
State
an undertaking
the position of
compared with other undertakings competing in intra-
Community trade, those undertaking must be regarded
as affected by that aid.

strengthens

(104) It

is not necessary that PI

itself be engaged in intra-
Community trade. Aid granted by a Member State to an
undertaking may help to maintain or increase domestic
activity, with the result that undertakings established in
other Member States have less chance of penetrating the
market of the Member State concerned. Furthermore, the
strengthening of an undertaking which, until then, was
not involved in intra-Community trade may place that
undertaking in a position which enables it to penetrate
the market of another Member State.

(105) As described in detail in Section 2 of this Decision, ‘The
business of PI and Bancoposta – the relevant markets’,
there was some competition in the postal sector in Italy
even before
liberalisation promoted by
Community legislation.

the gradual

(106) It is acknowledged that the main challenge to EU public
postal operators has been increasing competitive pressure
in all market segments – letter post, parcels and express
services. While the parcel and express markets have been
open for competition for decades,
in the letter post
segment legal monopolies have strongly impeded devel­
In the perception of national
opment of competition.
regulatory authorities and public postal operators, compe­
segments has been
tition in the parcel and express
substantial at national as well as at international
levels
while in the letter post segment competition is still
emerging (43).

(42) See for example the judgment of the Court of

Justice in Case
C-372/97 Italy v Commission [2004] ECR I-3679, paragraph 44.
for

the Regulatory Model

(43) Study by wik-Consult, The Evolution of
European Postal Services, July 2005.

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(107) In particular,

express mail

services, parcel

services
dedicated to business customers and logistical services
have been developed in Italy by private undertakings,
some of which,
like TNT and DHL, are based in other
Member States. A report published in 2004 by the
Commission (44) highlights the fact
that several postal
operators (Royal Mail of the UK, TPG of the Netherlands,
Deutsche Post of Germany and La Poste of France) have
acquired postal service businesses located in Italy.

(111) For the same reason, the Commission is of the view that
for undertakings
the measure makes it more difficult
to penetrate the
established in other Member States
Italian market. Banks
from different Member States
operate in Italy, either directly through branches or rep­
resentative offices, or indirectly by controlling Italian-
based banks and financial
institutions. Recent cross-
border capital transactions involving Italian banks such
as Antonveneta and BNL exemplify the situation. Both
types of market penetration are hampered by the
strengthened market position of PI.

(108) As regards financial services, the Commission would point
out that the banking sector has been open to competition
for many years. Progressive liberalisation has enhanced the
competition that had already been launched by the free
movement of capital provided for in the EC Treaty.

(112) To conclude, there is trade between Member States in the
postal and financial
sectors. The loan rate
strengthens the position of PI in relation to postal under­
takings and banks competing in intra-Community trade.
The measure is consequently liable to affect such trade
and to distort competition.

services

(109) Moreover, as already explained in a previous State aid case
relating to PI, which was formerly Ente Poste Italiane (45),
PI competes with banks and financial operators offering
products which can to a large extent be substituted for
PI’s products. Most importantly, postal current accounts
are in competition with bank current accounts in places
where both banks and PI have outlets. In the last few
years, too, PI has significantly broadened the range of
the payment services it offers its customers, adding to
the
current
account deposit receipts and postal orders, a range of
instruments that were formerly the province of banks
(debit and credit cards, credit transfers, or standing debit
orders for utility bills). In some cases (debit cards and
the service is provided by PI
standing debit orders)
third
the products of
itself;
parties (banks, in the case of credit cards). These develop­
ments have increased the substitutability of the financial
services offered by PI with those offered by banks.

in others PI distributes

traditional postal

instruments,

such as

(110) Banks and other players in the financial market in Italy
are likely to be adversely affected by the aid. In particular,
to the extent that the remuneration by the Treasury of the
sums deposited by PI
relevant market
benchmark, PI will have an incentive to expand its
deposit collection business beyond the level
it
would have chosen if it obtained only the remuneration
that is normal in the market. The market opportunities
for banks will be diminished correspondingly.

exceeds

that

the

7.4. Economic advantage

(113) To constitute State aid, a measure must favour the under­

takings concerned.

7.4.1. Context of the analysis

(114) It has already been said that the loan rates payable under
the 2006 Finance Act and the Agreement will confer an
economic advantage if they are higher than the rate that a
private borrower operating under market conditions
would be prepared to pay to PI for the funds deposited,
in the light of their nature and volume.

(115) The Commission’s assessment of the measure will analyse
whether the Agreement establishes a remuneration similar
to what a private borrower in a market economy would
have offered for the funds deposited, taking account in
particular of the Obligation and the associated financial
risks (Section 7.4.2). An adequate remuneration should
reflect both the expected return and the risk, and not
merely the performance in terms of return determined
ex post.

(44) Study by wik-Consult, Main Developments in the European Postal
Sector, July 2004. See in particular Table 5.1.6 ‘Geographical distri­
bution and business focus of companies acquired by the “Big four”
(1998 and before until June 2004)’.

(45) Decision of 12 March 2002 (OJ C 282, 19.10.2002, p. 29).

(116) Furthermore, because of

the Obligation,

Italy has
repeatedly maintained that PI has been put at a disad­
vantage, as it would have obtained higher yields in the
absence of the Obligation. The Commission will analyse
whether Italy’s argument is well founded (Section 7.4.3).

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(117) The assessment by the Commission involves a complex economic appraisal. Where the Commission

adopts a measure involving such an appraisal, it enjoys a wide discretion (46).

(118) Finally, the Agreement, which entered into force on 4 April 2006, was concluded on 23 February
2006 (47). The analysis conducted by the Commission has to be made on the basis of the information
available to the parties to the Agreement up to February 2006.

7.4.2. The test of the prudent borrower operating in a market economy

(119) In defining the loan rate, a prudent borrower operating in a market economy (hereinafter a ‘private

borrower’) would essentially have considered the following factors:

— the gross volume of the funds deposited,

— the stable and volatile components in the deposits,

— the average life and variations of the deposits,

— the financial risks borne.

(120) These aspects are interrelated, and jointly determine the rate a private borrower would be willing to
pay in a risk-return perspective. The present decision will discuss them one by one. It will then be
possible to draw a conclusion regarding the structure and amount of the associated rates of interest,
so that the difference between the rates established by the Agreement and the private borrower’s rates
can be quantified.

7.4.2.1. G r o s s v o l u m e o f

t h e f u n d s d e p o s i t e d

(121) Before 2004, funds collected in postal current accounts were deposited not only with the Treasury but
also with CDP (48). The following table shows the average volume of postal current accounts and the
annual average deposit with the Treasury:

Table 4

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(EUR billion)

Postal current
accounts

Deposit to Treasury

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(122) The large increase in the deposit with the Treasury from 2002 onward is linked to the creation of the
BancoPosta account. Before the launch of the BancoPosta account, the postal current account was not
an adequate retail
instrument, because of the lack of associated services (such as credit and debit
cards);
it was used mainly by the public administration and companies writing large numbers of
invoices (national utilities).

(46) Judgment of
paragraph 97.

the Court of First

Instance in Case T-198/01 Technische Glaswerke Ilmenau [2004] ECR II-2717,

(47) It applies retrospectively from 2005.
(48) Private borrowers would consider only the money they could use.

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(123) The Italian authorities state that postal current accounts provide the Treasury with a stable and reliable
source of funds which gives it an alternative to the market. In addition, Italy argues that in 2005-
2006, when the Agreement was prepared and signed, the deposits in postal current accounts were
expected to grow.

(124) In this context, EUR 35 billion from a single lender is a considerable loan. The Commission notes,
however, that the Italian Treasury issued securities with both short and long maturities for a value of
around EUR 400 billion annually over the period 2001-2005 (49), and that the issues were over­
subscribed. Thus there was no shortage of funds on the market in that period.

(125) Furthermore, the Commission would observe that growth in deposits in postal current accounts does
not necessarily mean an increase in the deposit with the Treasury, because the Obligation might, at
least theoretically, be modified (see below).

7.4.2.2. S t a b l e a n d v o l a t i l e c o m p o n e n t s i n t h e d e p o s i t s

(126) Normally, the remuneration that a private borrower would be willing to pay is a function of the
lifetime of the funds provided. Funds that are committed for a long term are typically remunerated at
a higher rate than funds that are committed only for a short period. In the case of the Agreement,
none of the money is really committed: if the level of deposits collected by PI goes down, the amount
of funds allocated to the Treasury goes down correspondingly. However, the historical level of funds
and the development of funds over time show that a distinction can be made between a stable
component of the deposits and a volatile component.

(127) As the Treasury here obtains access to a source of funding that is relatively stable, the Italian
authorities hold that it is appropriate to base the remuneration on a benchmark that partially
reflects the funds’
long-term nature. The Commission shares the view that a private borrower
would link the remuneration of the bulk of the funding, which is stable, to medium or long-term
parameters, and the remuneration of the remainder, which is volatile, to short-term ones.

(128) As noted above, Italy has taken the stable component of total deposits in postal current accounts to
be equal to the minimum level of the annual total deposits in postal current accounts. The difference
between this minimum level of the annual total deposits and the annual average total deposits in
postal current accounts constitutes the volatile component of the annual total deposits in postal
current accounts.

(129) It has been confirmed by Italy, and verified by the Commission, that other financial institutions make
a distinction between ‘stable’ and ‘non-stable’ to characterise the level of the deposits they collect in
their ordinary business. They use different methodologies to draw this distinction (50), but the method
proposed by the Italian authorities is one that is relatively simple to use. And the benchmark obtained
using this method appears to be close to the outcome obtained using other approaches.

