Operational Guidelines for Ministerial Decree No. 29 of 17 February 2009 on Financial Intermediaries

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BANKING AND FINANCIAL SUPERVISION AREA
SPECIALIZED INTERMEDIARIES SUPERVISION SERVICE (846) DIVISION FOR INTERMEDIARIES EX ART. 106 TUB AND OTHER OPERATORS

MINISTERIAL DECREE 17.2.2009, NO. 29 ON FINANCIAL INTERMEDIARIES EX ARTS. 106, 107, 113 AND 155 TUB - OPERATIONAL GUIDELINES.

The Regulation on financial intermediaries issued by the Decree of the Ministry of Economy and Finance of 17.2.2009, no. 29 (hereinafter the "Decree")1, which entered into force on 18 April 2009, contains the revision, rationalization, and updating of the secondary implementing legislation of Title V of the Banking Consolidation Law (Testo Unico Bancario - TUB).

The main operational guidelines regarding the novelties introduced by the aforementioned Decree are illustrated below.

FINANCIAL INTERMEDIARIES REGISTERED IN THE SPECIAL LIST EX ART. 107 OF D.LGS. 385/93.

The Decree introduces the verification of the existence – during the registration procedure in the special list – of adequate supervisory capital for the risks assumed by the intermediary in relation to the activity carried out. Therefore, pursuant to Art. 17, paragraph 2 of the Decree, the Bank of Italy cannot register in the special list ex Art. 107 of the TUB intermediaries that do not have adequate capital.

Art. 15 of the Decree no longer includes the exceeding of the threshold related to equity resources among the conditions under which the obligation to request registration in the special list arises. Pursuant to Art. 23, paragraph 1 of the Decree, intermediaries registered in the special list on the date of entry into force of the Decree solely due to the exceeding of the equity resources parameter maintain their registration in the special list for 12 months. The Bank of Italy will proceed with the ex officio deletion from the special list if, within this term, the intermediaries do not exceed the relevance threshold related to operational volumes.

1 Published in the Official Gazette of 3/4/2009, General Series no. 78 and consultable on the website www.bancaditalia.it.

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FINANCIAL INTERMEDIARIES REGISTERED IN THE LISTS OF ARTS. 106 OR 107 OF D. LGS. 385/93 AND EXERCISING FACTING ACTIVITIES TOWARDS COMPANIES OF THE BELONGING GROUP.

Art. 9, paragraphs 2 and 3 of the Decree establish that the purchase of credits is no longer configured as an activity towards the public, provided that a company of the group is involved as the assignor (paragraph 2) provided it is different from a financial intermediary, or as the assigned debtor (paragraph 3).

Intermediaries registered in the general list ex Art. 106 TUB that exercise exclusively the factoring activity as defined in Art. 9 of the Decree must, therefore, submit an application for downgrading to the specific section of the list ex Art. 113 TUB pursuant to the provisions of the Bank of Italy Measure of 14 May 2009 governing registration methods.

With reference to intermediaries registered in the special list ex Art. 107 TUB, based on information available to the Supervisory Body, deletion from the special list will be carried out, and – where the prerequisites exist – downgrading to the specific section of the general list referred to in Art. 113 TUB.

INTERMEDIARIES EXERCISING THE ACTIVITY OF ISSUING GUARANTEES TOWARDS THE PUBLIC

From the date of entry into force of the Decree, the Ministerial Decree of 2 April 1999 is repealed, and the exercise of the activity of issuing guarantees is modified for the aspects indicated below.

• Definition of prerequisites and provision of new requirements for carrying out the activity.

Entities wishing to exercise the activity of issuing guarantees towards the public must be registered in the general list and, in addition to respecting the conditions provided in Art. 106 of the TUB, must assume the form of a joint-stock company and satisfy specific capital requirements2.

Intermediaries intending to exercise this activity exclusively or exercising it predominantly or significantly are required to register in the special list, the latter definition being introduced by the Decree (cf. Art. 1,

2 The paid-up share capital, not less than 1.5 million euros, must be invested in liquid assets or in securities with immediate liquidity, both deposited in a single account established at a branch operating in Italy of a national, EU, or non-EU bank. Equity resources must not be less than 2.5 million euros.

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paragraph 1, letters m) and n) of the Decree)3. Such intermediaries must satisfy all the aforementioned requirements with the only distinction regarding equity resources, which must be not less than 5 million euros.

An intermediary registered in the general list that ascertains the exceeding of the aforementioned thresholds of predominance or relevance is required to reduce the activity or request registration in the special list.

Regarding the definition of the activity of issuing guarantees exercised "predominantly", already present in the previous reference legislation, the Decree has clarified that the exceeding of the threshold must be ascertained based on the balance sheet or the semi-annual situation (cf. Art. 1, paragraph 1, letter m) of the Decree). Therefore, intermediaries must calculate this parameter both on a semi-annual basis (first semester – report referring to the period January - June) and on an annual basis. The existence of "relevance" must always be calculated on a semi-annual basis.

