CICR and Urgent DM Deliberation - Deliberation of 9 February 2000

Interministerial Committee for Credit and Savings

SECRETARIAT

DELIBERATION 9 FEBRUARY 2000

Methods and criteria for the accrual of interest on overdue interest in operations carried out in the exercise of banking and financial activities (Article 120, paragraph 2, of the Consolidated Banking Act, as amended by Article 25 of Legislative Decree 342/99).

THE INTERMINISTERIAL COMMITTEE FOR
CREDIT AND SAVINGS

HAVING REGARD TO Article 120 of Legislative Decree 1 September 1993, No. 385 (Consolidated Banking Act), as amended by Article 25, paragraphs 1 and 2, of Legislative Decree 4 August 1999, No. 342, which grants the CICR the power to establish methods and criteria for the accrual of interest on accrued interest in operations carried out in the exercise of banking activities;

HAVING REGARD TO Article 115, paragraph 1, of the Consolidated Banking Act, which establishes that the rules on transparency of contractual conditions in banking and financial operations and services, contained in Title I of Chapter VI of the same Consolidated Act, apply to activities carried out on the territory of the Republic by banks and financial intermediaries;

HAVING REGARD TO Article 25, paragraph 3, of Legislative Decree 342/1999, which grants the CICR the authority to establish the methods and timing for adapting the clauses relating to the accrual of interest on interest, contained in contracts concluded prior to the date of entry into force of this deliberation, to the provisions of this deliberation;

TAKING INTO ACCOUNT the technical peculiarities that characterize the accrual and calculation of interest on overdue interest in the different types of banking and financial operations and the existence of different theories on the

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Interministerial Committee for Credit and Savings

SECRETARIAT

configuration of the legal case of anatocism (compound interest) and therefore on the scope of application of Article 1283 of the Civil Code;

ON THE PROPOSAL formulated by the Bank of Italy, after hearing the Italian Foreign Exchange Office;

DELIBERATES

Article 1
(Scope of Application)

1. In savings collection and credit exercise operations carried out by banks and financial intermediaries, interest may itself accrue interest according to the methods and criteria indicated in the following articles.

Article 2
(Current Account)

1. In the current account, the crediting and debiting of interest occurs based on the rates and with the periodicity contractually established. The periodic balance accrues interest according to the same methods.

2. Within each individual current account, the same periodicity must be established for the calculation of creditor and debtor interest.

3. The balance resulting from the definitive closure of the current account may, if contractually established, accrue interest. Periodic capitalization is not permitted on this interest.

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Interministerial Committee for Credit and Savings

SECRETARIAT

Article 3
(Loans with Installment Repayment Plan)

1. In financing operations for which it is provided that the repayment of the loan occurs through the payment of installments with predefined temporal deadlines, in the event of the debtor's default, the total amount due at the deadline of each installment may, if contractually established, accrue interest from the deadline date until the moment of payment. Periodic capitalization is not permitted on this interest.

2. When non-payment determines the termination of the financing contract, the total amount due may, if contractually established, accrue interest from the date of termination. Periodic capitalization is not permitted on this interest.

3. When payment occurs through settlement in a current account, the provisions of Article 2 apply.

4. In contracts that provide for a pre-financing period, the interest accrued at the end of such period, if contractually established, may be added to the amount to be repaid according to the amortization plan.

Article 4
(Savings Operations)

In savings operations, interest accrued at periodic deadlines may accrue interest according to the methods and criteria contractually established.

Article 5
(Judicial Demand and Subsequent Agreements After Maturity)

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Interministerial Committee for Credit and Savings

SECRETARIAT

Overdue interest may accrue interest, in addition to the hypotheses and according to the methods referred to in the previous articles, from the day of the judicial demand or by virtue of an agreement subsequent to the maturity, provided that they are interest due for at least six months.

Article 6
(Contractual Transparency)

Contracts relating to savings collection and credit exercise operations concluded after the entry into force of this deliberation indicate the periodicity of interest capitalization and the interest rate applied. In cases where sub-annual capitalization is provided, the value of the rate, related on an annual basis, taking into account the effects of capitalization, is also indicated. Clauses relating to the capitalization of interest have no effect unless specifically approved in writing.

Article 7
(Transitional Provisions)

1. The conditions applied based on contracts concluded prior to the date of entry into force of this deliberation must be adapted to the provisions contained herein by 30 June 2000, and their effects shall take place from the following 1 July.

2. If the new contractual conditions do not entail a worsening of the previously applied conditions, banks and financial intermediaries, within the same deadline of 30 June 2000, may proceed with the adaptation, generally, by publication in the Official Gazette of the Italian Republic. Appropriate notice of such new conditions must be provided in writing to customers at the first available opportunity and, in any case, by 31 December 2000.

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Interministerial Committee for Credit and Savings

SECRETARIAT

3. In the event that the new contractual conditions entail a worsening of the previously applied conditions, they must be approved by the customers.

Article 8
(Entry into Force)

This deliberation enters into force on the sixtieth day following its publication in the Official Gazette of the Italian Republic.

Rome, 9 February 2000

THE PRESIDENT
G. AMATO