Interministerial Committee
for Credit and Savings
Secretariat

2 7 7

DELIBERATION 29 July 2008
Regulation of risk activities and other conflicts of interest of banks and banking groups towards affiliated parties, pursuant to Article 53, paragraphs 4 and 4-ter, of Legislative Decree 1 September 1993, No. 385.

THE INTERMINISTERIAL COMMITTEE
FOR CREDIT AND SAVINGS

HAVING REGARD to the Consolidated Act of banking and credit legislation, contained in Legislative Decree 1 September 1993, No. 385, and subsequent amendments (TUB), and in particular:

• Article 1, paragraph 2, letter h-quater), which defines participations as shares, quotas, and other financial instruments that confer administrative rights or any other rights provided for in the last paragraph of Article 2351 of the Civil Code;
• paragraph 2, letter h-quinquies), of the same article, which defines as significant participations that entail control of the intermediary and participations identified by the Bank of Italy, in conformity with the deliberations of the CICR, with regard to the different regulated cases, taking into account voting rights and other rights that allow influencing the company;
• Article 53, paragraph 1, letters b) and d), according to which the Bank of Italy, in conformity with the deliberations of the CICR, issues general provisions aimed at containing risk in its various configurations as well as administrative and accounting organization and internal controls;
• Article 53, paragraph 4, according to which: i) the Bank of Italy, in conformity with the deliberations of the CICR, establishes conditions and limits for the assumption, by banks, of risk activities towards those who can exercise, directly or indirectly, an influence on the management of the bank or banking group as well as towards subjects connected to them; ii) where it verifies in concrete terms the existence of conflicts of interest situations, the Bank of Italy may establish specific conditions and limits for the assumption of risk activities;
• Article 53, paragraph 4-ter, according to which the Bank of Italy identifies the cases in which the non-compliance with the conditions provided for in paragraph 4 entails the suspension of administrative rights connected with the participation;
• Article 53, paragraph 4-quater, according to which the Bank of Italy, in conformity with the deliberations of the CICR, regulates conflicts of interest between banks and the subjects indicated in paragraph 4, in relation to other types of economic relationships;
• Article 67, paragraph 1, letters b) and d), according to which the Bank of Italy, in conformity with the deliberations of the CICR, issues to the parent company, with general or specific measures, provisions concerning the banking group

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Interministerial Committee
for Credit and Savings

considered as a whole or its components, aimed at containing risk in its various configurations as well as administrative and accounting organization and internal controls;

• Article 136, which regulates the procedure for deliberating the assumption of bonds, by the bank or another company of the banking group, with a series of specifically indicated subjects;
  HAVING REGARD to Article 13 of Decree-Law 30 September 2003, No. 269, converted, with modifications, by Law 24 November 2003, No. 326, concerning the "Regulation of the collective guarantee activity for credit facilities", and in particular paragraphs 29, 30 and 31, concerning banks constituted in the form of limited liability cooperative societies that, based on their statutes, predominantly exercise the activity of collective guarantee for credit facilities in favor of members ("collective guarantee credit banks"); HAVING REGARD to "International Accounting Principles" Nos. 24 and 28 as reported by Commission Regulation 2238/2004/EC; HAVING REGARD to the regulation of large exposures contained in Directive 2006/48/EC of the European Parliament and of the Council, relating to the access to the activity of credit institutions and its exercise; HAVING REGARD to Decree No. 242633 of the Minister of the Treasury – President of the CICR of 22 June 1993, concerning "Control of large exposures"; HAVING REGARD to its own deliberation of 19 July 2005, No. 1057, concerning "Regulation of participations and control in banks and other intermediaries as well as bank financing to related parties", published in the Official Gazette No. 188 of 13 August 2005; HAVING REGARD to its own deliberation of 22 February 2006, No. 240, concerning "Regulation of risk activities of banks and banking groups towards affiliated parties", published in the Official Gazette No. 68 of 22 March 2006; HAVING REGARD to the urgent decree of the Minister of Economy and Finance – President of the CICR of 27 December 2006, No. 933, concerning "Transposition of the new regulation on bank capital", published in the Official Gazette No. 17 of 22 January 2007; ON PROPOSAL formulated by the Bank of Italy;

D E L I B E R A

Article 1
(Affiliated Parties)

1. For the purposes of this deliberation, the following are understood as:

1. related party:

