Opinion of the European Central Bank of 25 March 2015 on the reform of popolari banks (CON/2015/13)
Date: 2015-03-25
Institutions: European Central Bank
Subjects: Italy, bank, banking supervision, company with share capital, cooperative, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 25 March 2015 

on the reform of popolari banks 

(CON/2015/13) 

Introduction and legal basis 

On  20  February  2015,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Ministry  of 

Economy  and  Finance  for  an  opinion  on  Article  1  of  Decree-Law  No  3  of  24  January  2015  on  urgent 
measures for the banking system and investments (hereinafter the ‘Decree-Law’)1. 

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  and  sixth  indents  of  Article  2(1)  of  Council 
Decision 98/415/EC2,  as  the  Decree-Law  relates  to  the  Banca  d’Italia  and  to  the  supervisory  tasks 

conferred upon the ECB and 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 Decree-Law 

1.1   Popolari  banks  are  currently  set  up  as  cooperative  companies  limited  by  shares.  Their 

distinguishing features are, inter alia, the fact that shareholdings are limited to 1 per cent of share 

capital,  except  where  a  bank’s  articles  of  association  provide  for  lower  limits  (between  0.5  and 

1 per cent), the ‘one member one vote’ principle, and the fact that the board of directors reserves 

the right to approve the admission of new members. The purpose of Article 1 of the Decree-Law is 
to reform popolari banks by amending Legislative Decree No 385 of 1 September 19933. 

1.2  A  distinction  can  be  made  between  popolari  banks  which  are  relatively  small  and  have  limited 

territorial  coverage,  and  those  which  have  cross-border  operations  or  are  listed  on  the  stock 

exchange. In line with this distinction, the Decree-Law divides popolari banks into two categories, 

depending  on  the  value  of  their  total  assets.  Those  with  assets  of  more  than  EUR 8 billion  are 

obliged  to  either  convert  to  joint-stock  companies  (with  subsequent  application  to  them  of  the 

ordinary  regime  for  such  companies),  wind  up  or  reduce  their  assets  to  below  that  threshold.  In 

order  to  facilitate  such  a  conversion,  the  qualified  majority  voting  threshold  has  been  lowered  for 

approving changes to the legal form of a popolare bank, as well as for decisions on mergers and 

acquisitions.  

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2 

3  

Gazzetta Ufficiale della Repubblica Italiana No 19, 24.01.2015. 
Council  Decision  98/415/EC  of  29  June  1998  on  the  Consultation  of  the  European  Union  by  national  authorities 
regarding draft legislative provisions (OJ 189, 3.7.1998, p. 42). 

Gazzetta Ufficiale della Repubblica Italiana No 230, 30.09.1993 

 
 
 
 
                                                 
ECB-PUBLIC 

1.3  Popolari banks with assets of EUR 8 billion or less are also affected by the Decree-Law. In contrast 

to the current regime, under the Decree-Law, a popolare bank’s memorandum of association may 

allow for the issuance of financial instruments bearing certain economic and administrative rights. 

Owners of these financial instruments may, where so provided by the memorandum of association, 

exercise voting rights up to a maximum of one third of the total votes in the general assembly of 

shareholders and appoint as many as one third of the members of the managing and supervisory 
bodies  of  the  bank4.  Furthermore,  company  members  who  are  legal  persons  may  cast  up to  five 

votes  if  the  memorandum  of  association  so  provides.  In  addition,  under  the  Decree-Law,  where 

proxy voting is allowed, the applicable voting right ceiling should not be set below 10 and may be 

increased to 20. A popolare bank with assets below the EUR 8 billion threshold will apply the lower 

qualified  majority  voting  threshold,  should  it  decide  to  convert  into  a  joint-stock  company.  In 

addition, the requirement that the majority of directors are appointed from among the members or, 

where members are legal entities, from among persons designated by them, is removed. 

1.4   Finally,  under  the  Decree-Law,  the  right  to  redeem  shares  in  the  event  of  withdrawal  from  the 
cooperative,  even  in  the  event  of  transformation,  death  or  exclusion  of  shareholders5,  may  be 

limited  by  the  Banca  d’Italia  if  such  measure  is  deemed  necessary  in  order  to  preserve  the 

adequacy of the Common Equity Tier 1 capital. 

2.  

