The Bank of Italy Acknowledges the Direct Vertical Effects of Certain Provisions of Directive 2007/44/EC on Acquisitions and Increases in Holdings in Financial Sector Companies and Implements Them in Italy Through a Notice

Directive 2007/44/EC of the European Parliament and of the Council of September 5, 2007, amending existing EU directives as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases in holdings in the financial sector (the “Directive”) introduces uniform procedural rules and evaluation criteria for the prudential assessment of acquisitions and increases in holdings in the banking, financial and insurance sector.

The main objective of the Directive is to provide the necessary legal certainty, clarity and predictability throughout the European Union with regard to the assessment process conducted by national regulators, since a single acquisition of a qualifying holding may be subject to scrutiny in several Member States. To this end, the Directive is based on the principle of maximum harmonization, preventing Member States from laying down stricter rules (thus prohibiting the so-called “gold-plating”).

One of the salient consequences of the maximum harmonization principle set forth by the Directive, is that the minimum direct or indirect holding threshold triggering a notification obligation is raised throughout the European Union to 10% of the capital or voting rights of a banking institution.

Although the Directive had to be implemented by all Member States on March 21, 2009, Italy has not yet adopted any implementing legislation. As a consequence, and in light of the European Court of Justice case law recognizing the binding nature on the Member States (so-called “vertical direct effects”) of the provisions of EU directives that are unconditional and sufficiently precise as to their subject-matter (so-called “self-executing” directives), on May 18, 2009 the Bank of Italy published a communication dated May 12, 2009, acknowledging the vertical direct effects of, among others, Article 5 of the Directive in Italy and setting forth the new procedural rules governing the acquisition or increase of holdings in Italian banks, bank holding companies and investment companies (the ”Communication”).

The Bank of Italy has clarified that the new rules set forth under the Communication are applicable regardless of whether contrary provisions of law exist under the current Italian banking legislation. The Communication states in particular that the statutory provision requiring the Bank of Italy’s prior authorization for any holdings exceeding 5% of the capital or the voting rights is no longer applicable. However, Recital 6 of the Directive clarifies that Member States may require ”that the competent authorities are to be informed of acquisitions of holdings below the thresholds laid down in [the] Directive, so long as a Member State imposes no more than one additional threshold below 10 % for this purpose.” Accordingly, the Communication confirms that the Bank of Italy must be informed of the acquisition of a holding exceeding 5% of the capital or the voting rights of an Italian bank or bank holding company within 10 days after the acquisition. The Communication specifies that prior authorization must be sought by persons who – acting solely or in concert – intend to directly or indirectly acquire a holding in a bank or a bank holding company, which, together with the holdings already held:

1. amount to a holding equal to or exceeding 10% or brings their holding to a percentage equal to or exceeding 20%, 33% or 50% of the share capital or of the voting rights;
   
   
2. entitles the holder(s) thereof to exercise a significant influence on the management of the bank or bank holding company;
   
   
3. regardless of its size, entitles the holder(s) thereof to exercise control over the bank or bank holding company.

The Communication also clarifies that the computation criteria listed under the Directive that must be taken into account when determining whether the acquirer is purchasing a “qualifying holding” are immediately applicable. In this respect, the Communication states that the voting rights which investment firms or banks acquire in the context of underwriting and/or placement activities on a firm commitment basis must not be taken into account for purposes of determining the size of a “qualifying holding,” provided that those rights are, on the one hand, not exercised or otherwise used to influence the management of the issuer and, on the other, disposed of within one year of the acquisition.

If you have any questions, please feel free to contact any of your regular contacts at the firm, or Giuseppe Scassellati-Sforzolini in our Rome office (+39 06 695 221) or Valentina Zadra and Maria Grazia Mamone in our Milan office (+39 02 726 081).