Opinion of the European Central Bank of 24 January 2012 on a guarantee scheme for the liabilities of Italian banks and on the exchange of lira banknotes (CON/2012/4)
Date: 2012-01-24
Institutions: European Central Bank
Subjects: Italy, State aid, bank, bond, central bank, guarantee, money, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 January 2012  

on a guarantee scheme for the liabilities of Italian banks and on the exchange of lira banknotes  

(CON/2012/4) 

Introduction and legal basis 

On  15  December  2011,  the  ECB  received  a  request  from  the  Italian  Ministry  of  Economic  Affairs  and 

Finance  (the  ‘Ministry’)  for  an  opinion  on  Article  8  of  Decree-Law  No  201  of  6  December  2011  on 
equity,  growth  and  fiscal  consolidation1  (hereinafter  the  ‘Decree-Law’).  This  Opinion  also  considers 

Article 26 of the Decree-Law. 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  first,  third  and  sixth  indents  of  Article  2(1)  of  Council 

Decision 98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities  regarding  draft  legislative  provisions2,  as  the  Decree-Law  concerns  currency  matters,  the 

Banca  d’Italia  and  rules  applicable  to  financial  institutions  insofar  as  they  materially  influence  the 

stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the 

Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion. 

1.   Purpose of the Decree-Law 

1.1  Article 8 of the Decree-Law establishes a guarantee scheme for the liabilities of Italian banks3 until 
30  June  20124,  in  accordance  with  the  Communication  from  the  Commission  on  the  application, 

from 1 January 2012, of State aid rules to support measures in favour of banks in the context of the 
financial  crisis  (the  ‘2011  Communication’)5.  The  Ministry  will  provide6  (i)  a  guarantee7  for  the 
liabilities of Italian banks8, provided they fulfill a number of requirements, including in particular 

1  
2  
3  
4  

5  
6  

7  

8  

Gazzetta Ufficiale No 284, 6.12.2011. 
OJ L 189, 3.7.1998, p. 42.  
Meaning banks having their registered office in Italy. See Article 8(5). 
Such date may be further extended by means of decrees of the President of the Council of Ministers, on a proposal of the 
Minister for Economic Affairs and Finance, and in accordance with Union law. See Article 8(1) of the Decree-Law.  
OJ C 356, 6.12.2011, p. 7. 
Up to EUR 200 million per year from 2012 to 2016. Such amounts are deposited in an account to cover any activation of 
the guarantees. Additional financial needs will be addressed by the funds allocated to the Ministry. See Article 8(4). 
Unconditional, irrevocable, first demand guarantees may be provided on principal and interest. See Article 8(3) and (11) 
of the Decree-Law.  
In accordance with the 2011 Communication, instruments that qualify as regulatory capital under Banca d’Italia Circular 
No 263 of 27 December 2006, Title I, Chapter 1, Section 2 are excluded from the scope of the guarantee. See Article 
8(12) of the Decree-Law. 

 
 
 
 
                                                 
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that  they  have  been  issued  by  banks  after  the  entry  into  force  of  the  Decree-Law  and  have  a 

residual maturity (a) between three months and five years; or (b) up to seven years from 1 January 
2012,  if  they  are  covered  bonds9  issued  by  Italian  banks;  and  (ii)  a  guarantee  for  emergency 
liquidity assistance operations conducted by the Banca d’Italia10.  

1.2  A guarantee may be provided on the basis of an assessment conducted by the Banca d'Italia on the 

relevant  bank,  concerning  (i)  capital  adequacy;  and;  (ii)  capacity  to  discharge  the  obligations 
assumed11. According to the Decree Law, the Banca d’Italia is closely involved in the management 

of the guarantee scheme, and is entrusted with several functions, including biannual monitoring of 
the  operations  conducted  and  their  effect  on  the  economy12.  The  Banca  d’Italia  is  also  closely 

involved in the management of the beneficiary institutions' compliance with the conditions set out 
in the Decree Law13, has an advisory function in view of possible changes to the framework14, and 
a  responsibility  for  handling  banks'  applications  for  admission15  and  recourse16  to  the  scheme,  as 
well as guarantee payments17. 

