Table of contents
Top stories
Conversion of the Relaunch Decree into law
The so-called Relaunch Decree has been recently converted into law, with amendments, providing, among the measures in support of joint-stock companies with a turnover exceeding 50 million euro, that the savings of taxpayers who intend to help the economic growth could go directly in the “relaunch assets” managed by CdP. In addition, tax measures have been strengthened, which support innovative start-ups and SMEs by providing a 50% tax deduction for investments of up to 1 million euro and a 30% tax credit for investments of up to 2 million euro.
The so-called “Simplifications Decree” just published in the Official Gazette
The so-called “Simplifications Decree” has recently entered into force, setting out urgent measures aimed at reducing bureaucracy and boosting digital innovation, among which those simplifying cancellation from the Register of companies, introducing exemptions to the Civil Code provisions on stock capital increases, and experimentations, through the use of emerging technologies, having as object initiatives related to technological innovation and digitalisation.
Main EU and Italian law provisions issued on the wake of the health emergency
- FSB Statement, according to which, following the health emergency, neither the underlying markets that LIBOR seeks to measure nor the main markets which banks rely upon for funding, are sufficiently active.
FSB’s Statement of 1st July 2020 on the impact of COVID-19 on global benchmark reform.
- EBA clarification on the loan moratoria treatment and the criteria that institutions should adopt to reduce losses in calculating operational risk capital requirements.
EBA’s Report on the implementation of selected COVID-19 policies of 7th July 2020.PO
LIC
- Consob Warning to issuers on (i) the assessment, in half-yearly report, of the effects of the health emergency as an indicator of impairment such as to require specific checks on the recoverability of assets, and (ii) the publication, in the interim reports on operations, of detailed information on the impact of the health emergency on strategic planning, targets identification, economic performance, financial position and cash flows.
Consob’s Warning no. 8 of 16th July 2020 on financial reporting.
- BoI Communication implementing EBA Guidelines on reporting and public disclosure requirements to be complied with by less significant banks and banking groups, regarding loans subject of moratorium and granting, as well as financing guaranteed by the State or other public entity.
- IBA Circular, which has (i) extended until 30th September 2020 the moratoria in favor of clients who are in a state of need due to the health emergency, and (ii) established that the suspension of the repayment of loans for the time being applies also to SMEs having NPEs upon submitting their application, provided they were in good economic conditions as at 31st January 2020.
- BoI Communication, which clarifies how intermediaries participating in the Central Credit Registered Data must report thereto arrangements entered into with their clients. In addition, BoI points out that public guarantees granted under laws, decrees and regulatory measures, as well as those issued automatically, must not be reported to the Central Credit Registered Data.
The Court of Cassation intervenes on the new provisions of the “emergency” law
The Supreme Court has recently analysed the law provisions issued in the health emergency concerning laws of contract, highlighting, on the one hand, the issues regarding the management of supervening debts that impinge upon the equilibrium of the contract and, on the other hand, the possible public and private remedies.
Court of Cassation’s Thematic Report no. 56 of 8th July 2020 (text available in Italian only).
Corporate/Laws of contract
On the business judgement rule
The principle whereby directors’ management decisions are irrevocable (the so-called “business judgement rule”) apply also to the decisions concerning the company’s organisation, since the organisational function integrates the company’s managing one.
Court of Rome, decision of 8thApril 2020.
Banking law
ECB consultation on the supervisory approach to consolidation in the banking sector
The ECB’s public consultation having as object a guide on the supervisory approach to the consolidation project of the European banks will end on 1st October 2020. The latter will have to (i) be based on a business and integration plan, (ii) improve the business model’s sustainability, and (iii) meet high standards of governance and risk management.
EBA consultation on early intervention measures
EBA consultation on proposed amendments to the EU regulatory framework for the credit institutions’ recovery and resolution is going to end on 25th September 2020. Among the main amendments proposed, it is worth mentioning the early intervention measures envisaged in the BRRD and the supervisory powers referred to in the CRD.
Updated the BoI’s Supervisory Provisions for banks
Among the main changes, the regulation of risk activities and conflicts of interest of banks and banking groups vis-à-vis related parties, in order to implement national provisions to the evolution of the European framework. Such provisions are to be applied by banks by 31 December 2020.
Basel Committee consultation on the amendments to prudential regulations on the treatment of NPLs
The Basel Committee on Banking Supervision has recently launched a consultation (ending on 23rd August 2020) on a proposal to amend its standard on the capital treatment of NPL securitisations. Among the main changes proposed, the introduction of a standard definition of NPL securitisation, a fixed weight floor of 100% for all NPL securitisation’s exposures, as well as of a fixed 100% risk weight applicable to the most senior tranche of qualifying NPL securitisations.