(130) The Commission can therefore accept the methodology proposed by Italy for differentiating between

the stable and volatile components in the deposits.

(49) In addition, the deposit lodged by PI with the Treasury represents only 2,8 % of the outstanding amount of

government securities on 31 December 2005.

(50) The prudential method used in the […] study appears to be a fairly commonly used example.

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(131) Since 1995, the amounts lodged in absolute terms have been the following:

Table 5

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

(EUR billion)

Average
total
postal current accounts

deposits

in

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Average stable total deposits
(equal
total
deposits in the calendar year)

to lowest

level of

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Average volatile total deposits

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(132) The Commission has calculated that the stable and volatile components represent on average respect­
ively 85,4 % and 14,6 % of the postal current accounts over the period 1995-2005, with a standard
deviation for the volatile component of 4,1 %. Furthermore, in the most recent years, the volatile
component of the deposits has been declining significantly, reaching 10,5 % in 2005 on a yearly basis.
For monthly, quarterly and half-yearly periods, the volatile component of the deposits is on average
close to or below 10 % for the periods 1995-2005 and 2001-2005. The first months of 2006
confirm this trend.

(133) In conclusion, the Commission is of the opinion that 90 % of the deposits in postal current accounts

can be considered relatively stable and 10 % relatively volatile.

(134) As long as the Obligation stands, the Commission is of the view that, in percentage terms, the stable
and volatile components of the deposits in postal current accounts would be mirrored in a deposit
with a private borrower.

(135) Consequently, in line with the Agreement, a 10 % weight for the short-term component in the loan
rate in the present case appears justified. The weight of the medium- and long-term element is
therefore 90 %. It will be shown below that within the medium- and long-term element there is
no need to enter into more detailed analysis regarding the 10 % weight given to the medium-term
component and 80 % given to the long-term component.

7.4.2.3. A v e r a g e l i f e a n d v a r i a t i o n s i n t h e d e p o s i t s

(136) Analysing the liability side of the balance sheet for sources of funding requires a bank to understand
the characteristics of its fund providers and funding instruments. To evaluate the cash flows arising
from its liabilities, a bank would first examine the liabilities’ behaviour under normal business
conditions, ascertaining in particular:

— the normal level of roll-over of deposits and other liabilities,

— the effective maturity of deposits withdrawable on demand, such as current account deposits and

many types of savings accounts,

— the normal growth in new deposit accounts.

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several

factors,

techniques a bank might use

(137) As in assessing roll-overs and new requests for loans,
there are
to
establish the effective maturities of its liabilities, such as
using historical patterns of deposit behaviour. For sight
individuals or businesses, many
deposits, whether of
banks conduct a statistical analysis that takes account of
rate sensitivities, and other
seasonal
large wholesale
macroeconomic
For
depositors,
customer-by-
a
customer assessment of the probability of roll-over. The
difficulty of
liability
behaviour has increased with the growing competition
of
investment alternatives to deposits. Assessments are
also made of cash flows arising from a bank’s liabilities
under abnormal circumstances (bank-specific or general
market problems).

some
a bank may undertake

establishing such estimates of

interest
factors.

[…]% of

(142) On the basis of the VaR specification of this model using
a 10 year cut-off point,
the funds have an
‘almost unlimited’ behavioural lifetime (in the sense that
it is considered very unlikely that the amount of deposits
will have dropped below the two-thirds level 10 years
from now), and the remaining part has a lifetime
varying from 0 to 10 years (i.e. it is expected that these
deposits may be withdrawn within 10 years).

(143) The Commission takes

view that

the passive
the
management of funds by PI is the result mainly of the
Obligation. It is therefore critical to assess how a private
borrower would have analysed the Obligation and the
maintenance of the Obligation over time (53).

(138) Against this background, the Commission has examined
in depth the data transmitted by Italy regarding the
statistical model used by PI
to identify the prudential
and estimated trends of funds collected in postal current
accounts on the basis of an analysis of historical trends
(the […] study) (51).

the overall

(144) First, the effect of the Obligation is to transfer the average
life of
funds collected in postal current
accounts to the current account held by PI with the
Treasury. Italy shares the opinion that the Obligation is
a key argument for describing the bulk of the deposit with
the Treasury as long term. Without the Obligation, the
deposit by PI would be quite similar to a current account
with a private borrower.

(139) The Commission stresses that the […] study is aimed at
lifetime of postal current
[…] does not draw any
the deposit with

quantifying the behavioural
account deposits, and that
conclusions regarding the lifetime of
the Treasury.

(145) Second, as shown by the figure below,

the amounts
deposited with the Treasury have varied significantly
since 1995 (54).

(140) In order to determine the relevant average life of the
two
deposits,
possible types of fund management: active and passive.

the Commission has here to consider

Figure 2

[…]

Passive fund management

(141) Italy argues that, within the specific context of the passive
management of PI’s liquidity in 2005 and 2006,
the
criteria for identifying the lifetime of the funds collected
in postal current accounts are identified by the […]
model. This probabilistic model is based on an analysis
of postal current accounts’ historical volatility and on the
behaviour of PI’s account holders (52), and identifies the
behavioural dynamics of PI’s customers with a 99 %
confidence interval.

(51) Even in the absence of a formal structured study, the Commission
considers that PI and the Treasury would in any event have had
access to similar data and results based on the history of postal
current accounts and their future prospects.

(52) The prudential trend is based on a conservative prediction of the
minimum level of deposits in the years to come by reference to the
historic pattern of the in- and outflows of deposits (VaR method).

(146) The variations are due in particular to changes in the

relevant national legislation:

— there was a sudden fall in deposits in 1996 and 1997,
when Act No 662 of 23 December 1996 imposed the
closure of the accounts used by the Treasury to pay
State pensions,

(53) The Commission considers that a private market borrower would
have carried out such an assessment, notably because of the gross
amount involved (see for instance recital 137, where it is pointed
out that for some large wholesale depositors, a bank may undertake
a customer-by-customer assessment of the probability of roll-over).
(54) Despite arguments put forward by Italy, there is no reason to limit
the assessment in this regard to the data relating the period 2001-
2006. While one might agree that the creation of the BancoPosta
account has had a significant impact on deposits in postal current
accounts, and even on the business model of PI’s financial activities,
a private borrower would have looked at a longer period.

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— the introduction of the BancoPosta account, allowed
led to a steep increase in

by Act No 144/2001,
deposits in postal current accounts in 2001,

— the deposit with the Treasury grew substantially in
2004 as compared with previous years as a result of
the Ministerial Order of 5 December 2003 under
which the Treasury took the place of CDP in rela­
tionships arising out of the postal current account
service.

the relevant

indefinite duration only if

(150) In this context, Italy’s argument that the lifetime of the
Obligation is unlimited cannot be accepted. A private
borrower could have regarded the Obligation as being
of
legislation
were not open to amendment, which it obviously was
in late 2005 (from ex post observation). Nor can the
Commission accept another argument invoked by Italy,
namely that at
the
Agreement the Treasury was obliged to have regard to
the Obligation and could not anticipate possible legal
changes, which
competence. The
outside
Treasury, as a prudent borrower in a market economy,
should have taken this very important aspect
into
account.

the conclusion of

the time of

fell

its

(147) The Italian authorities confirm that the legislative changes
were made as a result of the Treasury’s determination to
give PI greater financial autonomy. This process, which
began with the conversion of PI
into a public limited
company in 1998, was marked by the launch of the
BancoPosta retail postal account in 2001.

(151) In addition, the variations in the amounts deposited with
the Treasury in the years 1995-2005, as a consequence of
the legal changes, should also have induced a private
borrower to take the five-year average life identified by
the prudential model referred to above as an upper bound
for the purpose of setting its own rate offering.

(148) A similar event, which was not entirely predictable in
2005-2006 (especially as regards the precise date of its
occurrence), took place again in early 2007, when the
2007 Finance Act significantly narrowed the scope of
in the money
the Obligation. This led to a sharp fall
deposited by PI with the Treasury:
in December 2007,
the deposit with the Treasury accounted for only
current
in postal
total deposits
around 25 % of
accounts. The Commission considers that at
the time
the Agreement was
concluded a prudent operator
should have anticipated this change in the legislation,
and in particular the consequence of the change, i.e. the
reduction in the amount deposited with the Treasury or
private borrower as the case may be, because the trend
towards
financial
independence
management had started some years before.

greater

PI’s

in

(149) The Commission is of

financial autonomy,

the opinion that when the
Agreement was negotiated a private borrower would
have expected the change in the Obligation to take
place within no more than five years. As shown in
Figure 2 and recital 146 above, over the period 1995-
2005, at a time when the Treasury wanted to give PI
greater
the legislation changed a
first time in 1997, a second time four years later, and a
third time two years after that. A private borrower would
have taken this into account, and would have expected
further changes in the legislation within a maximum of
five years including a possible transitional period of some
months. A prudent private borrower would not have
expected to benefit from the postal deposit for a period
longer than five years.

in view of

the Commission considers that

(152) Therefore, in the context of passive management of the
funds,
the
strengthening of PI’s financial autonomy (with the risk
of changes in the law, leading to a significant reduction
in the amount deposited with the Treasury or private
borrower),
five-year maturity would have been
regarded by a private borrower, when the Agreement
was negotiated, as a maximum maturity for the purpose
of setting its own offering.

a

Active fund management

(153) Italy considers that, in the specific context of the active
management of PI’s liquidity (which has become a reality
from 2007 onward), the […] model supports PI’s choice
of optimal asset allocation and the trade-off between risk
and return. In this context, and on the basis of a very
prudential hypothesis, it is reasonable for PI to adopt an
asset allocation having an average life of […] – […] years,
depending on the model used (55).