1.3  Banknotes and coins denominated in lire lapse within 10 years from the date on which they ceased 
to be legal tender18, and a deadline is imposed for the exchange of such banknotes and coins at all 
branches of the Banca d’Italia19. Article 26 of the Decree-Law brings forward the deadline to the 

date  of  entry  into  force  of  the  Decree-Law  and  specifies  that  the  countervalue  of  unexchanged 

banknotes and coins, to be allocated to the Italian Treasury, is to be subsequently credited to the 

Italian Government Bonds Sinking Fund. 

2. 

General observations  

2.1  The ECB welcomes the Decree-Law as a crucial step in enhancing financial stability in Italy. At 

the same time, the ECB wishes to make the following comments on several technical aspects of the 

Decree-Law. 

9  
10  
11  
12  
13  
14  
15  
16  
17  

18  

19  

Pursuant to Article 7bis of Law No 130 of 30 April 1999 (Gazzetta Ufficiale No 111, 14.5.1999). 
See Article 8(34) of the Decree-Law. 
See Article 8(2) of the Decree-Law.  
See Article 8(6) of the Decree-Law. 
See Article 8(7) of the Decree-Law. 
See Article 8(20) and (33) of the Decree-Law. 
See Article 8(21), (22), (24) and (25) of the Decree-Law. 
See Article 8(26) of the Decree-Law. 
See Article 8(27) of the Decree-Law. In addition, according to Article 8(30), operations conducted by the Banca d’Italia 
to  address  liquidity  needs  against  the  provision  of  a  pledge  or  a  loan  disposal  benefit  until  31  December  2012  from  a 
special  regime,  more  favourable  than  the  regime  under  Law  No  170  of  21  May  2004  (Gazzetta  Ufficiale  No  164, 
15.7.2004),  implementing  Directive  2002/47/EC  of  the  European  Parliament  and  of  the  Council  of  6  June  2002  on 
financial collateral arrangements (OJ L 168, 27.6.2002, p. 43). 
See Article 3 of Law No 96 of 7.4.1996 (Gazzetta Ufficiale No 85, 12.4.1997) and Article 52-ter of Legislative Decree 
No 213 of 24.6.1998 (Gazzetta Ufficiale No 157, 8.7.1998), respectively. This legislation was amended by Article 87 of 
Law No 289 of 27 December 2002 (Gazzetta Ufficiale No 305 of 31.12.2002), i.e. the ‘2003 Budget Law’, which was the 
subject of Opinion CON/2002/31. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.  
Article  87  of  the  2003  Budget  Law  also  introduced  an  obligation  for  the  Banca  d’Italia  to  pay  to  the  Government  the 
value of the banknotes not submitted for exchange by that date. Pursuant to the amended provisions, the Banca d’Italia 
and the Ministry also estimated the amount of banknotes which would have not been submitted for exchange, and on that 
basis the Banca d’Italia carried out in two instalments an interim payment of 90% of the estimated amount.  

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2.2  Proper timing to consult the ECB  

The  ECB  received  the  consultation  request  only  on  15  December  2011  although  the  Decree-Law 

entered into force on 6 December 2011. As specified in the consultation request, the Decree-Law 

was  presented  to  Parliament  for  conversion  into  law  within  60  days.  The  consulting  authority 

requested the ECB to consider the consultation as a matter of urgency, without however setting a 

time limit. As underlined in several ECB opinions, Article 3 of Decision 98/415/EC provides that 

the consulting authorities may set a time limit for the submission of an ECB opinion, but it may not 

be  less  than  one  month,  unless  a  shorter  time  limit  is  justified  with  reasons  for  the  extreme 
urgency20. Hence, the Ministry has not consulted the ECB in accordance with Decision 98/415/EC. 

The ECB would therefore like to remind the consulting authority of the importance of consulting 

the  ECB  at  an  appropriate  point  in  time  ‘enabling  the  authority  initiating  the  draft  legislative 

provision  to  take  into  consideration  the  ECB’s  opinion  before  taking  its  decision  on  the 
substance’21.  