The appropriate time to consult the ECB 

2.1  The ECB must be consulted at an appropriate stage in the legislative process. This should be at a 

time that enables the ECB to adopt its opinion in all required language versions and that enables 

the  authority  initiating  the  legislative  provision  to  take  the  ECB’s  opinion  into  account  before  it 
decides on the substance6. 

2.2 

In  the  Italian  legal  system,  a  decree-law,  adopted  by  the  Government,  enters  into  force  following 

publication  in  the  Gazzetta  Ufficiale  and  must  be  submitted  on  the  same  day  to  Parliament  for 

conversion  into  law.  If  not  converted  within  60  days  of  publication,  the  decree-law  is  rendered 

invalid with retroactive application. In the light of the above, the ECB should be consulted before 
the adoption of a decree-law7. 

2.3 

In the present case, as the Decree-Law was adopted and published on 24 January 2015, not only 

was the ECB not consulted before its adoption but the submission of the consultation request was 

unnecessarily  delayed.  The  request  was  received  by  the  ECB  on  20  February  2015,  when  the 

Ministry  of  Economy  and  Finance  asked  the  ECB  to  consider  the  consultation  as  a  matter  of 

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5  

6  

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More specifically, holders of financial instruments, in accordance with the memorandum of association, might appoint 
up to one third of the supervisory board members and one third of the management board members in case of two-
tier  governance  system  (Article  1(1)(d)(1)  of    the  Decree-  Law,  amending  Article  150-bis(2)  of  Legislative  Decree 
No 385 of 1 September 1993, in conjunction with Article 2544(2) of the Civil Code) or - alternatively - up to one third 
of  the  directors  in  case  the  one-tier  governance  system  applies  (Article 1(1)(d)(1)  of  the  Decree-  Law,  amending 
Article 150-bis(2) of Legislative Decree No 385 of 1 September 1993, in conjunction with Article 2544(3) of the Civil 
Code). 

Amendments made by the Chamber of Deputies in the process of conversion exclude the power of the Banca d’Italia 
to limit the right to redeem shares in case of death of the shareholder. 

See Title IV, Section I of the Guide to consultation of the European Central Bank by national authorities regarding 
draft legislative provisions, which is available from the ECB’s website.   

See ECB Opinion CON/2012/64. 

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ECB-PUBLIC 

urgency  in  view  of  the  short  deadline  for  conversion.  This  situation  is  unfortunate  and  the  ECB 

would like to emphasise to the Ministry the need for proper consultation. 

3.   General observations 

3.1  The  ECB  welcomes  the  proposed  reform  of  popolari  banks  as  an  essential  step  towards 

addressing shortcomings regarding their governance, and supports the Italian authorities in giving 

this reform permanent effect without delays. 

3.2  The  ECB  understands  that  the  Decree-Law  addresses  certain  rigid  features  of  the  governance 

framework  of  popolari  banks  with  the  aim  of:  (i)  enhancing  the  effective  monitoring  power  of  the 

shareholders  vis–à–vis  the  management;  (ii)  increasing  the  banks’  capital-raising  capacity; 

(iii) reducing  the  risk  of  concentration  of  power  in  a  minority  group  of  shareholders,  and; 

(iv) providing  opportunities  to  look  for  synergies  and  economies  of  scale,  resulting  in  efficiency 

gains within the banking segment, for instance through mergers and acquisitions. 

3.3  The  ECB  notes  that  popolari  banks  with  assets  above  EUR 8 billion  represent  a  significant 

proportion of the popolari segment in terms of loan amounts, number of branches and number of 

employees. Therefore, the threshold set for mandatory conversion seems to be expedient for the 

achievement of the objectives of  the Decree-Law for a significant part of the popolari segment of 

the Italian banking sector. The ECB understands that the asset size criterion is coherent with the 

current distinctions between popolari banks with a wide territorial and operational outreach, having 

a business model similar to the one adopted by commercial banks, and those with a cooperative 

and mutual banking model. In light of this, the ECB welcomes the Decree-Law, which realigns the 

company and governance structure of larger popolari banks with those of their commercial peers 

while not prejudicing the ability of popolari banks to finance the local regional economy. 

3.4   As far as popolari banks with assets of EUR 8 billion or less are concerned, the ECB would like to 

emphasise  the  importance  of  measures  aimed  at  strengthening  their  governance  structures.  A 

more  appropriate  structure  could  help  enhance  their  risk  management  capabilities,  their  internal 

capital  generation  ability  as  well  as  their  potential  for  attracting  additional  capital,  and  their 

competence to withstand financial and economic crises of significant magnitude. This would enable 

popolari  banks  to  continue  to  provide  credit  to  the  regional  and  local  economies  even  during 

difficult times. 