(154) In this regard, the Commission notes that:

(55) This second model proposed by […] is based on an even more
conservative hypothesis ([…] year cut-off and distribution of the
virtually infinite lifetime component over a […]-[…] year period),
and gives an average life of […] or […] years (lifetime of […] to
[…] years), depending on whether one follows a VaR approach or a
linear approach.

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— for the active management of the deposits by PI, the

Obligation must not be in force,

(158) The weighted maturity of the instruments composing the
loan rate set by the Agreement is consequently 25 years.

— the model is based on the assumption of a 10-year
cut-off (i.e. the 10th year represents the moment of
final extinction set for the component having virtually
infinite lifetime),

(159) The Commission shares the view that a private borrower
would link the remuneration of the bulk of the liquidity,
which is stable, to medium- and long-term parameters,
and the remuneration of the remaining part, which is
volatile, to short-term ones.

— the basis for the definition of the (hypothetical) corre­
the prudential

sponding investment portfolio is
trend (56),

— the lifetime of the global amount of funds collected in
postal current accounts diverges from the lifetime of a
single postal current account,

— the type of prudential model developed by […] is used
by several Italian banks in the context of their active
management of funds in order to determine the beha­
vioural lifetime of their current accounts, and then to
mirror this behavioural lifetime as part of their ALM.

(155) The Commission stresses that, in active fund management,
the average life of the global amount of funds collected in
postal current accounts is no more than five years.

(156) In conclusion, whether fund management

is active or
passive,
the deposits which
would have been considered by a private borrower is
no more than five years.

the effective maturity of

7.4.2.4. P r o v i s i o n a l

c o n c l u s i o n :

r e l e v a n t b e n c h m a r k s
r a t e

i n t h e

t h e
l o a n

(157) According to Italy, as we have seen, the stable component
of the deposit, which is of a long-term nature, is reflected
in the long-term element of the loan rate (90 %, made up
of (i) 10 % linked to the yield of the 10-year multiannual
Treasury bond, and (ii) 80 % linked to the yield of the 30-
year multiannual Treasury bond). The volatile component
is reflected in the short-term element of the loan rate
(10 %, 12-month ordinary Treasury bill).

(56) By contrast, the estimated trend gives an estimate of how the funds
collected in postal current accounts will evolve on the basis of
reasonable macroeconomic
commercial
activities. This
the definition of budgetary
objectives.

scenarios and normal

trend is used for

stable

component of

(160) Because a private borrower would have estimated the
effective maturity of
the
the
deposits at a maximum of five years, the market remuner­
ation of the stable component ought to be based on the
yield of
the five-year multiannual Treasury bond. The
Commission considers that it makes sense to use these
multiannual Treasury bonds as the medium- to long-term
benchmark, because they are financing instruments that
serve as a reference for investors.

(161) The short-term element of the loan rate refers to the
volatile component of the deposit with the Treasury or
private borrower. Every day, if the amounts deposited in
postal current accounts fall in comparison to the previous
day, the difference has automatically to be returned to PI.
Under such circumstances, a private borrower would not
invest the volatile component of the deposits in ordinary
Treasury bills at 12 months.

(162) For managing the variations in deposits on a daily basis,
the Commission believes that it is appropriate to refer to
three-month ordinary Treasury bills and to overnight
instruments (57). The remuneration paid to PI should
reflect the interest rate on these two instruments.

(163) While several combinations of short-term instruments are
theoretically possible, the Commission considers that a
50-50 split (58) between three-month ordinary Treasury
bills
risk
instruments
management and is in line with what would be done
by a prudent market operator.

and overnight

allows proper

(57) The 2005 annual report of the French La Banque Postale indicates
that: ‘Les opérations de bilan liées à la gestion de la partie volatile
des fonds CCP (comptes courants postaux) constituent un moindre
enjeu en terme de PNB mais permettent de garantir la liquidité
quotidienne. À l’actif, les fonds correspondants sont soit placés en
titres de transaction ou de placement (ayant la note la meilleure
attribuée par une agence de notation de renommée internationale),
soit prêtés à très court
le marché interbancaire
terme sur
(notamment au travers de prises en pensions livrées). Les prévisions
du compte courant représentatif de la partie volatile sur un horizon
de 3 mois, et sur un pas quotidien, permettent d’anticiper les
variations importantes de liquidité et de déterminer les modalités
de placement’.

(58) This means that an overnight volatility of 5 % is regarded as a
maximum in normal times. Such an order of magnitude appears
reasonable.

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(164) Even though the overnight interbank interest rate relates
to the monetary interbank market, and does not represent
the Treasury’s debt
the Commission
considers that it can be used as a proxy for the rate
pertaining to overnight operations.

service burden,

(168) The two main classes of risk for the deposited funds are

interest rate risk and liquidity risk (61).

(165) The Commission would point out

that

following the
2007 Act PI began actively managing the funds deriving
from postal current accounts. The average life of PI’s
investments in securities is […]
to […] years (59). Of
this figure 85 % is invested in bonds having a […] to
[…] year maturity, while the remainder is invested in
[…] year.
instruments with a maximum maturity of
These figures validate the Commission’s conclusions a
posteriori.

(169) Interest rate risk (62) is the risk that short-term interest
rates may increase during the lifetime of the long-term
investments, while long-term interest rates are locked in;
or, to take an equivalent market-value perspective, that the
market value of equity drops while the yield curve shifts
up, given that the value of the assets will fall further than
the liabilities have a shorter effective
the liabilities if
lifetime.

7.4.2.5. F i n a n c i a l r i s k s

(166) In general, one can distinguish between four main types

of financial risk:

(170) However, the indexation mechanism of the Agreement
includes a fortnightly resetting of the rates of the three
components, which is why the indexation is floating. Thus
the deposited funds are not subject to a risk of loss of
capital, but only of loss of interest (63). With a floating
interest rate, the risk is split between the parties.

— market risk (e.g. equity risk, etc.),

— credit risk (default risk),

— liquidity risk (funding liquidity risk and market

liquidity risk),

— interest rate risk (yield curve risk, repricing risk).

(167) Taking into account the nature of the deposited funds, the
Commission is of the view that the credit and market
risks are very limited (60).

(59) The […] study speaks of to an average life of […] for PI’s portfolio

in 2007.

(60) PI’s annual report for 2005 indicates the following:

‘“Market risk”
relates to financial assets that PI intends to sell. At present there are
no assets held with the specific purpose of trading’.
‘“Credit risk” is the risk that a debtor on whom PI has a claim might
default. Since Gruppo Poste is not authorised to issue loans, this
risk is limited to the financial
instruments in the investment
portfolio (issuer risk)’.

(171) The funding liquidity risk relates to the ability to fund
increases in assets and meet obligations as they become
due (64). The management of
liquidity is therefore an
important activity of financial institutions or banks. The
analysis of funding liquidity requires bank management
not only to measure the liquidity position of the bank
on an ongoing basis but also to examine how funding
requirements are likely to develop under various scenarios,
including adverse conditions (65).

for

(61) Basel Committee on Banking Supervision, Principles

the
Interest Rate Risk, Bank for Inter­
Management and Supervision of
national Settlements, September 2003, pp. 6-8 (http://www.bis.org/
publ/bcbs102.pdf?noframes = 1); Basel Committee on Banking
Supervision, The Management of Liquidity Risk in Financial Groups,
Bank for International Settlements, May 2006 (http://www.bis.org/
publ/joint16.pdf?noframes = 1); Basel Committee on Banking
Supervision, Liquidity Risk: Management and Supervisory Challenges,
Bank for International Settlements, February 2008 (http://www.
bis.org/publ/bcbs136.pdf?noframes = 1); Principles of Liquidity Risk
Management,
International Finance, March 2007,
Appendix 1.

Institute of

(62) PI’s annual report for 2005 indicates that ‘“Cash flow interest rate
risk and hedging policy” relates to financial assets that are remun­
erated at a floating rate. The company may pursue a hedging policy
making use of derivatives limited to specific ratings, concentrations
or amounts’.

(63) See also the letter from […] of 13 February 2006.
(64) PI’s annual report for 2005 indicates the following: ‘“Liquidity risk”
is the risk that an entity may have difficulty finding sufficient funds
to meet obligations deriving from financial instruments. Liquidity
risk may arise out of an inability to sell financial assets quickly at a
price close to fair value, or out of a need to raise funds at unfair
rates. The risk is negligible, as the terms to maturity of investments
and borrowings are substantially balanced’.

(65) See Basel Committee on Banking Supervision, Sound Practices for
Managing Liquidity in Banking Organizations, Basel, February 2000.

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(172) In the present case, the funding liquidity risk and yield
curve risk are borne entirely by the borrower, and not by
PI. More
that
depositors were to withdraw their funds in a mass, the
State would be obliged to provide PI with the money
required to refund its depositors, and PI would not have
to refinance itself.

in the hypothetical

specifically,

case

(173) The Commission would point out that the scheme does
not provide the same degree of certainty with respect to
the cash available to the borrower. When an operator
issues and sells bonds, the operator has the disposal of
the whole sum for the whole term to maturity of the
bonds. The deposit mechanism does not produce the
same result, as the money available to the borrower
changes every day and may even diminish significantly
if adverse conditions are encountered.

(174) Consequently, the rate of interest paid to PI should in
than the rate offered on bonds
principle be lower
having
The Commission
an
therefore considers that there should be a markdown on
the basic rate that a private borrower would offer,
in
order to take account of the funding liquidity risk.

equivalent maturity.