2.3  Compliance  with  the  Union  legal  framework,  temporary  nature  of  the  scheme  and  pricing  of 

guarantees 

National  legislative  provisions  need  to  fully  comply  with  Union  law,  including  competition  and 

State  aid  rules.  In  particular,  national  authorities  should  seek  to  coordinate  their  responses  to  the 

current financial situation with their Union partners, in order to act in a united manner and to avoid 

that national measures adversely affect the functioning of the single market and the other Member 

States. In this respect, it is essential that Member States comply with the European Commission’s 
communications22 on the application of State aid rules to support measures in favour of banks and 
government  guarantee  schemes  for  bank  debt,  including  with  regard  to  the  temporary  nature23  of 

the acceptability of such aid measures and the need for credit institutions receiving State support to 

submit to the Commission restructuring plans. Against this background, the ECB understands that 

the pricing terms and conditions for the State guarantees under the Decree-Law are aligned with the 
conditions established by the Commission for the relevant reference periods24 and expects that such 

pricing terms will be applied to financial institutions benefiting from the granted State guarantees.  

20  

21  
22  

23  

24  

On  26  October  2011  the  ECB  wrote  to  the  Ministry,  together  with  consulting  authorities  in  other  Member  States, 
encouraging them to take the measures necessary to ensure effective compliance with Article 4 of Decision 98/415/EC, 
by  duly  consulting  the  ECB  on  draft  legislative  provisions  falling  within  its  field  of  competence,  including  provisions 
which are not subject to parliamentary approval, at an appropriate stage of the legislative process. In that context they 
should put in place appropriate internal procedures to ensure that consultation of the ECB takes place at an appropriate 
stage,  which  enables  the  consulting  and/or  adopting  authority  to  take  into  consideration  the  ECB’s  opinion  before  the 
legislative provision in question is adopted. 
See Article 4 of Decision 98/415/EC. 
See ‘Communication from the Commission – The application of State aid rules to measures taken in relation to financial 
institutions  in  the  context  of  the  current  global  financial  crisis’  (OJ  C  270,  25.10.2008,  p.  8)  and  the  2011 
Communication. 
See  Opinion  CON/2009/24,  paragraph  3.1,  Opinion  CON/2009/54,  paragraph  2.5.2,  Opinion  CON/2009/73,  paragraph 
3.2, Opinion CON/2011/79, paragraph 4 and Opinion CON/2011/85, paragraph 4. 
For the period ending on 31 December 2011, see the DG Competition Staff Working Document of 30 April 2010 ‘The 
application  of  State  aid  rules  to  government  guarantee  schemes  covering  bank  debt  to  be  issued  after  30  June  2010’, 
which  referred  to  the  ‘Recommendations  of  the  Governing  Council  of  the  European  Central  Bank  on  government 
guarantees for bank debt’ of 20 October 2008; for the period starting on 1 January 2012 see the 2011 Communication. 

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The ECB understands that implementing rules will expand on the provisions of the Decree-Law25 

and  expects  to  be  consulted  on  any  proposed  implementing  legislation  to  be  adopted  on  matters 
within its competence26.  

3.  

Interaction of the Decree-Law with the monetary policy of the euro area  

The  ECB  reminds  the  consulting  authority  that  government  guarantees  for  bank  debt  should,  when 

implemented:  (i)  address  the  funding  problems  of  liquidity-constrained  solvent  banks  by  improving  the 

functioning  of  the  market  for  bank  debt  of  longer-term  maturity;  (ii)  preserve  the  level  playing  field 

among financial institutions and avoid market distortions; and (iii) ensure consistency in the management 

of Eurosystem liquidity. In this regard, government guarantees for short-term bank debt with a maturity of 
three to 12 months may be provided to revitalise the short-term bank debt market27. The ECB welcomes 

that  the  Decree-Law  does  not  allow  government  guarantees  for  bank  debt  with  a  maturity  of  less  than 
three months28.  

