Opinion of the European Central Bank of 27 December 2013 on a capital increase of the Banca d’Italia (CON/2013/96)
Date: 2013-12-27
Institutions: European Central Bank
Subjects: Italy, capital increase, central bank, foreign-exchange reserves, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 27 December 2013 

on a capital increase of the Banca d’Italia 

(CON/2013/96) 

Introduction and legal basis 

On  22  November  2013,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Ministry  of 

Economy and Finance for an opinion on a draft decree-law providing for a capital increase of the Banca 

d’Italia  and  laying down principles  for  amendments  to  the  Statute  of  the  Banca  d’Italia. The  Decree-

Law  was  adopted  on  30  November  2013.  This  opinion  is  based  on  the  Decree-Law  adopted  by  the 
consulting authority1 (hereinafter 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 

third 

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  provisions2,  as  the  Decree-Law  relates  to  the  Banca  d’Italia.  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 

The Decree-Law provides for an increase of the Banca d’Italia’s share capital by converting statutory 

reserves  into  capital.  The  share  capital,  set  by  the  Banking  Law  of  1936  at  EUR  156  000,  has  been 

estimated  to  be  between  EUR  5  billion  and  EUR  7.5  billion  by  a  High  Level  Group  of  Experts 
established  by  the  Banca  d’Italia3  and  is  to  be  updated  accordingly.  While  the  draft  decree-law 

envisaged a capital increase in this range, the Decree-Law simply authorises the Banca d’Italia to raise 

its capital to EUR 7.5 billion. 

Furthermore,  material  changes  in  profit  distribution  are  envisaged,  with  annual  dividends  to 

shareholders drawn on net profits to be capped at six per cent of the share capital, to the exclusion of 
any further payouts to shareholders4. 

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Gazzetta Ufficiale della Repubblica Italiana No 281, 30.11.2013. 
OJ L 189, 3.7.1998, p. 42.  
The note released by the High Level Group of Experts was attached to the draft decree law. 
See Article 6(5)(b) of the Decree-Law, which specifies that the economic rights of shareholders are limited to what is 
provided  for  in  Article  4(2),  i.e.  updated  value  of  the  shares  and  Article  4(3),  i.e.  annual  dividends  only,  out  of  net 
profits, for an amount no greater than 6% of the capital of the Decree-Law. 

 
 
 
 
                                                 
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In addition, the authorities aim to foster the Banca d’Italia’s independence and the public’s perception 

of that independence by means of a more balanced distribution of the shares among shareholders.  The 

shareholdings  of individual  shareholders  and  the  attached voting  rights  are  capped  at  five per  cent of 

the  Banca  d’Italia’s  share  capital.  The  range  of  eligible  shareholders  is  broadened  to  include  pension 

funds while also specifying the eligibility of all commercial banks, and the Banca d’Italia is authorised 

to carry out temporary transactions in its own shares. 

Pursuant to Article 6(6) of the Decree-Law, the Banca d’Italia’s shareholders shall transfer their shares 

to their trading book ‘at the value at which they were stated in the item of origin’. The same provision 

specifies  that,  except  as  provided  for  above,  International  Accounting  Standards  (IAS)  (now 
International Financial Reporting Standards5 (IFRS)) shall apply. 

2. 

The appropriate time to consult the ECB 

The ECB has underlined in several opinions that ‘even in cases of extreme urgency national authorities 

are not relieved from their duty to consult the ECB and to allow sufficient time to take the ECB’s views 
into  account  as  laid  down  in  Articles  127(4)  and  282(5)  of  the  Treaty’6.  Moreover,  Article  3(4)  of 

Decision  98/415/EC  obliges  the  Member  States  to  suspend  the  process  of  adoption  of  draft  legislative 

provisions  pending  the  receipt  of  the  ECB’s  opinion.  The  ECB  received  the  consultation  request  on 

22 November  2013,  and  the  Decree-Law  was  adopted  on  30  November  2013.  Since  the  adoption  of 

legislative provisions prior to delivery of the opinion or expiry of the set deadline is tantamount to a non-

consultation  of  the  ECB,  the  ECB  would  like  to  remind  the  Ministry  of  the  proper  procedure  for 
consultation7, in particular taking into account the relevance of the legislation for the Banca d’Italia and 

the Eurosystem. 