(175) The Commission is aware that it is difficult to quantify the
markdown for the liquidity risk precisely. In the present
case, an appropriate markdown is already built into the
Agreement and the Commission’s methodology, which
define a volatile component and link it to an interest
rate based on very short-term instruments.

(176) Finally, the Commission considers that the arguments put
forward by Italy regarding a supposed rigidity of the para­
metric investment defined by the Agreement have to be
rejected, for the following reasons:

(i) they disregard the liquidity risk;

(ii) they are related to another argument put forward by
Italy regarding the opportunity cost associated with
fund
the
management, which is discussed, and rejected,
in
Section 7.4.3 of the present Decision;

impossibility

conducting

active

of

(iii) the claim that the Agreement provided for compen­
sation for the alleged rigidity has been put forward
only ex post. The Italian authorities have said that ‘the
rationale of the definition of the basket was not based
on the determination of a spread compensating this
limit on PI’s autonomy’ and that ‘the agreed basket
produced ex post a spread which, on the one hand,
compensates PI of the investment constraint, and on
the other hand is fair to the Treasury’. There is
nothing to show that
this ex post reasoning was
considered during the negotiation on the Agreement,
and it cannot be regarded as relevant for purposes of
the present Decision.

7.4.2.6. C o n c l u s i o n : d e f i n i t i o n o f

t h e r a t e o f f e r e d b y a p r i v a t e b o r r o w e r ;

e x i s t e n c e o f S t a t e a i d

(177) The rates provided for in the Agreement and the rates which according to the Commission’s analysis

would be offered by a private borrower (66) are compared below:

Table 6

Agreement

Private Borrower

Instrument/yield

Weight

Instrument/yield

Stable component

30-year BTP bond

10-year BTP bond

Volatile component

12-month BOT
bond

80 %

10 %

10 %

5-year BTP bond

3-month BOT bond

Overnight interbank
interest rate

Weight

90 %

5 %

5 %

(66) In the private borrower methodology, as in the Agreement, the interest rates are computed using floating rate

parameters (parameters reset every 15 days).

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2005

2006

2007

Table 6a

Agreement rate

Private borrower rate

3,90

4,25

4,70

2,81

3,60

4,23

(178) Because the benchmark instruments used in the Agreement have longer maturities than ‘market’ ones,
and, as a consequence, have higher yields over the period concerned (67), and because the division of
risk is more favourable to PI than if PI had to bear the liquidity risk on the funds deposited, the loan
rate defined by Italy confers an advantage on PI.

(179) Therefore the scheme consisting of the payment of the loan rate by the Treasury for the funds

deposited by PI under the 2006 Act and the Agreement constitutes State aid.

(180) Finally, the Commission would observe that there is no single combination of short-term and long-
term instruments which would be the only one in line with the market. In the Commission’s view it is
the overall balance of the instruments used and of their respective weights that makes it possible to
decide whether the loan rate complies with the principle of the prudent borrower operating in a
market economy. The loan rate provided for in the agreement does not satisfy this test of propor­
tionality, which a private borrower would have applied to the deposited funds.

7.4.3. Analyses of investment policies pursued by PI in the absence of the Obligation

(181) For the sake of comprehensiveness, and from a teleological point of view, it will be appropriate to
enquire whether the possible alternative investments outlined by PI on the assumption that it was not
subject to the Obligation would have offered yields similar to or higher than the one arrived at by the
Agreement or by the Commission’s own methodology.

(182) In the assessment that follows the Commission will analyse both the financial risk and the return,
which are factors determining the conduct of a market operator engaging in financial transactions.

7.4.3.1. Summary of the arguments put forward by Italy (68)

(183) Italy has argued that the Obligation penalises PI in its asset allocation, as PI is deprived of any other
(possibly more rewarding) outlet for the use of the money collected from its customers’ current
accounts.

(184) According to Italy, in the absence of the Obligation, PI could have:

(i) invested the money collected from postal current accounts in instruments similar to the ones used
by the PI’s insurance divisions, and in particular Poste Vita SpA. Referring to letters sent by
various financial intermediaries (see recital 73), the Italian authorities consider that the remuner­
ation set by the Agreement is in line with the remuneration obtained by Poste Vita SpA on its

(67) Even though, on the basis of today’s long- and short-term interest rates, the interest rate curve is reversed, this could

have not been anticipated when the Agreement was signed in 2005-2006.

(68) For a more detailed presentation of the arguments put forward by Italy see Section 6.

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invested funds (see recitals 74 et seq.). In particular, they say that class I life assurance policies are
products that can be considered comparable to postal current accounts, and that the average yield
on the management of these products (e.g. Posta Più) over the period 2002-2006 was 4,68 %, in
line with the rate of the Agreement, which was 4,55 %; or

(ii) diversified its portfolio on the basis of credit risk (see recital 85(i)); or

(iii) adopted an active fund management strategy (see recital 85(iv)); appropriate fund management
could have consistently produced a higher yield, as shown by past experience (La Poste case and
active management on the trading system model) and by future developments.

(185) The Commission will demonstrate, first, that these alternative investment policies are not relevant to
the present analysis, and, second, that their results cannot be used to show that the Agreement confers
no advantage on PI.

(186) From a comparison between PI and private-sector banks, Italy also argues (recital 85(ii)) that the
interest margins achieved by some private-sector banks on the deposit component of their funding is
substantially higher than PI’s. Moreover, the investment patterns of banks operating in the public
sector are similar to those of PI (recital 85(iii)). These points show, it is argued, that PI does not enjoy
State aid.

(187) The Commission will demonstrate that the comparisons made by Italy (notably in the […] study) are

not meaningful.

7.4.3.2. G e n e r a l

r e m a r k s o n t h e r e l e v a n c e o f

l e t t e r s f r o m f i n a n c i a l

i n t e r m e d i a r i e s

t h e [ … ]

s t u d y a n d o f

t h e

(188) The […] study, and the letters sent by financial intermediaries to PI arguing that the rate of remuner­
ation provided for in the Agreement is in line with the market, call for general comment from the
Commission.

(i) The letters and the study may have been written in the course of commercial relations between

their authors and PI. The Commission has to approach them with great caution.

(ii) The general conclusions of the […] study raise questions, as […] states that ‘it is understood that
the assumptions and the initial conclusion, as outlined in this presentation, are based on the
informations (and their understanding by […]) provided by PI. Such information may be subject
to different interpretation; therefore the analysis could lead to different solutions and conclusions’.

(iii) The interest rate provided for in the Agreement is indexed to parameters with floating rates. The
use of these parameters was decided freely by the Treasury and PI, and is not a consequence of any
legal constraint. The Commission shares the view of the Italian authorities that the choice of
floating-rate parameters was a rational choice for the parties at the time the Agreement was
negotiated.

The […] study, however,
Agreement and instruments with fixed interest rates.

is based mainly on a comparison between the parameters of the

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Floating rates have been lower than fixed rates of similar lifetime (69). As an illustration, the table
below indicates the annual average rates of Treasury issues of five- and 10-year multiannual
Treasury bonds (BTPs), which have a fixed interest rate, and Treasury credit certificates (CCTs),
which are seven-year instruments with a floating interest rate (70).

Table 7

(%)

2000

2001

2002

2003

2004

2005

2006

2007

BTP 5 years

5,30

4,59

4,56

3,27

3,34

2,84

3,60

BTP 10 years

5,57

5,13

5,46

4,20

4,29

3,54

3,95

CCT 7 years

4,40

4,35

3,41

2,36

2,12

2,20

3,13

4,23

4,41

4,12

Furthermore, the study makes a comparison between the deposit with the Treasury and active
fund management strategies (see below), and in the implicit return achieved by PI takes account of
capital gains. But the Agreement mechanism cannot generate capital gains (or capital
losses),
because of its indexation to floating-rate parameters. In the reasoning put forward by Italy, a
correct comparison for determining whether PI has been penalised by the Obligation would have
to be based on floating-rate parameters. The interest rates that PI might theoretically have been
able to achieve according to the study are irrelevant – and probably overestimated – notably
because they rely on fixed-rate instruments (71).

(iv) Finally, the […] study and the letters compare instruments which carry different risks. For instance,
as already explained (Section 7.4.2), the liquidity risk borne by PI is nil when the money is
invested pursuant to the Agreement, whereas PI does bear a liquidity risk when it invests under
normal circumstances. Similarly, investments in insurance products bear a market risk (72), while
for the deposit with the Treasury (or private borrower) the market risk is of limited relevance.
These risk-related aspects are never pointed out or quantified in a substantiated manner in the
letters.

(189) The Commission consequently cannot conclude either from the letters from financial intermediaries or

from the study that PI is penalised by the Obligation.

7.4.3.3. C o m p a r i s o n w i t h i n s u r a n c e a c t i v i t i e s

(190) Even taking the Obligation into account, the Commission does not share the Italian authorities’ view
that class I
life assurance policies sold by Poste Vita SpA are products that can be considered
comparable to postal current accounts, because the nature of the resources is different. For instance:

(69) Since 1997, CCT rates have been lower than five- and 10-year BTP rates, except in 1997 and 1998.
(70) CCTs are floating-rate seven-year instruments. The interest is paid in six-monthly dividends indexed to the return on

six-month BOT bills.

(71) The argument put forward by Italy that returns on fixed-rate portfolios tend to be in line with returns on floating-rate
portfolios over a 10-year period, so that the analysis has to cover a 10-year period, is considered and rejected in the
Section ‘Trading system active management’ below.

(72) PI’s annual report for 2006 indicates that ‘Market risk relates to financial assets that PI intends to sell. At the balance
sheet date almost all of these items are attributable to financial instruments held by the company’s subsidiary Poste
Vita SpA in separately managed accounts (class I)’.