Moreover,  it  is  also  stressed  that  it  is  of  the  utmost  importance  that  support  operations  conducted  by 

national authorities do not in any way affect the conduct and the implementation of monetary policy in 
the euro area29. In this context, the ECB reiterates its view that the extension of a State guarantee to cover 
interbank deposits should be avoided30, as this could entail substantial distortion in the various national 

segments of the euro area money market by potentially increasing short-term debt issuance activity across 

Member  States,  thereby  impairing  the  implementation  of  the  single  monetary  policy,  which  is  an 
exclusive competence of  the Eurosystem under Article 127(2) of the Treaty31. The extension of a State 
guarantee  to  cover  interbank  deposits  could  also  affect  the  transmission  of  monetary  policy  decisions32 

and make it difficult to maintain the necessary level playing field in the euro area between the financial 

institutions  benefiting  from  a  State  guarantee,  on  the  one  hand,  and  those  not  benefiting  from  a  State 

guarantee, on the other hand.  

25  
26  

27 

28  

29 
30  

31  

32  

See Article 8(33) of the Decree-Law. 
See  the  definition  of  ‘draft  legislative  provisions’  in  Article 1(1),  and  also  the  sixth  indent  of  Article  2(1)  of  Decision 
98/415/EC.  
See Opinion CON/2009/12, paragraph 3.3, Opinion CON/2009/49, paragraph 3.9 and Opinion CON/2009/73, paragraph 
3.1. 
See Opinion CON/2008/58, paragraph 3.2, Opinion CON/2009/73, paragraph 3.1, Opinion CON/2009/92, paragraph 3.5, 
Opinion CON/2011/79, paragraph 3 and Opinion CON/2011/85, paragraph 3. 
See Opinion CON/2009/73, paragraph 3.1 and Opinion CON/2009/92, paragraph 3.5. 
See  Opinion  CON/2008/50,  paragraph  3.2,  Opinion  CON/2009/12,  paragraph 3.3.2,  Opinion  CON/2009/49,  paragraph 
3.9 and Opinion CON/2009/73, paragraph 3.1. 
See  Opinion  CON/2008/48,  paragraph  3.7,  Opinion  CON/2009/12,  paragraph 3.3.2,  Opinion  CON/2009/49,  paragraph 
3.9 and Opinion CON/2009/73, paragraph 3.1. 
See  Opinion  CON/2009/12,  paragraph 3.3.2,  Opinion  CON/2009/49,  paragraph  3.9  and  Opinion  CON/2009/73, 
paragraph 3.1. 

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4. 

The  role  of  the  Banca  d’Italia  in  managing  the  scheme  and  the  prohibition  on  monetary 

financing  

4.1  Under the Decree-Law, the Banca d’Italia is closely involved in managing the scheme. First, it will 

assess the eligibility of the beneficiary institutions with particular regard to their capital adequacy 
and ability to discharge the obligations assumed33. Second, it will support the Ministry in ensuring 

the compliance of the beneficiary institutions with the general conditions for the provision of the 
guarantees34.  In  line  with  its  previous  opinions35,  the  ECB  reiterates  that  the  functions  to  be 

performed  by  the  Banca  d’Italia  in  managing  the  guarantee  scheme  need  to  comply  with  the 

monetary  financing  prohibition  as  regards  the  remuneration  of  the  Banca  d’Italia  for  its 

involvement.  Such  functions  must  be  conducted  in  a  manner  fully  compatible  with  the  Banca 

d’Italia’s institutional and financial independence under the Treaty and the Statute of the European 

System of Central Banks and of the European Central Bank. 

4.2  The involvement of the Banca d’Italia must not go beyond the traditional task of a fiscal agent and 
all the guarantees must be financed from the State’s budget36. The role of the Banca d’Italia must 

comply  with  the  monetary  financing  prohibition  in  Article  123  of  the  Treaty,  which  prohibits 

overdraft facilities or any other type of credit facility with an NCB in favour of the public sector, 
including ‘any financing of the public sector’s obligations vis-à-vis third parties’37. This means in 

particular that no bridge financing may be provided by an ESCB central bank to enable a Member 

State to honour its obligations in respect of State guarantees of bank liabilities. Under the Decree-