3. 

Capital increase and the Banca d’Italia’s independence 

3.1  The  principle  of  financial  independence,  which  is  an  aspect  of  the  principle  of  central  bank 

independence  for  the  members  of  the  European  System  of  Central  Banks  (ESCB)  enshrined  in 

Article 130 of the Treaty, requires a national central bank (NCB) to have sufficient means to not 

only  perform  its  ESCB-related  or  Eurosystem-related  tasks,  but  also  its  national  tasks,  e.g. 
financing  its  administration  and  own  operations8.  Financial  independence  also  carries  an 

implication that NCBs should always be sufficiently capitalised. In particular, the ECB is of the 

view that the higher the level of capital, reserves and provisions against financial risks, the higher 
the safeguards will be against future losses9. NCBs must be free to independently create financial 

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8  
9  

Available  on  the  IFRS  Foundation’s  website  at  www.ifrs.org.  The  Decree-Law  under  scrutiny  by  reference  to 
Legislative Decree No 38/2005 restates that application of international accounting standards is mandatory. 
See  Opinion  CON/2012/20;  see  also  Opinions  CON/2012/4,  CON/2012/9  and  CON/2012/13.  All  ECB  opinions  are 
published on the ECB’s website at www.ecb.europa.eu. 
See Opinion CON/2012/20. 
See the ECB’s Convergence Report 2013, p. 25. 
See Opinion CON/2010/88. 

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provisions  and  buffers  to  safeguard  the  real  value  of  their  capital  and  assets.  Additionally, 

Member  States  should  not  impede  NCBs  in  building  up  their  reserve  capital  to  a  level  that  is 
necessary for a member of the Eurosystem to fulfil its tasks10. 

3.2  The ECB takes note of the authorisation to increase the Banca d’Italia’s capital and understands 

that it has been proposed in close cooperation with the Banca d’Italia, which set up a High Level 

Group of Experts to assess the current value of its shares. In fact, the ECB considers it important 

from the perspective of central bank independence that such decisions are initiated and taken in 
close cooperation with the relevant NCB11. 

3.3  With regard to financial independence, it is pointed out that the Banca d’Italia should always be 
sufficiently  capitalised12,  and  that  the  Banca  d’Italia  needs  to  be  able  to  independently  create, 

build  up  and  replenish  adequate  financial  buffers  commensurate  with  the  level  of  risks  arising 

from  the  nature  of  its  activities,  including  reserves  representing  retained  profits,  in  order  to 
preserve an appropriate level of net equity13. 

3.4.  The High Level Group of Experts established by Banca d’Italia carried out a valuation exercise 

according to a ‘dividend discount model’ based on selected parameters, e.g. the free-risk interest 

rate, the dividend growth rate, the ‘Beta’ coefficient of the shares of the Banca d’Italia, the equity 
premium  and  the  liquidity  discount14.  The  ECB  understands  that  such  a  long-term  assessment, 

where assumptions about future dividends over a  period of more than 20 years are being made, 

requires  a  certain  degree  of  conjecture  regarding  the  quantification  of  key  parameters. 

Nevertheless, additional details on the quantitative assumptions underlying the assessment would 

be  important.  In  any  case,  the  ECB  recommends  that  the  Banca  d’Italia,  having  been  fully 
involved in the valuation exercise and  being best placed to assess its required level of capital15, 

acts prudently and in accordance with principles and objectives of the ESCB when effectuating 
the capital increase16. 

3.5  Since  the  existing  statutory  reserve  will  be  partly  incorporated  into  the  Banca  d’Italia’s  share 

capital in order to carry out the capital increase, the amended rules should ensure, with the aim of 

safeguarding  the  Banca  d’Italia’s  financial  independence,  that  such  reserve  may  be  gradually 

replenished  over  an  appropriate  period  of  time  and  up  to  the  amount  deemed  necessary  to 

safeguard the value of the Banca d’Italia’s capital and assets. In this respect, the ECB welcomes 

that  Article  6(5)(a)  of  the  Decree-Law  requires  the  Statute  of  the  Banca  d’Italia  to  contain 