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— life assurance policies are capitalisation products, whilst postal current accounts serve mostly to
transfer money, by telephone, electronically or through deposits of cash at a post office counter;
moreover, customers cannot generally replace current accounts with other banking products,

— the profitability of life assurance policies is much higher than that of postal current accounts,

— the tax arrangements for income from life assurance policies can be different from those for

interest on postal current accounts.

(191) As a consequence, a comparison between the interest rates resulting from the Agreement and those
deriving from the management of life assurance products is not relevant to the present analysis.

(192) Though it was not strictly necessary, the Commission has compared the return obtained under the
Agreement with the average return on the management of Posta Più, an insurance product linked to
separately managed class I accounts of Poste Vita SpA, and which Italy has presented as an alternative
investment available to PI in the absence of the Obligation.

(193) The yield of Posta Più indicated by Italy is expressed in gross terms (before management costs) (73),
and cannot be considered equivalent to what PI might have obtained on the market in the absence of
the Obligation. The Commission is of the view that the loan rate provided for in the Agreement is
more in the nature of a net rate, which is offered to the investor with all management costs
deducted (74).

(194) In the following analysis the Commission has examined the figures year by year, and has also

considered average figures, in order for example to limit the effect of rate volatility.

(195) The Commission has compared the rates stemming from the Agreement over the period 2005-2007
with the net yields of insurance products of Poste Vita SpA linked to the separately managed class I
accounts (Posta Più and Posta Valore (75).

Table 8

Net yields of Posta
Più (1)

Net yields of Posta
Valore (1)

Agreement rates

Private borrower rates

(%)

31 December 2005

31 December 2006

31 December 2007

Average

(1) PI website.

3,00

2,80

2,71

2,8

3,08

2,63

2,46

2,7

3,90

4,25

4,70

4,3

2,81

3,60

4,23

3,5

(73) The letters from the financial intermediaries also seem to refer to gross yields (see for instance the letter from […] of

4 October 2006).

(74) The Commission considers that no significant transaction cost would occur in the private borrower methodology or

under the Agreement.

(75) The Commission has observed that other Poste Vita SpA products linked to separately managed accounts, such as
Posta Pensione and Dinamica, are not comparable in terms of volume of business to Posta Valore and Posta Più. The
total business of the separately managed Dinamica account amounts to EUR 120 million, while the Posta Più account
exceeds EUR 6,5 billion. See also the letters from […].

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(196) The rates defined by means of the Agreement are significantly higher than the net yields of Posta Più,
which are regarded by Italy as an alternative investment policy open to PI in the absence of the
Obligation.

(197) The rates defined by means of the Agreement are also higher than the net yields of Posta Valore.

(198) The difference would be even bigger if proper account were to be taken of the market and liquidity

risks.

(199) In conclusion, a comparison between the interest rates resulting from the Agreement and those
deriving from the management of
the
Agreement confers no advantage on PI. In 2005, the yields deriving from the private borrower
methodology and those of Posta Più and Posta Valore are broadly similar (76), and therefore do not
change the overall assessment made by the Commission regarding the relevance of the private
borrower methodology. On average, over the period 2005-2007,
the yields deriving from the
private borrower methodology are comparable to those of Posta Più and Posta Valore.

life assurance products does not demonstrate that

7.4.3.4. A l t e r n a t i v e i n v e s t m e n t s t r a t e g i e s

(200) The […] study indicates that the Obligation generates opportunity costs, associated in particular with
the impossibility of investing in a diversified portfolio of assets on the basis of credit risks. For
example, bonds issued by European corporate and financial names with an AA rating bear interest
rates higher than government bonds by a minimum of 60 bp and a maximum of 150 bp.

(201) It should be pointed out, first of all, that in another State aid case relating to PI (77) Italy has indicated
that the difference in pricing between different types of issuer (State, financial, banking and corporate)
is very small: at the same risk rating, the difference in the cost of funding between the two extreme
ranges, sovereign and corporate, is about 5-6 bp, and the difference between financial and corporate is
about 2-3 bp.

(202) Second, the […] study itself acknowledges that portfolio investment strategies diversified by credit risk
are exposed to a credit risk higher than that of government bonds or deposits. The […] study does
not quantify this greater risk.

(203) Third, even if some data are provided on the spreads between government, financial and corporate
bonds (with an AA rating), the Commission considers that these investments are also exposed to other
risks which do not exist in the case of the deposit with the Treasury provided for in the Agreement.
For example, PI does not bear any liquidity risk on the funds deposited, since the liquidity risk is
borne entirely by the Treasury. This is not mentioned in the […] study, but it is relevant to an
assessment of the case.

(204) Thus the brief reference in the study to one theoretical investment strategy does not demonstrate that
no advantage is conferred on PI as a consequence of the Agreement, notably in terms of risk and
return.

(76) The rates would be even closer if proper account were taken of the market and liquidity risks of life assurance

products.

(77) State aid measure No C 49/2006 – Remuneration paid for the distribution of postal savings financial products.

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7.4.3.5. A c t i v e f u n d m a n a g e m e n t s t r a t e g i e s

Comparison with the French operator La Poste

(205) Regarding the comparison made with the yield achieved in 2005 by Efiposte, the financial arm of the

French postal operator La Poste, the Commission would observe that:

— in order to determine whether an advantage is conferred on an undertaking, the Commission does

not compare situations in different Member States,

— the alleged lifetime of five years for Efiposte’s investments is not clearly confirmed by the La

Poste/Efiposte annual report (78),

— Efiposte’s investments appear to have risk profiles different from those of PI; in particular, Efiposte

is exposed to liquidity risk, which PI is not (79),

— the comparison made by Italy concerns one year only, which is too short to allow meaningful
conclusions in the present case; and the comparison made in the […] study concerns the period
2004-2005, which differs from the period covered by the Agreement.

(206) Each of the above points is by itself sufficient to show that the comparison made by Italy is not

conclusive.

Trading system active management

(207) Italy argues that active management of the trading system type, investing in government bonds, can

generate substantial extra returns above the deposit market or the bond market.

(208) The Commission does not deny that some forms of active management may, in theory, generate
returns higher those of other forms of fund management; but it considers that the […] does not allow
any conclusions to be drawn that are relevant to the present case, for the following reasons:

(i) As a general remark, the […] study acknowledges that the effect of limiting the scope for actively

managing a portfolio is difficult to evaluate.

(ii) As mentioned in recital 85, the study compares a baseline investment strategy (benchmark
strategy), consisting of a mixture of 10-year multiannual Treasury Bonds (60 %) and of three-
month ordinary Treasury bills (40 %), with an active trading system using a long-term signalling

(78) In addition, Italy has not explained how the alleged yield of 4,4 % for 2005 was calculated, nor has […] explained in

detail how it calculated the alleged yield of 4,45 % over the period 2004-2005.

(79) However, Efiposte, the subsidiary of La Poste group in charge of investing the resources from postal cheque accounts
(which are current accounts) in 2005, benefits from stable resources given by La Poste by means of contractually
irrevocable term deposits (see Section 4-5 ‘Liquidity risks’ of the 2005 management report of La Banque Postale/E­
fiposte). The risk split between La Poste and Efiposte, which belong to one group, is different from the situation
encountered between PI and the Treasury.

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fixed interest rate securities.

approach (referred to as the ‘tactical portfolio’) (80). The performance metric relates to the
benchmark portfolio. The portfolios are composed of
In this
context, Italy argues that, over a 10-year period, investment portfolios based on floating rates
(such as the rate provided for in the Agreement) can be compared to investment portfolios based
on fixed rates (such as the benchmark defined by […]), because capital gains will offset capital
losses. Over a 10-year period, it is argued, returns on fixed-rate portfolios tend to be in line with
returns on floating-rate portfolios. Moreover, according to Italy, the comparison between the
remuneration provided for in the Agreement and the remuneration offered by active management
fund strategies has to consider a significant time horizon – 10 years – in order to cover a full
economic cycle. During the period from 2005 to the first half of 2007, interest rates rose, and
alternative investment strategies based on fixed interest rates, like the ones used by […], provided
a return lower than that provided for in the Agreement, because of capital
losses. But the
Commission cannot accept the methodology or the conclusions of the Italian authorities, for
the following reasons.

— In an assessment for State aid purposes, the analysis of the possible advantage conferred by
the Agreement has to be made ex ante, on the basis of the information available to the parties
at the time the Agreement was concluded, which was February 2006. At the time of the
conclusion of an agreement covering the period 2005-2009, no private investor would have
analysed the historical series for rates over the period 1997-2007. From an economic point of
view, the […] study performs an ex post analysis, based on financial indicators covering the
period 1997-2007. But ex ante and ex post concepts are not comparable (81). First, realised
capital gains or capital losses over the short term cannot be predicted reliably. Furthermore, it
is well established that it is difficult for any given investor systematically to outperform the
market, so that it would be difficult to argue that PI would ex ante be able to earn supra-
normal returns, even in the short run. The Commission therefore takes the view that capital
gains or losses should not be considered here, but that instead the focus should be on the
yields that PI could be expected to achieve on an ex ante basis (that is to say the interest rate
component in total returns) (82).

— Even if the annual average return over a 10-year horizon could be used in order meaningfully
to compare the different investments (as the Italian authorities claim), the comparison would
still have to address the expected performance of the alternative investment portfolios over the
period for which the Agreement was concluded (see also point (iii)).

— If account were also to be taken of the capital gains (and losses) derived ex post, as Italy
suggests, one would necessarily also have to consider the risk factors associated with these
capital gains and losses. In comparing the performance of different portfolios, return cannot
be dissociated from risk. As shown below (point (iii)), it is very unlikely that the risk-return
performance of the active management portfolios would match that of the Agreement.