Law,  payments  of  State  guarantees  are  carried  out  by  the  Banca  d’Italia  in  its  capacity  as  fiscal 

agent for the Italian Government. If the normal procedure cannot be followed, Article 8(27) of the 

Decree-Law provides that the Banca d’Italia will make payments to creditors, to be recorded on a 
suspense  account38  and  settled  in  the  following  90  days.  The  ECB  understands  that  pursuant  to 
Article 5(4) of the Consolidated Law on the public debt39, any payment by the Banca d’Italia in its 

capacity  as  government  fiscal  agent  is  recorded  daily  in  the  Treasury  account  held  by  the 

Government  with  the  Banca  d’Italia.  According  to  Article  5(1)  of  the  Consolidated  Law,  such 

Treasury account may not have a negative balance, and in general, Article 5(1) of the Consolidated 

33  

34 
35  
36   

37  

38  
39  

The Banca d’Italia will assess against the following benchmarks: (i) the capital ratios at the date of the last supervisory 
reporting should not be below minimum requirements; and (ii) income producing capacity should be adequate to meet the 
guaranteed liabilities. See Article 8(23) of the Decree-Law. In this respect, the Banca d’Italia will benefit from its role as 
supervisory authority  of  the  banking  sector:  see Title  III,  and in particular  Article  51  of  Legislative  Decree  No 385  of 
1 September 1993 (Gazzetta Ufficiale No 230, 30.9.1993). 
See Article 8(8) of the Decree-Law. 
See, in particular, Opinion CON/2008/52, paragraph 3.2 and Opinion CON/2008/65, paragraph 3.1. 
See,  e.g.  Opinion  CON/2008/58,  paragraph  4.2,  Opinion  CON/2008/65,  paragraph  3.2  and  Opinion  CON/2011/76, 
paragraph 3.1. See also the ECB Annual Report 2010, p.120, and the ECB Convergence Report, May 2010, p. 25. 
See  Article  1(1)(b)(ii)  of  Council  Regulation  (EC)  No  3603/93  of  13 December 1993  specifying  definitions  for  the 
application of the prohibitions referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1). 
See Article 8(27) of the Decree-Law. 
Decree of the President of the Republic No 398 of 30 December 2003 (Gazzetta Ufficiale No 57, 9.3.2004, S.O. No 37).   

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Law prohibits the Banca d’Italia from granting any kind of overdraft facility to the Government40. 

However,  the  ECB  notes  that  the  provisions  regarding  the  suspense  account  lack  some  clarity. 

Thus,  for  the  sake  of  legal  certainty,  the  ECB  recommends  regulating  more  transparently  the 

suspense account, as well as any other sub account of the Treasury account.  

5. 

Emergency  liquidity  assistance  operations  collateralised  by  a  State  guarantee  and  the 

prohibition on monetary financing 

The Decree-Law provides for the possibility for the Ministry to provide a State guarantee on discretional 

loans  made  by  the  Banca  d’Italia  to  Italian  banks  and  to  Italian  branches  of  foreign  banks  in  severe 
liquidity  crises  (emergency  liquidity  assistance)41.  The  ECB  notes  that  emergency  liquidity  assistance, 

granted  by  the  national  central  bank  (NCB)  independently  and  at  its  full  discretion  to  a  solvent  credit 

institution on the basis of a collateral security in the  form of a State guarantee, is in principle possible, 

provided that a number of conditions are met in order to ensure the NCB’s compliance with the monetary 

financing prohibition under Article 123 of the Treaty. As noted in previous opinions, the relevant criteria 

are the following: (i) it must be ensured that the credit provided by the NCB is as short term as possible; 

(ii) there must be systemic stability aspects at stake; (iii) there must be no doubts as to the legal validity 

and enforceability of the State guarantee under applicable national law; and (iv) there must be no doubts 

as to the economic adequacy of the State guarantee, which should cover both principal and interest on the 
loans, thus fully preserving the NCB’s financial independence42.  