3.5  Given  the  importance  of  the  Decree-Law  in  addressing  one  of  the  vulnerabilities  of  the  Italian 

banking sector, the ECB strongly supports the essential elements of the proposed reform which it 

feels  should  not  be  substantially  amended.  The  ECB,  furthermore,  advocates  for  its  timely 

implementation. 

4. 

Supervisory implications for larger popolari banks 

4.1  The  ECB  notes  that  most  of  the  popolari  banks  with  assets  above  EUR 8 billion  are  directly 

supervised  by  the  ECB.  Against  this  backdrop,  the  ECB  welcomes  the  Decree-Law,  which  is 

intended  to  reshape  the  governance  structure  of  popolari  banks  with  a  wider  territorial  and 

operational outreach. 

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4.2  Under  the  current  prudential  regulatory  framework,  both  strong  governance  arrangements  and  a 

solid capital structure are crucial concerns for the banking supervisor. To this end, the ECB notes 

that the transformation of the biggest popolari banks into joint-stock companies would facilitate their 

ability to raise capital and enhance the shareholders’ control over the management. In addition, this 

could make it easier for the capital instruments issued to be included as part of the fulfilment of the 

Common  Equity  Tier  1  requirements.  Under  Regulation  (EU)  No 575/2013  of  the  European 
Parliament  and  of  the  Council8,  as  supplemented  by  Commission  delegated  Regulation  (EU) 
No 241/20149, for capital instruments to qualify as Common Equity Tier 1 a number of conditions, 

in addition to those applicable to capital instruments issued by joint stock companies, have to be 

met. 

4.3  The transformations envisaged by the Decree-Law will lead to substantial changes, particularly with 

regard  to  the  capital  structure  and  the  governance  arrangements  of  the  credit  institutions 

undergoing  such  transformation.  To  that  end,  the  ECB  notes  that,  pursuant  to    Article  9(1), 
subparagraph  2,  Article  4(1)(e)  and  Article  4(3)  of  Council  Regulation  (EU)  No  1024/201310,  and 
Article 104(1)(b) of Directive 2013/36/EU of the European Parliament and of the Council11, the ECB 

shall have all the powers of the competent and designated authorities under the applicable Union 

law  to  ensure  compliance  with  requirements  regarding  robust  governance  arrangements  with 

regard  to  significant  institutions.  These  powers  include  assessing  whether  such  arrangements 

would jeopardise the safety and the soundness of the credit institution in question, and whether the 

changes to its governance structure are consistent with the credit institution’s sound and prudent 

management and with SSM standards. 

4.4  Moreover,  the  ECB  welcomes  the  fact  that  Decree-Law  explicitly  confers  upon  the  Banca  d’Italia 

the  capacity  to  limit  the  shareholders’  redemption  rights  should  the  exercise  thereof  cause  the 

banks’ own funds to be reduced, as this explicit conferral will facilitate the exercise of the powers of 

the supervisory authority. In light of the competences conferred on the ECB by Article 4(1)(d) and 

the  second  subparagraph  of  Article 9(1)  of  Regulation  (EU)  No  1024/2013,  i.e.  to  ensure 

compliance with own funds requirements, the ECB notes that, for significant institutions, it is for the 

ECB alone to assess in each case whether such limitation of the shareholders’ redemption rights is 

necessary. Finally, it is understood that the Decree-Law is without prejudice to other supervisory,  

8  

9  
10  

11  

Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on  prudential 
requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU)  No  648/2012  (OJ L 176, 
27.6.2013, p. 1).  
Commission delegated Regulation (EU) No 241/2014 (OJ L 74, 14.3.2014, p. 8). 

Council Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank concerning policies 
relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 

Directive  2013/36/EU  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on access  to  the  activity  of 
credit 
firms,  amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 

the  prudential  supervision  of  credit 

institutions  and 

institutions  and 

investment 

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enforcement  and  sanctioning  powers  conferred  on  the  ECB.  This  does  not  prejudice  the  Banca 

d’Italia’s regulatory powers under the Decree-Law. 

ECB-PUBLIC 

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

Done at Frankfurt am Main, 25 March 2015.  

[signed] 

The President of the ECB 

Mario DRAGHI 

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