The Bank of Italy considers the second semester of 2009 (from 1/7/2009 to 31/12/2009) as the first reference period for the determination of relevance.

Non-compliance with the new provisions constitutes a prerequisite for deletion from the list pursuant to Art. 111 of the TUB.

• New communication obligations.

Regarding the communication obligations provided for in Art. 11, paragraph 4 of the Decree, Art. 12, paragraph 11 of the Bank of Italy Measure of 14 May 2009 provides that intermediaries carrying out the activity of issuing guarantees towards the public:

a) send the annual balance sheet, complete with related attachments, to the Bank of Italy within 30 days of its approval; b) fulfill the obligation to transmit the semi-annual account situation by sending periodic reports (Circular no. 273/2009);

3 For "exercise of the activity of issuing guarantees predominantly", the situation in which, based on the balance sheet or the semi-annual situation, the amount of guarantees in place is higher than the total assets of the balance sheet, or the amount of revenue generated from the issuance of guarantees is higher than 50% of the total revenue of the financial intermediary. For "exercise of the activity of issuing guarantees significantly", the situation in which the average amount of guarantees in the semester is higher than 25 million euros.

4 c) communicate to the Bank of Italy that they have ascertained the exercise of the activity of issuing guarantees predominantly or significantly within 7 days from such ascertaining. In the communication, they indicate the initiatives undertaken to bring the activity back within the permitted limits and transmit the resolutions adopted for this purpose by the administrative body, verified by the control body; d) communicate within 7 days to the Bank of Italy the successful bringing back within the permitted limits of the activity exercised predominantly or significantly.

In this regard, taking into account the new provisions introduced by the Decree, it is noted that the intermediary, upon finding the predominance or relevance of the activity, if it intends to register in the special list, is required to notify this Institution4 within 7 days from the ascertaining; the application for registration must be submitted within the subsequent 60 days. In the event of rejection of the application, the same intermediary is required to bring the activity back within the permitted limits for the maintenance of registration in the general list within the subsequent 60 days from the notification of the refusal measure. It remains understood that during the procedure, the intermediary cannot issue new guarantees.

Non-compliance with the new provisions may constitute a prerequisite for deletion from the list pursuant to Art. 111 of the TUB.

CURRENCY INTERMEDIATION WITHOUT ASSUMPTION OF OWN RISKS (MONEY BROKER)

By repealing the Ministerial Decree of 2 April 1999, the Decree (cf. Art. 24, paragraph 1, letter f)) reformed the regulation on capital requirements related to intermediaries operating in currency exchange without assuming own risks (money brokers), eliminating the exemption from the minimum capital previously granted in favor of this category of operators.

Effective from 18 April 2009, the new minimum share capital threshold required for the exercise of this activity has been increased from 120,000 to 600,000 euros. Intermediaries already registered on the aforementioned date had a term of 180 days to adjust their capital or dispose of the activity, adopting the consequent statutory modifications.

4 Bank of Italy, Specialized Intermediaries Supervision Service, Division for Intermediaries ex Art. 106 and other operators.

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Failure to comply with the new provisions constitutes a prerequisite for deletion from the general list pursuant to Art. 111 of the TUB.

SUBJECTS NOT OPERATING TOWARDS THE PUBLIC EX ART. 113

Art. 12, paragraph 3 of the Decree provides that financial intermediaries that exercise exclusively the activity of acquiring participations, without carrying out other financial activities towards the investees, are not required to register in the specific section of the general list provided for in Art. 113 of the Banking Consolidation Law.

As a result of the regulatory modification introduced by the Decree, registered companies that exercise exclusively the activity of acquiring participations (including simple partnerships)5 must therefore be deleted from the specific section of the general list. Such companies must submit a specific application for deletion using the form attached to the Bank of Italy Measure of 14 May 2009 governing registration methods, indicating in the string "Other to specify" that the deletion is requested in compliance with what is provided for in the aforementioned paragraph 3 of Art. 12 of the Decree.

It is further emphasized that operators for whom financial predominance is attributable solely to the holding of participations and who have not exercised, in a non-occasional manner, other activities of a financial nature among those indicated by Art. 106, paragraph 1 TUB, are not required to submit an application for registration to the specific section provided for in Art. 113 of the Banking Consolidation Law. This principle also applies for the purpose of submitting the application for deletion from the list6.

Rome, 28 October 2009

5 It is noted that simple partnerships constituted for the mere holding of share packages, although they cannot carry out commercial activity (Art. 2249, paragraph 1, c.c.), were registered upon request in the aforementioned section of the list due to specific needs, particularly of a fiscal nature.
6 For the determination of the methods for calculating financial predominance, reference is made to what is provided for in Art. 13 of the Decree.