People’s banks: the EU Court of Justice rules on redemption limits for withdrawing shareholders and the assets threshold
A EU Member State’s law provision does not breach EU law, whether:
- it prohibits people’s banks established in such Member State from refusing the redemption of their shares or other financial instruments, by allowing the same banks to defer, for an unlimited period, the redemption of shares held by a withdrawing shareholder and limit the amount to be redeemed in full or in part, provided that limitations on redemption do not go beyond what is necessary, in light of the prudential situation of the interested banks; and
- it sets out an assets threshold on the exercise of banking activities by people’s banks established in such Member State as limited liability cooperatives, above which the banks themselves must be converted into companies limited by shares, reduce their assets to below that threshold or be liquidated, provided that such law is adequate for securing achievement of general interest objectives and does not exceed what is necessary to attain them.
EU Court of Justice, First Chamber, judgment of 6th July 2020 In Case C‑686/18.
Damage for wrongful reporting to the Central Credit Registered Data
In ascertaining the damages caused by the wrongful reporting to the Central Credit Registered Data, it is necessary to consider the previous financial and economic conditions of the reported company in order to assess whether they have caused, concurred or merely accelerated the damages for which it claims damages.
Civil Court of Cassation, order no. 13264 of 1st July 2020.
The intermediary cannot be held liable for the financial advisor’s illicit conduct in case of the investor’s anomalous behavior
The intermediary cannot be held liable for the financial advisor’s illicit conduct to the detriment of the investor, if it proves that the such conduct was facilitated by the collusive behavior of the latter and capable of interrupting the causal link between illicit conduct and damages incurred.
Civil Court of Cassation, decision no. 12110 of 22nd June 2020 (text available in Italian only).
Nullity or redemption of collateral to secure an assignment of credit
If an assigned receivable is not secured by the collateral promised by the assignor, the assignee can claim damages vis-à-vis the latter in an amount equal to the reduction in the circulation value of the receivable in question, even before calling the debtor.
Financial law
Consob communication on the prospectus’ control criteria
In order to facilitate the preparation of a prospectus to the advantage of potential investors, Consob has recently clarified that the inclusion of information therein must pursue the goals of investor protection, as well as of simplification and clarity of information.
Consob’s Communication no. 7/2020 of 9th July 2020 (text available in Italian only).
Published the ABF and ACF Reports on the activity carried out in 2019 and the first half of 2020, respectively
In the report on ABF’s activity for 2019, its role as an alternative dispute resolution entity was emphasized by pointing out the work of its local colleges, which are autonomous, independent and highly-qualified in banking and financial law.
Moreover, in its report on the activity carried out in the first half of this year, ACF has highlighted that, despite the health emergency, it has continued to carry out its role as an extra-judicial dispute resolution entity, as well as a guide for intermediaries in dealing with their clients’ complaints.
ABF’s Report of 8th July on the activity carried out in 2019 (text available in Italian only).
EU regulation in favor of sustainable investments
In order to remove barriers to the functioning of the internal market with regard to raising funds for sustainability projects, EU Regulation 2020/852 has recently introduced the criteria for determining whether an economic activity qualifies as environmentally sustainable, which establish the degree to which an investment is environmentally sustainable.
ESRB’s recommendation on liquidity risks in investment funds
To avoid future adverse shocks that could severely reduce financial market liquidity, with adverse implications for financial stability conditions in the EU, ESRB has recently recommended ESMA to coordinate with the NCAs to supervise investment funds that have significant exposures to corporate debt and real estate assets and report to ESRB itself on its analysis and related conclusions regarding the preparedness of the relevant investment funds.
Transactions with related parties: statutory auditors’ control duties
In case of transactions with related parties, the statutory auditors must disclose all the critical issues arisen from the lack of substantial fairness and independence of the advisor, as well as from the non-compliance of the procedure with the law, as they cannot limit themselves to verify the compliance thereof with the legal procedures.
Civil Court of Cassation, decision no. 14708 of 10th July 2020 (text available in Italian only).
Reduction of administrative sanctions applied for market abuse behavior
According to the Supreme Court, in a market abuse case, following the declaration of unconstitutionality of the provision that excluded the retroactive application to the offence at issue of the more lenient sanctionary regime introduced by Legislative Decree no. 72/2015, the competent Court of Appeal must redetermine the less favourable administrative sanction applied pursuant to the provision in force at the time the market abuse was committed.
Validity of the IRS contract
According to the ACF, the “Mark to Market” clause solely indicates the value of an IRS contract in a given time. Therefore, the absence thereof in the contract does imply neither the indeterminacy of its object nor a defect in its purpose.
ACF’s decision no. 2678 of 16th June 2020 (text available in Italian only).
Financial services/FinTech
Completed the work of the MISE’s Group of Experts
The results of the work carried out by the MISE’s Group of Experts on an Italian Strategy for Artificial Intelligence have been recently published, which include:
- an analysis of the global, European and national market of artificial intelligence;
- the fundamental elements of such strategy;
- the proposed governance for the Italian artificial intelligence; and
- some recommendations for the implementation, monitoring and communication of the same.
