Opinion of the European Central Bank of 17 December 2012 on the creation of capital buffers for the Banca Monte dei Paschi di Siena (CON/2012/109)
Date: 2012-12-17
Institutions: European Central Bank
Subjects: Italy, bank, capital increase, financial stability, reserves

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 December 2012 

on the creation of capital buffers for the Banca Monte dei Paschi di Siena 

(CON/2012/109) 

Introduction and legal basis 

On 6 December 2012, the European Central Bank (ECB) received a request from the Italian Ministry of 

Economic Affairs and Finance (hereinafter ‘the Ministry’) for an opinion on Article 8 of Decree Law No 

216 of  11  December  2012  (hereinafter  the  ‘draft  amendment’),  amending  Decree-Law  No  95  of  6  July 

2012 (hereinafter the ‘amended legislation’), on the creation of capital buffers for the Banca Monte dei 

Paschi di Siena (MPS) through the issuance by the MPS  of hybrid instruments to be subscribed by the 

Ministry. 

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 sixth indent of Article 2(1) of Council Decision 98/415/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft amendment relates to 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 draft amendment 

1.1  Decree-Law  No  87  of  27  June  2012,  on  which  the  ECB  adopted  Opinion  CON/2012/642,  was 

adopted by the Italian Government in order to create a temporary capital buffer for the MPS in line 

with  the  Recommendation  of  the  European  Banking  Authority  on  the  creation  and  supervisory 
oversight of temporary capital buffers to restore  market confidence3. The provisions contained in 

that Decree-Law were later included in Decree-Law No 95 of 6 July 2012, which was converted 

into  law  by  Law  No  135  of  7  August  2012.  The  amended  legislation  established  a  form  of 

government  support  by  authorising  the  Ministry  to  subscribe  certain  hybrid  instruments  (new 

financial instruments, NFIs) to be issued by the MPS, up to an amount of EUR 3.9 billion, of which 

EUR  1.9  billion  would  replace  an  equal  outstanding  amount  of  hybrid  instruments  previously 

issued by the MPS and subscribed by the Ministry.  

1  
2 
3  

OJ L 189, 3.7.1998, p. 42.   
All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
EBA/REC/2011/1 of 8 December 2011, available on the European Banking Authority’s website at www.eba.europa.eu. 

 
 
 
 
                                                 
ECB-PUBLIC 

1.2  The draft amendment introduces several changes in the recapitalisation scheme currently in force 

for the MPS. In particular, the NFIs’ coupon is to be paid in cash up to the operating result from the 

MPS’s most recent financial statement, net of the provisions for obligatory reserves. If the MPS is 

not able to pay the coupon or any part of it in cash, for that amount the MPS could either allocate to 

the  Ministry  an  equivalent  nominal  amount  of  new  ordinary  shares,  issued  at  market  price,  or 

newly issued additional NFIs. The draft amendment also extends the deadline for the activation of 

the scheme to 31 January 2013. 

2. 

General observations 

2.1  The  Ministry  informed  the  ECB  on  an  informal  basis  about  the  content  of  its  draft  amendment, 

before submitting it to the Italian Parliament. However, the consultation request should have been 

submitted so as to allow both the Ministry and the Parliament to take into consideration the ECB’s 

opinion  before  taking  a  decision  on  the  substance  of  the  draft  amendment,  in  accordance  with 

Article 4 of Decision 98/415/EC. 

2.2  The ECB notes that, subsequent to the adoption of Opinion CON/2012/64, the Italian Parliament 

introduced  in  the  amended  legislation  a  new  provision  changing  the  way  remuneration  is 

determined for the members of the Board of Directors and certain executives  to ensure that their 

remuneration  is  linked  to  the  business  performance  of  the  bank,  the  risks  to  which  the  bank  is 

exposed and the need to maintain adequate capital levels. The ECB welcomes the ongoing work on 

remuneration policies and schemes for financial institutions receiving public support in accordance 
with the Commission recommendation4.  

2.3  The ECB recommends specifying in more detail in the implementing legislation the features of the 

NFIs, in particular as regards subordination, interest payments on the coupon, conversion features 

and other terms and conditions of issue.  

2.4 

In the ECB’s view, the option granted to the MPS to pay the NFIs’ coupon, by issuing new shares 

to  the  Ministry,  should  be  preferred  to  that  of  issuing  additional  NFIs.  This  second  option, 

especially if repeated over time due to the absence or inadequacy of distributable profits, would add 

to the bank’s interest servicing burden on the NFIs in an already difficult operating environment. 

This  could  pose  further  challenges  to  the  bank’s  performance  in  the  near  term  and  impair  its 

capacity to redeem the NFIs in a timely manner.  

4  

Commission  Recommendation  of  30  April  2009  on  remuneration  policies  in  the  financial  services  sector  (OJ  L  120, 
15.5.2009, p. 22). See also ECB Opinions CON/2010/63 and CON/2011/42, paragraph 6.3. 

2 

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

Done at Frankfurt am Main, 17 December 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

3