(80) The […] study says that this approach ‘compares the current level of yields and the steepness of the yield curve
relative to recent history and indicates trades based on expectations of yield level and curve steepness mean reversion.
For instance, the trading strategy essentially says that if yields are high then expect them to fall and position the
investment portfolio with a longer lifetime than the benchmark’.

(81) In fact, ex ante and ex post returns often move in opposite directions. This can be clearly seen in the case of zero
coupon bonds. When required returns increase (for example owing to an increase in investors’ risk aversion), the
price of zero coupon bonds falls, resulting in an immediate loss in capital. The lower price then tends to grow
towards the nominal value, at the higher expected rate of return. And vice versa.

(82) It should also be borne in mind that the mechanism of the Agreement does not generate capital gains or losses,

because it is indexed to floating-rate parameters.

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— Benchmark and tactical strategy portfolios do not incorporate the liquidity risk aspect. In the
present case, the liquidity risk is borne entirely by the borrower, and not by PI. More
specifically,
in the hypothetical case that depositors were all to withdraw their deposits at
once, the funds needed to meet the demand would have to be provided by the borrower, that
is to say the Treasury, and PI would not need to refinance itself at high rates or with
substantial capital losses.

— According to Italy, the parties (PI and the Treasury) could not be aware of the future trend of
the rate curve (83). Italy therefore considers that the choices made in the Agreement were
rational. The Commission agrees that at the time the Agreement was negotiated, on the basis
of the information available, the choice of variable parameters was a rational one for the
parties to make. By choosing variable parameters the parties protected themselves against the
risk of capital loss. The choice of parameters in the Agreement is not a consequence of any
legal constraint. Moreover, as Italy has acknowledged, the Agreement allows either party to
withdraw from the contract if market conditions no longer guarantee the consistency of the
mechanism of calculating the remuneration of the deposit. These clauses are intended to
protect both parties from the risk that during the three-year period special conditions
might arise, linked to the market or to the characteristics of postal current accounts, which
might alter the rationale of the remuneration mechanism. If the choice of floating-rate para­
meters had proved inappropriate the Agreement could have been amended. This did not
happen. The Commission considers, therefore, that from a methodological point of view
the use of portfolios based on fixe-rate securities in the […] study is not correct.

The Commission takes the view that each of the above arguments is by itself sufficient to show
that the findings of the […] study regarding active management cannot be viewed as supporting
the claim that the remuneration that PI obtains under the Agreement is in line with the market.

(iii) As a complement to point (ii) above, if the Commission were to accept the approach used by […]
– which it does not – the results obtained by the model over the last 10 years would have been
the following:

Table 9

(1997 to 2007)

Cash return

Agreement

Benchmark total return

Tactical strategy total
return

Average return

3,30 %

5,15 % (1)

Volatility of return

0,32 %

Sharpe ratio

0,33 %

146,74

5,02 %

2,16 %

0,93

6,78 %

2,42 %

1,66

(1) The Italian authorities state that if the annual returns are calculated from January to January, rather than August to August,
and on the assumption that the proceeds are not reinvested, the average return paid by the Treasury in accordance with
the parameters of the Agreement is 4,94 %, rather than the 5,15 % indicated in the […] study.

(83) At the relevant time, however, the parties also knew that since 1997 the interest rates on CCTs had been lower than
those for five- and 10-year BTPs, except for 1997 and 1998. In addition, at the time the Agreement was concluded,
in February 2006, the 2005 interest rates were already known.

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Figure 3

From Table 8 it will be seen that the tactical strategy model generates a return substantially higher
(176 bp higher) than the benchmark return, with only a modest increase in risk. According to
Italy, this confirms that active management can be more efficient than the benchmark portfolio.

But the benchmark portfolio is not the deposit with the Treasury under the Agreement. The risk-
return profile is completely different. The Sharpe ratios (84) of the benchmark portfolio and of the
tactical strategy portfolio are significantly lower than the ratio of the Agreement. This is not
surprising, because the greater returns on the benchmark and tactical strategy portfolios, as
compared with the returns under the Agreement, come at the cost of a sharp increase in the
volatility of the returns themselves. Furthermore, the benchmark and tactical strategy portfolios do
not incorporate the liquidity risk, as they would need to;

(iv) Looking at the period relevant to the Agreement, the annual returns under the Agreement – and
under the private borrower methodology – are higher than those deriving from the active funds
management outlined by […]:

Table 10

Trading strategy total
return (1)

Trading strategy
interest income (2)

Agreement rate

Private borrower rate

(%)

2005

2006

2007

Average

2,78

1,78

3,58

2,71

2,18

3,88

3,88

3,31

3,90

4,25

4,70

4,28

2,81

3,60

4,23

3,55

(1) The return is already corrected by a 12 bp transaction cost required by active management.
(2) The return includes only the interest component, without the capital gains or losses, and is already corrected by a 12 bp

identified by […] as the level of transaction cost required by active management.

(84) The Sharpe ratio is a measure of the excess return (or risk premium) per unit of risk in an investment asset or a
trading strategy. It is used to characterise how well the return of an asset compensates the investor for the risk taken.
When comparing two assets each with the same expected return against the same benchmark, the asset with the
higher Sharpe ratio gives more return for the same risk. Investors are often advised to pick investments with high
Sharpe ratios.

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(v) In 2007,

the

real

first

active

year of

fund
management conducted by PI, the portfolio had an
average life of […] years, and its implicit return was
5,13 %, made up of 4,13 % in yield on the portfolio
and 1 % in implicit capital gain. The Commission
would point out, however,
that capital gains (or
capital
losses) cannot be considered in an analysis
ex ante. Thus no meaningful comparisons can be
made between the total returns on the benchmark
and tactical portfolios and the total returns under
the Agreement.
the 4,13 % return on
active management in 2007 (fixed, without capital
is
gains, and apparently without
lower
the
than the 4,70 % rate obtained under
Agreement and the 4,23 % rate computed by the
in 2005,
private borrower methodology. Moreover,
and on average over the period 2005-2007,
the
the private borrower
rates achieved by means of
the
methodology compare positively to those of
trading strategy.

transaction costs)

If anything,

(vi) The Commission notes

that
analyses possible investment
These scenarios are not
relate
Decision,
as
unknown at
time of
conclusion of the Agreement.

they
the

the […]
strategies

study also
for 2008.
to the present
relevant
to
obviously
the negotiation and

events

(vii) Italy claims

is

that

subject

to a
the Agreement
repricing risk (85) higher than that of the benchmark
and the tactical strategy. However, while it is true that
for a 10-year period the average return on a fixed-rate
bond with a 10-year maturity is known in advance,
Italy’s reasoning depends critically on an equality
between the
asset
portfolio maturity. In addition, the benchmark and
the tactical strategy portfolio are baskets of
fixed-
income securities of various lifetimes. This means
that they too are exposed to a significant repricing
risk.

investment horizon and the

(209) In conclusion,

the returns theoretically achievable by
active fund management on PI’s part, according to the
[…] study, are not comparable to the returns achieved
under the Agreement (or the private borrower metho­
dology), because the underlying financial instruments are

(85) Repricing risk refers to the fact that the continuous roll-over of
short term investments involves a higher interest rate risk than a
long-term investment for which the investment horizon is identical
to the residual term to maturity, and for which the average total
return equals the yield.

the

time of

the negotiation of
is not appropriate for an assessment

different in nature. In particular, the risk profiles of the
types of investment differ substantially. In addition, the
study, which is based on ex post data (data which were
the
unknown at
for
Agreement),
State aid purposes. The Commission therefore takes the
view that the active management model explained in the
[…] study does not show that the Obligation penalises PI.
in 2005-2007, when the Agreement
Quite the reverse,
fund
applied,
management would have led to returns
than
those of
the private borrower
the Agreement and of
methodology.

the proposed active
lower

appears

that

it

Comparison with alleged market peers

Comparison of PI’s interest margin with the interest margin of
comparable private-sector banks

(210) The […] study claims that PI’s interest margin was lower
in 2005 and 2006 than the average interest margin in the
Italian private banking system.

exists

in favour of

(211) The Commission would draw attention to what was said
‘The analysis of
in the decision initiating the procedure:
the elements constituting the spread between the loan/de­
posits rates is of relevance when assessing whether an
advantage
PI/BancoPosta. The
Commission notes that a market spread may contain
State aid elements under certain circumstances, notably
when the loan and deposit rates individually are off
market. This is not the case in the present case. The
Commission considers the deposit rate offered on final
consumer’s current accounts is not constitutive of a
State aid in favour of PI/BancoPosta. Notably, the setting
of this rate does not include a transfer of State resource to
PI/BancoPosta. Moreover, the rates offered over the period
concerned appear to be within a market range, when
comparing with interest
for
similar products. Finally, the beneficiaries of the deposit
rate are individuals. Therefore, at
stage, when
that
examining the spread,
the Commission comes to the
conclusion that, in the present case, an advantage could
only derive from the loan rates. The loan rate paid by the
State gives an economic advantage if it were higher than
the rate which would have been paid to PI/BancoPosta,
under market circumstances, by a private borrower for the
deposited funds, according to their nature and amount’.

rates offered by banks

(212) On the basis of

the initiating decision,

the
comparison between the interest margins of PI and
other banks in the private sector is irrelevant, and the
only element to be analysed in the present decision is
the interest rate paid by the State to PI for the funds
deposited.

therefore,

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(213) Moreover,

there

is no Italian private bank really
in terms of balance-sheet structure.
comparable to PI
PI’s
current
are
liabilities
accounts (postal current accounts). This is not the case
with ‘normal’ banks, which rely notably on bonds,
current accounts, savings accounts etc.

essentially made up of

liabilities of private banks investing in public-sector assets
is made of up repurchase transactions and short-term
deposits: the rest derives from medium- and long-term
funding.