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15  
16  

See the ECB’s Convergence Report 2013, p. 26; see also Opinion CON/2009/26. 
See Opinion CON/2010/88. 
See ECB’s Convergence Report 2013, p. 25. 
See Opinion CON/2012/69. 
Note of the High Level Group of Experts, p. 3. 
See the ECB’s Convergence Report 2013, p. 26; see also paragraph 2.1 of Opinion CON/2010/88. 
Pursuant to Article 10(2) of Legislative Decree No 43 of 10 March 1998, referred to by Article 3(5) of the  Decree-
Law, amendments to the Statute of  the Banca d’Italia are voted  on in the extraordinary meeting  of shareholders and 
transposed  in  the  form  of  a  Presidential  Decree  on  proposal  of  the  President  of  the  Council  of  Ministers  acting 
together the Ministry of the Treasury, the Budget and Economic Planning. 

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provisions  ensuring  that  the  Banca  d’Italia  maintains  adequate  capital  safeguards  against  risk, 

consistent  with  ESCB  standards.  The  ECB  furthermore  considers  it  important  from  a  financial 

independence perspective that the current mechanism provided for in Article 39 of the Statute of 

the Banca d’Italia, which allocates part of the annual net profits to the Banca d’Italia’s reserves, 

is preserved. 

4. 

Amendments to the Statute of the Banca d’Italia 

4.1 

It  is  understood  that,  pursuant  to  Articles  4(5)  and  4(6)  in  conjunction  with  Article  6(5)  of  the 

Decree-Law,  shares  representing  more  than  the  current  maximum  five  per  cent  of  the  Banca 

d’Italia’s share capital, while not bestowing voting rights, shall grant their holders attached rights 

to  dividends  from  declared  profits  for  a  period  of  no  longer  than  24  months  starting  from  the 
completion  of  the  capital  increase17.  At  the  end  of  that  period,  any  dividend  rights  attached  to 
such shares will be allocated to the Banca d’Italia’s statutory reserves18. The Banca d’Italia may 

temporarily buy back such shares from the shareholders and enter into contracts to this effect to 

enable compliance with the five per cent limit imposed on individual shareholdings in the Banca 
d’Italia19. 

4.2  The Decree-Law establishes certain general principles. The ECB understands that  detailed rules 

on the imposition of limits on shareholdings in the Banca d’Italia and any  further clarifications 

regarding possible buy-back arrangements and the relevant time limit will be enacted by means 

of amendments to the Statute of the Banca d’Italia. The ECB has been consulted on the proposed 

amendments to the Statute of the Banca d’Italia. 

5. 

Treatment of the Banca d’Italia’s shareholdings 

5.1  As  a  result  of  the  recapitalisation  operation  authorised  by  the  Decree-Law,  the  Banca  d’Italia 

shares  are  to  be  recorded  in  the  balance  sheets  of  its  shareholders  as  positions  in  their  trading 

book  at  their  value  prior  to  the  operation  in  order  to  create  a  market  for  the  Banca  d’Italia’s 

shares. 

5.2 

In this respect it is important that the recapitalisation fully complies at all times with the existing 

Union  prudential  and  accounting  frameworks,  and  in  particular  that  the  rules  on  the 
reclassification of financial instruments as laid down by IAS-IFRS are not infringed20. Moreover, 

consistent application of the IFRS guidance on fair value measurement should be ensured. 

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18  
19  
20  

See Article 6(5)(c) of the Decree-Law. 
See Article 4(5) of the Decree-Law. 
See Article 4(6) Decree-Law. 
See in particular IAS 39(50). 

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6. 

The buy-back scheme 

As  mentioned  above,  the  Decree-Law  includes  provisions  authorising  the  Banca  d’Italia  to  launch 

temporary buy-back operations to repurchase its own shares from shareholders holding more than  five 

per cent of  the  Banca d’Italia’s share capital. The ECB understands that the possibility for  the Banca 

d’Italia  to  enter  into  such  a  scheme  may  entail  the  transfer  of  financial  resources  to  shareholders. 

However,  the  terms  of  the  scheme  are  not  set  out  in  the  Decree-Law  and  the  scheme,  while  being  in 

place only temporarily, will need to comply with relevant Union laws. 

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

Done at Frankfurt am Main, 27 December 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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