Regulatory Alerts2023-02-15
Communications - Unilateral Modifications of Contractual Terms Motivated by Interest Rate and Inflation Trends
The Bank of Italy has instructed banks to carefully evaluate unilateral increases in current account fees, noting that recent ECB interest rate hikes may offset inflation-driven cost increases. The regulator emphasizes that such contractual changes must primarily aim to restore the original economic balance between the bank and the client, rather than simply passing on inflation costs. Customers retain the right to terminate contracts without penalty if they disagree with the new terms and wish to seek more favorable offers elsewhere.
1 DEPARTMENT FOR CUSTOMER PROTECTION AND FINANCIAL EDUCATION SERVICE FOR SUPERVISION OF INTERMEDIARIES' CONDUCT (967) DIVISION FOR PROTECTIVE SUPERVISION (003) Unilateral Modifications of Contractual Terms Motivated by Interest Rate and Inflation Trends
The high levels of inflation reached in recent months are inducing some banks to increase the cost of current accounts borne by customers, proposing unilateral modifications to contractual terms.
In exercising its functions of protecting banking customers and supervising the correctness of intermediaries' conduct, the Bank of Italy has invited all banks to evaluate such unfavorable contractual modifications with extreme care, considering that the increase in official interest rates initiated last July by the European Central Bank may have positive effects on the overall profitability of relationships between banks and their customers, potentially capable of compensating for the increase in costs induced by inflation.
This phase of normalization of monetary policy follows a long period of extraordinarily low or negative interest rates that had already pushed some banks to zero the remuneration of current account deposits and increase the charges borne by customers. With the current increase in interest rates, these intermediaries have been urged to revise conditions in a manner favorable to customers. Some banks are proceeding in this direction.
This awareness-raising initiative follows other communications through which, over time, the Bank of Italy has clarified some fundamental criteria that banks must respect when proposing unilateral modifications to contracts to customers (*). The main objective of these communications is to ensure that contractual variations are always motivated by the need to restore the actual balance of the commitments originally assumed by the intermediary and the customer.
It remains clear that, in a market economy, the setting of economic conditions for goods and services offered represents a central element of free entrepreneurial choices. In any case, in the presence of unilateral modifications, customers always have the right to withdraw from the contract without charges by the date of entry into force of the new conditions, also evaluating more convenient offers from other banks.
(*) Unilateral Modifications of Banking and Financial Contracts. Obligations of Intermediaries and Rights of Customers (October 13, 2014); Unilateral Modifications of Banking and Financial Contracts. Obligations of Intermediaries, Rights of Customers, Role of the Supervisory Authority (April 11, 2017).