(214) The Commission would also point out that PI

is not
authorised to lend money to its customers; the personal
loans and mortgages it offers are offered on behalf of
other banks.

(220) Second, the comparison with other banks is also vitiated
by the fact that PI does not incur the risks to which they
are exposed and for which they expect to be compensated
on market terms.

(215) In conclusion, the interest margins of PI and of private
banks are different in their composition, and cannot be
meaningfully compared.

Comparison of PI’s tenor mismatch with those of its private-
sector peers

(216) The […] study indicates that PI’s postal current accounts
are a long-term liability, given the high diversification and
stable behaviour of its customers. It also indicates that it is
common practice for the banking system to fund long-
term assets in large part using deposits. In this respect, the
study compares PI’s asset and liability approach to those
of private banks investing their funds in loans to the
public sector (Depfa, Dexia, CCF etc.).

(221) Third, […] rightly says that La Banque Postale cannot be
compared with PI from 2006 onward, because La Banque
in that
Postale began lending to the private sector
year (86); and for the same reasons no conclusions can
be drawn from a comparison between PI and private
banks operating in the public sector, because they also
provide financing outside the public sector (for example,
almost 50 % of Dexia loans are to non-public customers).

requirements on a medium-

(217) According to […], those banks follow the same approach
as PI, since they invest in very long-term public assets
(above 15 years), and obtain funds from a mix of short-
In particular, they collect
term and long-term sources.
their
about 50 % of
to
long-term basis,
term from
financing the rest
repurchase transactions with the European Central Bank
intermediaries, and invest
and deposits from financial
their funding in loans to public authorities, usually with
maturities of from 10 to 50 years. On the basis of the
above, […] concludes that PI’s asset liability management
(ALM) model is in line with that of its market peers, if not
indeed more prudent.

short

(218) The Commission considers that no conclusions can be
drawn from the comparison between PI’s asset liability
management and that of comparable operators, for the
following reasons.

(222) Fourth, as already indicated in connection with the
to
Efiposte/La
comparison with
determine whether an advantage has been conferred on
an undertaking the Commission does not compare the
situation in different Member States.

Poste,

order

in

for

Economic Affairs

(223) To close the comparison with alleged market peers, the
Commission notes that ‘CDP SpA’s cash is deposited in an
interest-bearing current account with the Central State
Treasury, No 29814, entitled “Cassa DP SpA – gestione
separata”. Pursuant to Article 6(2) of the Order of the
Minister
of
5 December 2003, interest on the funds in that account
is paid half-yearly at a floating six-month rate equal to the
simple arithmetic mean of the gross yield on six-month
ordinary Treasury bills
the
Rendistato index. From 1 January 2006, following the
merger
SpA
(Article 1(79) et seq. of Act No 266 of 23 December
2005), interest-bearing current account No 20347, in the

and the movement of

Infrastrutture

SpA into

Finance

CDP

and

of

(219) First, PI’s liabilities structure is not comparable to that of
its market peers: almost 90 % of PI’s liabilities is made up
the
of postal current accounts, while hardly 50 % of

(86) According to the […] study, on p. 15, ‘2006 cannot be considered
for the comparison since La Banque Postale (the new entity after the
transformation of Efiposte in a commercial bank) started the
lending activity to the private sector’.

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account No 29815,

ISPA, was renamed “Cassa DP SpA – gest.
name of
Patrimonio TAV”. The Ministry of Economic Affairs and
Finance pays six-monthly interest on deposits in this
account at a rate equal to the average yield on the six-
month ordinary Treasury bills issued during the previous
six-month period. In order to make use of the treasury
and disbursement services performed by the Banca d’Italia,
to use the non-interest-bearing
CDP SpA continues
entitled “CDP SpA –
current
pagamenti”. With the
interbank
payment
treasury
channel for in- and out-payments has declined consider­
ably’ (87). The Commission is aware of the difficulty of
drawing useful conclusions from comparisons between
PI and operators alleged to be comparable, which differ
from PI in various ways. It can be seen from what has
been said, however, that financial intermediaries investing
in the public sector, like CDP, are not necessarily remun­
erated in line with long-term parameters (88).

increasing use of

to the national

recourse

systems,

portfolio would have. The Commission considers that a
risk-return approach is more appropriate than an analysis
based on return only.

(228) The Commission concludes that in the absence of the
Obligation over the relevant period the possible alter­
to
native
achieve returns which in a risk-return perspective were
similar
than those provided by the
Agreement.

investments would not have

to or better

allowed PI

(229) The appropriateness of the private borrower methodology

is therefore confirmed.

(224) This confirms the Commission’s view that for the purpose
of this Decision no conclusions can be drawn from the
comparison between PI and alleged market peers.

7.4.4. Additional observations

7.4.4.1. T h e n a t u r e o f P I ’ s r o l e

(225) The Commission concludes that the comparisons referred
to above, between the interest margins of PI and the
interest margins of banks operating in the private
sector, and between the tenor mismatch of PI and the
tenor mismatches of operators specialised in funding the
public sector, are irrelevant, and do not show that the
Agreement confers no advantage on PI.

7.4.3.6. C o n c l u s i o n s

(226) To sum up,

the interest

rate provided for

in the
Agreement can be compared with the rate for alternative
investments in a risk-return perspective. For a similar level
of risk, the Agreement provides returns higher than alter­
native investments, and for similar returns it is subject to
lower risks.

(227) Italy itself

the deposit with the
Treasury has a return-risk ratio higher than a fixed-rate

takes the view that

(87) CDP SpA’s annual report for 2006. CDP SpA’s annual report for
‘CDP SpA’s cash is deposited in an interest-bearing
2005 states:
current account with the Central State Treasury, No 29814,
entitled “Cassa DP SpA – Gestione Separata”. Pursuant
to
Article 6(2) of the Order of the Minister for Economic Affairs
interest on the funds is paid
and Finance of 5 December 2003,
half-yearly at a floating six-month rate equal
to the simple
arithmetic mean of
the gross yield on six-month ordinary
Treasury bills and the movement of the monthly Rendistato index.’
the
average cost of funding was 2,3 %, and the spread between rates
on assets and liabilities was 1,5 percentage points.

(88) Moreover, according to CDP’s annual accounts for 2005,

(230) In its

initiating decision of September 2006,

the
Commission said that given the specific position of PI,
it was possible that no standard of comparison would
be available on the market. Under such circumstances,
the Commission would have to establish the cost of
for PI and add a reasonable
operating the account
margin. Such an approach would also be justified if the
Commission were to consider that PI was acting merely as
a conduit to collect funds for the State through its widely
spread post offices.

(231) As explained in Section 7.4.2, the Commission is satisfied
that a standard of comparison can in fact be indentified
on the market, using the private borrower approach.

(232) The Commission considers that the role of PI is not in
any way confined to that of a conduit for collecting funds
for the State. PI has been pursuing an active policy of
developing its banking activities, notably by increasing
the attractiveness of its postal current account. Besides,
in another decision regarding PI, adopted in November
2006 (89), in a case where the postal operator was distri­
buting postal savings books on behalf of CDP, and
passing the money collected to CDP, the Commission
took the view that that activity was not equivalent to
the function of a conduit; the remuneration paid to PI
was based on the annual average deposits on the savings
books. Finally, even ABI does not consider that PI’s re­
muneration should be based on its costs.

(89) Commission Decision 2007/C 31/05 of 26 November 2006, re­
muneration paid for the distribution of postal saving financial
products (see OJ C 31, 13.2.2007, p. 11).

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7.4.4.2. C o m p a r i s o n

c o s t
m e d i u m / l o n g t e r m f u n d i n g o f
T r e a s u r y

w i t h

t h e

o f
t h e

(233) Italy argues that

the cost of medium- and long-term
funding of the Treasury is often higher than the rate
provided for in the Agreement (recitals 77 et seq.).

(234) The Commission would point out the following:

— a comparison with medium- and long-term funding is
not enough by itself.
Italy has not convincingly
demonstrated that postal current accounts serve to
finance only the Treasury’s medium-to long-term
needs. The Commission considers that the deposit is
used to cover the general needs of the Treasury,

— about 60 % of Treasury

are

issues

short-term
instruments (BOTs and CTZs), having a maturity of
no more than two years. The average maturity of the
financial
instruments issued by Italy in the period
2001-2005 (CCTs, CTZs, BTPs, BOTs) was about
four years,

7.4.4.3. O t h e r a r g u m e n t s

(236) In order to prove that the yield obtained by PI on the
deposits it
is required to hold with the Treasury is
achievable in financial markets with a comparable risk
profile, Italy has spoken of a hypothetical one-year swap
operation against the Agreement rate. On the basis of
current market conditions, Italy argues that the value of
such a transaction would be six-month Euribor plus a
spread of 1 % at the end of 2005, 0,40 % at the end of
2006 and 0,30 % in October 2007. Before presenting a
much more detailed examination of the opportunity cost
of
the short-term
interest rate that PI would have to pay on the market
the yield paid by the Treasury (a
in exchange for
‘constant maturity swap’)
is six-month Euribor plus a
spread of 0,43 %. The Commission considers that this
argument, which has not been elaborated,
is neither
appropriate nor relevant to the present analysis.

the Obligation,

indicates that

[…]

7.4.4.4. R e p l i e s

t o t h e

r e m a i n i n g o b s e r ­

v a t i o n s f r o m A B I

(237) ABI states that the two interest-bearing accounts with the
Treasury opened by CDP pay interest every six months at
a floating rate equal to the simple arithmetic mean of the
gross return on six-month ordinary Treasury bills and the
movement of the monthly Rendistato index.