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Interministerial Committee
for Credit and Savings

a) those who perform administration, direction, and control functions at the bank or parent company; b) the holder of a participation, the acquisition of which is subject to authorization by the Bank of Italy pursuant to Article 19 of the TUB or by another foreign supervisory Authority, in the bank or parent company and those who exercise the rights inherent to it, as well as whoever holds control of the bank. The Bank of Italy may establish, for Italian companies, participation thresholds lower than those provided for for authorization purposes; c) subjects who are able to appoint, also based on agreements or statutory clauses, one or more members of the board of directors or supervisory board of the bank or parent company; d) companies over which the bank or another company of the banking group exercises, directly or indirectly, significant influence. The Bank of Italy establishes the criteria to identify cases where there is significant influence, taking into consideration: the simultaneous presence of investments, also through intermediary bodies, and significant operations with the company; the presumptions of Article 2359, third paragraph, of the Civil Code; "International Accounting Principle" No. 28 as reported by Regulation (EC) 2238/2004; e) other subjects identified by the Bank of Italy taking into account "International Accounting Principle" No. 24 as reported by Regulation (EC) 2238/2004;
2) subjects connected to a related party:
a) companies and entities controlled, directly or indirectly, by a related party; b) subjects who control, directly or indirectly, a related party referred to in number 1, letters b) and c), or who are subject, directly or indirectly, to common control with them; c) other subjects identified by the Bank of Italy taking into account "International Accounting Principle" No. 24 as reported by Regulation (EC) 2238/2004;
3) affiliated parties: a related party and the set of subjects connected to it.
2. Related parties provide information to the bank or parent company to enable the census of affiliated parties.

Article 2
(Limits on Risk Activities)

1. The overall risk activities of a banking group or a bank not belonging to a banking group towards affiliated parties must be lower than a percentage of regulatory capital fixed by the Bank of Italy, in any case not exceeding 20 percent.
2. Without prejudice to the respect of the consolidated limit provided for under paragraph 1, the Bank of Italy may provide, for individual banks belonging to a group, limits

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Interministerial Committee
for Credit and Savings

different from those indicated in paragraph 1, in any case not exceeding 20 percent of individual regulatory capital.
3. The limits provided for under paragraph 1 may be differentiated according to the type of related party.
4. The Bank of Italy may provide limits on the assumption of market risks arising from transactions with related parties, also by establishing specific capital requirements.

Article 3
(Procedures and Controls)

1. Risk activities and any other economic relationship with affiliated parties are deliberated with methods that guarantee the objectivity of evaluations.
2. The deliberations referred to in paragraph 1 are adequately motivated with regard to the compliance of the economic conditions applied with market criteria.
3. Banks carry out specific controls on the progress of the relationships regulated by this article.

Article 4
(Implementation and Transitional Provisions)

1. The Bank of Italy issues implementation provisions for this deliberation and may provide:
   a) the weighting of risk activities for the purpose of respecting the limits provided for under Article 2; b) limits different from the general ones for risk activities of cooperative credit banks and, limited to the issuance of collective guarantees for credit facilities, of collective guarantee credit banks; c) in the case of banks part of a banking group subject to consolidated supervision in another Member State of the European Union, that the consolidated regulatory capital of such group be taken into account; d) the non-application, in whole or in part, of the regulation provided for under this deliberation for risk activities towards other companies belonging to the same banking group, if this is subject to consolidated supervision in Italy or in another Member State of the European Union; e) the deduction from regulatory capital of the excesses of risk activities compared to the limits provided for under Article 2 in case of non-compliance with the limits, until recovery measures are implemented; f) methods and deadlines for the recovery of risk activities that, on the date of entry into force of the implementation regulation, exceed the limits of Article 2, according to criteria of gradualness.

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Interministerial Committee
for Credit and Savings

6. The provisions of Decree No. 242633 of the Minister of the Treasury of 22 June 1993 concerning "Control of large exposures" remain in force for what is not regulated pursuant to this deliberation. In particular, the provisions concerning affiliated parties are repealed as of the entry into force of the Bank of Italy's implementation provisions of this deliberation.

7. The CICR deliberation of 22 February 2006, No. 240, is repealed. Chapter III of the CICR deliberation of 19 July 2005, No. 1057, remains repealed.

This deliberation will be published in the Official Gazette of the Italian Republic.
Rome, 29 July 2008

THE PRESIDENT
G. Tremonti