6.   Payment by the Banca d’Italia to the Government of the value of unexchanged lira banknotes 

The  2003  Budget  Law  introduced  a  regime  for  the  treatment  of  lira  banknotes  which  have  not  been 

exchanged  by  28  February  2012.  The  Ministry  and  the  Banca  d’Italia  estimated  the  value  of  such 

banknotes  and  the  Banca  d’Italia  had  to  pay  such  estimated  amount  to  the  Government  in  three 

instalments, amounting to 65% by 28 February 2003, 25% by 31 January 2008 and the residual amount 

by 31 March 2012. The ECB issued Opinion CON/2002/31 on this matter. The Decree-Law provides that 

all  lira  notes  still  in  circulation  will  be  withdrawn  in  favour  of  the  Treasury  with  immediate  effect  and 

their value allocated to State revenue, thereby bringing forward the withdrawal by three months.  

40  

41  

42  

The ECB understands that the suspense account is an accounting unit used to record payments carried out by the Banca 
d’Italia  with  funds  withdrawn  from  the  Treasury  account,  before  these  amounts  are  debited  to  the  relevant  part  of  the 
public  administration;  i.e.  in  this  case,  the  Ministry.  As  a  consequence,  the  ECB  also  understands  that  recording  a 
payment  in  the suspense  account  is  only  possible  insofar  as  the  payment  has  been financed  with  the  funds  held  in  the 
Treasury  account  and  this  operation  has  been  duly  recorded  under  this  account,  and  that  this  does  not  constitute  the 
provision of a temporary overdraft facility to the Treasury. 
One of the specific tools available to central banks in a crisis situation is the provision of emergency liquidity assistance 
to individual banks. This provision of liquidity assistance consists in giving support in exceptional circumstances and on 
a case-by-case basis to temporarily illiquid but solvent credit institutions. The extension of emergency liquidity assistance 
falls  within  the  Banca  d’Italia’s  task  of  contributing  to  the  stability  of  the  financial  system.  See  the  ECB’s  Financial 
Stability Review, December 2006, pp.171-172, and the ECB Annual Report 1999, p. 98; see also in particular Opinion 
CON/2008/42, paragraph 4.10, Opinion CON/2008/46, paragraph 3.1 and Opinion CON/2008/58, in particular paragraph 
4.1. 
See  Opinion  CON/2008/42,  paragraph  4.11,  Opinion  CON/2008/48,  paragraph  3.9  and  footnote  34  and  Opinion 
CON/2008/58, paragraph 4.3 and in particular footnote 20 referring to Opinion CON/2008/46, paragraph 4.3.  

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In light of the ECB’s refinement of the principle of financial independence and the monetary financing 

prohibition in its opinions and Convergence Report, the ECB notes that the provisions according to which 

the value of legacy banknotes that have not been exchanged into euro is allocated to State revenue raise 

concerns  for  the  following  reasons.  Given  that  the  banknotes  denominated  in  the  legacy  currency  are 

recorded  as  a  liability  on  an  NCB’s  balance  sheet,  the  revenue  should  be  determined  via  the  relevant 

NCB’s profit and loss account to safeguard its financial independence. Directly allocating to the State the 

value of unexchanged banknotes denominated in the legacy currency, outside the calculation of profits, 

and prior to establishing whether the NCB accumulated any losses that have to be covered, constitutes an 

intra-year  payment  in  advance  of  the  profit  distribution  breaching  the  principle  of  financial 
independence43.  

Moreover, given that the distribution of central bank profits which have not been fully realised, accounted 
for and audited does not comply with the monetary financing prohibition44, a payment to the State by the 

NCB  of  the  proceeds  from  the  withdrawal  of  the  banknotes,  denominated  in  the  legacy  currency  in 

advance  of  the  distribution  of  the  NCB’s  annual  profits,  raises  concerns  with  regard  to  the  monetary 

financing  prohibition.  Against  this  background,  proper  safeguards  should  be  in  place  to  ensure  that  the 

revenue  from  the  withdrawal  of  unexchanged  banknotes  denominated  in  the  legacy  currency  is  only 

transferred to the State after any potential losses have been covered. 

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

Done at Frankfurt am Main, 24 January 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

43  
44  

See ECB Convergence Report, May 2010, p. 23. 
See ECB Convergence Report, May 2010, p. 25. 

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