— the average rate of those issues was 2,47 % in 2005,
3,32 % in 2006 and 4,14 % in 2007 (90), well below
the Agreement rates,

(238) The Commission would make the following points:

— in Table 3, the figures in the ‘average’ are calculated
over the period from 2001 up to the year in question.
the figure of 4,7 % in 2003 is the
For instance,
the
average for 2001, 2002 and 2003. Moreover,
average rate computed by Italy is based on funds
raised by issuing 5-10-15-30-year bonds, while the
rate includes a short-term component.
Agreement
The Commission considers,
there is no
too,
logical reason for Italy to exclude three-year bonds
could also be
computation,
from the
as
regarded
The
as medium-term instruments.
Commission is of
the facts do not
justify the use of this methodological analysis.

the view that

these

that

(235) Once again, each of the points set out above is sufficient
by itself to show that the comparison made by Italy is not
conclusive.

(90) Le emissioni del Tesoro series, 2005, 2006 and 2007, available on

http://www.tesoro.it/publicdebt and http://www.dt.tesoro.it

— the nature of CDP’s resources is different from that of
the current accounts of PI’s customers. CDP resources
savings (91), while PI’s
consist mainly of postal
resources derive from postal current accounts,

— like the remuneration paid to PI on the funds
deposited with the Treasury, the remuneration paid
to CDP includes both a short-term component,
accounting for 50 %, and a medium- to long-term
component, accounting for
the other 50 %. The
difference between the two remuneration mechanisms
lies mainly in the weight of each of the components.
However, ABI has not provided data pertaining to the
stability or volatility of CDP’s resources, which might
have helped to determine the nature, average life and
weighting of CDP’s deposits.

(91) In 2005, out of a balance-sheet total of EUR 150 billion, EUR 122
billion came from postal savings, and in 2006, out of a balance-
sheet total of EUR 181 billion, EUR 145 billion came from postal
savings (source: CDP annual reports 2005 and 2006).

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(239) Therefore, no conclusive comparison between the CDP
accounts with the Treasury and the PI account can be
made.

7.5. Lawfulness and compatibility of the State aid

(240) Italy did not notify this new aid scheme in advance, and
has consequently put it into effect unlawfully, contrary to
Article 88(3) of the Treaty.

(246) The Commission considers that

this is operating aid
which cannot be regarded as designed to favour the devel­
opment of certain economic activities within the meaning
of Article 87(3)(c) notably because that provision requires
that the aid ‘does not adversely affect trading conditions
to an extent contrary to the common interest’, a condition
which in the Commission’s opinion is not satisfied in the
targeted to any general
present case. The aid is not
objective of common interest. Finally,
it
the fact
applies only to PI does not change the conclusion of
the assessment, because the effects on trade between
Member States and the effects of operating aid of this
kind in terms of distortion of competition are particularly
sensitive in the financial and postal sectors in which PI
operates.

that

(241) It must now be determined whether the aid is compatible
with the common market under any of the exemptions
laid down in Article 87(2) and (3) of the EC Treaty.

(247) Italy has never invoked any of these exemptions.

(242) The aid is not compatible under Article 87(2). It is not aid
having a social character, granted to individual consumers;
nor aid to make good the damage caused by natural
disasters or exceptional occurrences; nor aid granted to
the economy of certain areas of the Federal Republic of
Germany affected by the division of Germany.

(243) Turning to the exemptions laid down in Article 87(3)(b)
and (d), the aid in question is not intended to promote
the execution of an important project of common
European interest, or to remedy a serious disturbance in
the economy of
intended to promote
culture or heritage conservation.

Italy, nor is it

(244) Article 87(3)(c)

states

aid may be

to an extent

considered
that
compatible if it is intended to facilitate the development
of certain economic activities or of certain economic
areas, where such aid does not adversely affect trading
common
conditions
interest; but
issue does not relate to
investment or to job creation, and constitutes operating,
unconditional aid. According to the Commission’s estab­
lished practice, such aid cannot be considered to facilitate
the development of certain economic activities or of
certain economic areas.

contrary to the

the measure at

(245) The aid applies in the same way across the whole of the
country, and therefore cannot be considered compatible
under
in
Article 87(3)(a) or (c).

the provision for

development

regional

(248) In conclusion, the aid scheme is not compatible with the
common market, and must be brought to an end.

the nature of

the funds and of

(249) Any agreement relating to the remuneration to be paid by
the Treasury to PI for the deposits not concerned by the
2007 Finance Act will have to be based on a detailed
analysis of
the risks
borne by the parties. The Commission would observe
that the results of the […] study and of the statistics
relating to the period before 2007 cannot be used
without further investigation, because the nature of the
funds may have changed. The […] study and the statistics
were based mainly on deposits owned by private
customers, and any funds transferred to the Treasury
from 2007 onward would not come primarily from the
same customers.

7.6. Recovery

(250) Article 14 of Regulation (EC) No 659/99 states that where
negative decisions are taken in respect to unlawful aid, the
Commission is to decide that the Member State concerned
must take all necessary measures to recover the aid from
the beneficiary. But the Commission is not to require
recovery of
this would be contrary to a
the aid if
general principle of Community law.

(251) The Commission considers that, in the present case, there
is no general principle of Community law which stands in
the way of recovery.

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10.3.2009

are

domestic

rules which

(252) In order to determine what must be recovered, it has to
be considered how the status quo ante can be restored,
assessing whether
there is an alternative investment
strategy which would have granted a similar advantage
to PI in the absence of unlawful aid and in accordance
with
compatible with
Community law. The Commission is of the view that
no ‘normal’ situation can be derived from the contra­
dicting alternative investments suggested by Italy. The
recovery cannot be determined in the light of various
transactions which might have been implemented by the
undertakings if
the type of
operation which was coupled with the aid. This would
mean reconstructing past
events on the basis of
hypothetical elements. The only point of reference that
the Commission can use is the methodology deriving
from the principle of the private borrower operating in
a market economy.

they had not opted for

HAS ADOPTED THIS DECISION:

Article 1

The State aid scheme for the remuneration of
the current
accounts held by Poste Italiane with the State Treasury under
Act No 266 of 23 December 2005 and the Agreement of
23 February 2006 between the Ministry of Economic Affairs
and Finance and Poste Italiane, which Italy has unlawfully put
into effect in breach of Article 88(3) of the Treaty, is incom­
patible with the common market.

Article 2

Italy shall bring the scheme referred to in Article 1 to an end
with effect from the date of adoption of this Decision.

(253) The amount

to be recovered in order to restore the
previous situation, therefore, is the difference between (i)
the yearly amount paid to PI under the Agreement and (ii)
the amount resulting from the application of the private
borrower approach (see Tables 6 and 6a).

Article 3

Italy shall recover the incompatible aid granted under the

1.
scheme referred to in Article 1 from the beneficiary.

8. THE 2007 FINANCE ACT

(254) Obviously the 2007 Finance Act was not mentioned in
the decision to initiate the procedure. However, its can be
assessed under the State aid rules without any difficulty.

(255) Under the 2007 Finance Act, the funds that PI collects
from private customers in the course of its postal banking
business are to be invested by PI in euro area government
bonds. The interest paid on such bonds does not contain
any State aid element, as it does not confer any selective
advantage.

9. CONCLUSION

(256) The Commission finds that Italy unlawfully put into effect
the aid scheme consisting of the payment of the loan rate
by the Treasury for the deposits lodged by PI under the
Finance Act 2006 and the Agreement,
in breach of
Article 88(3) of the Treaty.

The amount

to be recovered shall be equal

2.
to the
difference between the annual remuneration paid on current
accounts held by Poste Italiane with the State Treasury under
the Agreement referred to in Article 1 and the amount arrived
at by applying the test of the prudent borrower operating in a
market economy as shown in Table 6a in this Decision.

3.
The sums to be recovered shall bear interest from the date
on which they were put at the disposal of the beneficiary until
their actual recovery.

4.
The interest shall be calculated on a compound basis in
accordance with Chapter V of Regulation (EC) No 794/2004
and Regulation (EC) No 271/2008 amending Regulation (EC)
No 794/2004.

Italy shall cancel all outstanding payments of aid under
5.
the scheme referred to in Article 1 with effect from the date of
adoption of this Decision.

(257) The scheme must be brought to an end. The illegal and

incompatible State aids must be recovered.

1.
Recovery of
immediate and effective.

the aid referred to in Article 1 shall be

Article 4

(258) The 2007 Finance Act does not comprise State aid,

Italy shall ensure that this Decision is implemented within

2.
four months of the date of its notification.

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Article 5

1. Within two months of the notification of this Decision,
Italy shall submit the following information to the Commission:

(a)

the total amount (principal and interest) to be recovered
from the beneficiary;

immediately submit, on simple

recovery of the aid referred to in Article 1 has been completed.
It
request by the
shall
information on the measures already taken and
Commission,
planned to comply with this Decision.
It shall also provide
detailed information concerning the amounts of aid and
interest already recovered from the beneficiary.

Article 6

(b) a detailed description of

the measures already taken or

planned in order to comply with this Decision;

This Decision is addressed to the Italian Republic.

(c) documents demonstrating that

the beneficiary has been

ordered to repay the aid.

Done at Brussels, 16 July 2008.

2.
Italy shall keep the Commission informed of the progress
of the national measures taken to implement this Decision until

For the Commission

Neelie KROES
Member of the Commission