IOSCO’s public consultation on artificial intelligence and machine learning
IOSCO consultation on the definition of a regulatory frameworks to supervise market intermediaries and asset managers utilising artificial intelligence and machine learning will end on 26th October next. The IOSCO’s guidance aims to ensure that intermediaries and managers have appropriate characteristics of (i) governance, internal control and oversight, (ii) knowledge, skills and experience of personnel, (iii) development and testing processes, and (iv) transparency and disclosure.
Public consultation on the proposals for an Italian strategy on DLT and blockchain
MISE consultation on “Proposals for an Italian strategy on DLT and blockchain” issued by a group of 30 experts appointed to this end will end on 20th July next. Among the main recommendations, it is worth mentioning: (i) ensuring the development and spread of such technologies, (ii) defining the context for a national strategy, (iii) providing Italy with a competitive regulatory framework, (iv) increasing public and private investments, (v) proposing new fields of application, and (vi) encouraging European and international cooperation.
SMEs’ digital transformation
By means of MISE’s decree, criteria and requirements for granting facilities to support projects for the technological and digital transformation of SMEs’ production processes through the implementation of enabling technologies identified in the National Enterprise Plan 4.0 (Piano Nazionale Impresa 4.0) and those related to digital technological solutions of the supply chain have recently been defined. Both individual and associated enterprises can access these facilities through network contracts or other forms of collaboration, in which a digital innovation hub or a digital ecosystem for innovation is the lead partner.
Compliance
Legislative Decree no. 231/2001
Implementation of the PIF Directive
In implementation of the PIF Directive, Decree 231 has recently been amended, expanding the catalogue of predicate offences, by including the following ones:
- unfaithful declaration, omission of declaration and undue compensation, if committed within cross-border fraudulent systems and in order to evade value added tax for a total amount of not less than 10 million euro;
- embezzlement and abuse of office; and
- fraud in public supply, agricultural fraud and smuggling.
Data protection
The US-EU Privacy Shield is no longer valid
The European Court of Justice has deemed no longer valid the so-called Privacy Shield, which regulates the transfer of data between United States and the EU, as it is not suitable to ensure that data subjects, whose personal data are transferred to a third country, are afforded a level of protection essentially equivalent to that guaranteed within the EU by GDPR, in light of the EU Charter of Fundamental Rights.
EU Court of Justice, Grand Chamber, judgment of 16th July 2020, in Case C-311/18.
Anti-money laundering
Updated Basel Committee on Banking Supervision’s Guidelines
Basel Committee on Banking Supervision has recently updated its guidelines on the management of money laundering and financing of terrorism risks, with the aim of enhancing cooperation and information exchange amongst NCAs active in the field of prudential supervision and anti-money laundering both in the national and cross-border context.
Corporate criminal law
Abusive exercise of financial activities
Pool financing transactions can integrate the offence of abusive financial activity even if the latter is carried out indirectly through the formal screen of an authorised bank, which has been granted a mandate without representation.
Criminal Court of Cassation, decision no. 12777/2019 (text available in Italian only).
List of abbreviations
ABF: Banking and Financial Ombudsman
ACF: Securities and Financial Ombudsman
BoI: Bank of Italy
BRRD: Directive 2014/59/EU of the European Parliament and of the COUNCIL of 15th May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council Bank Recovery and Resolution Directive
CONSOB: The national financial markets Authority
CdP: Cassa Depositi e Prestiti S.p.A.
CRD: Directive 2013/36/EU of the European parliament and of the Council of 26th June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC
Decree 231: Legislative Decree no. 231 of 8th June 2001
DLT: Distributed Ledger Technology
EBA: European Banking Authority
ECB: European Central Bank
ESMA: European and Securities Market Authority
ESRB: European Systemic Risk Board
EU: European Union
FSB: Consiglio per la Stabilità Finanziaria (Financial Stability Board)
GDPR: Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46
IBA: Italian Banking Association
IOSCO: International Organization of Securities Commissions
IRS: Interest Rate Swap
Legislative Decree no. 72/15: Legislative Decree no. 72 of 12th May 2015, Implementation of Directive 2013/36/EU, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, as regards access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms
LIBOR: London Interbank Offered Rate
MISE: Ministry of Economic Development
NCAs: National Competent supervisory Authorities
NPEs: Non-Performing Exposures
NPLs: Non-Performing Loans
PIF Directive: Directive (EU) 2017/1371 of the European Parliament and of the Council of 5th July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law
Privacy Shield: Commission Implementing Decision (EU) 2016/1250 of 12 July 2016 pursuant to Directive 95/46 on the adequacy of the protection provided by the EU-US Privacy Shield
SMEs: Small and Medium Enterprises