By amending Articles 7, 7.1 and 7.2 of Law No. 130/1999 (the Italian Securitisation Law), the reform enables companies to unlock the financial value of their stock through capital markets structures, offering an alternative to traditional collateral-based lending.

1. Key Elements of the Reform

Inventory becomes a securitisable asset: for the first time, non-registered movable assets — including inventory — may be directly securitised. This allows transactions based on the transfer of stock to an securitisation vehicle and the issuance of inventory-backed notes under Article 7.2.

Expansion of the segregated pool (patrimonio destinato): the designated pool may now include not only receivables but also assets across the entire production cycle — raw materials, work in progress, finished goods and substitute assets — enabling dynamic, revolving structures aligned with operational needs.

Two alternative securitisation routes:

(i) Article 7.1 structure: the company designates inventory (together with existing or future receivables) within a segregated pool, or transfers it to a supporting non-issuing SPV. The issuing SPV grants a limited recourse loan, with repayment sourced from the segregated assets and related proceeds within a statutorily ring-fenced structure.

(ii) Article 7.2 structure: the inventory is sold to the issuing SPV in a true sale transaction. The SPV finances the purchase through the issuance of notes backed by the transferred stock and related sale proceeds, allowing a structurally cleaner destocking solution.

Access for non-licensed lenders: non-licensed lenders may use securitisation techniques to provide inventory financing (previously reserved for banks and regulated intermediaries) or to purchase the inventory.

2. Biggest Changes from the Previous Framework

The reform marks a clear shift from pledge-based inventory finance to full securitisation alternatives. Previously, inventory financing relied on non-possessory pledges securing a loan. The new regime introduces structures based either on statutory segregation (Article 7.1) or on true sale to an issuing SPV (Article 7.2), significantly broadening the available toolkit. Designated pools are no longer limited to receivables and ancillary collateral but may encompass the entire production cycle, enabling revolving and continuously replenishable structures. The introduction of a true sale option under Article 7.2 also creates the possibility of off-balance sheet treatment and clearer structural ring-fencing compared to traditional security-based models.

3. Why It Matters

The reform materially expands inventory-based financing in Italy. It opens new liquidity channels, reduces the operational constraints associated with pledge structures, and facilitates market-driven destocking transactions through standardised securitisation tools.

For a complete analysis — including structural diagrams, tax considerations and a detailed comparison of Articles 7.1 and 7.2 — please refer to our full alert available here.

https://www.advant-nctm.com/en/news/legge-annuale-pmi-novita-in-tema-di-cartolarizzazioni-per-lo-smobilizzo-del-magazzino 

As a professional with over twenty years’ experience gained at leading national and international firms, Antonio La Porta boasts solid and recognised expertise in special and structured finance, with a particular focus on securitisations, covered bonds and NPL transactions, as well as in private debt, acquisition finance and the debt capital market. 

Alongside Antonio La Porta, Francesca Spadafora is also joining the firm as a managing associate. She specialises in banking and finance law, with expertise in debt capital market, corporate finance and acquisition finance.

This move is a sign of the further strengthening of ADVANT Nctm’s Banking & Finance practice, a process that began at the start of the year with Federico Morelli joining the partnership, and confirms the firm’s strategy of building a highly specialised team capable of identifying key market trends in a timely manner in order to offer increasingly focused and dedicated advice.   

“The entry of Antonio La Porta marks a further step in the strenghtening of our Banking & Finance practice. Following the recent joining of Federico Morelli, we are continuing to bolster our team by recruiting professionals with distinctive skills who can bring significant added value. This investment enables us to further enhance the quality of the support we give our clients in a constantly evolving market”, commented Paolo Montironi, Senior Partner of ADVANT Nctm.

“Joining ADVANT Nctm is a particularly exciting opportunity for me, in an area – Banking & Finance – that is already well-established and recognised in the market. I will bring to the firm my experience in corporate finance and structured finance, with the aim of further contributing to the development of the practice by leveraging four elements that I consider central: specialist expertise, strategic vision, teamwork and the ability to build solid and lasting market relationships”, said Antonio La Porta.

With the joining of Antonio La Porta, the total number of Partners at ADVANT Nctm rises to 85.

Morelli comes from CRCCD and has extensive experience in advising on debt capital markets transactions, both domestically and internationally, as well as on subordinated debt issues, company law and corporate governance.

The arrival of the new partner also sees Martina Baldi, managing associate, and Federica Alici Biondi, senior associate with expertise in equity capital markets (ECM), join ADVANT Nctm. 

Morelli’s entry also responds to the new market trend involving an increasingly widespread use of Italian law to regulate bond issues, with a consequent repatriation of bonds from Italian issuers.

As part of this development strategy, the firm also announces the entry, as counsel, of Gaetano Petroni, a professional who, in addition to dealing with real estate finance, has solid experience in high-yield instrument issues.

“The arrival of Federico Morelli – comments Paolo Montironi, Senior Partner at ADVANT Nctm – confirms the firm’s desire to continue along a path of strengthening through the addition of professionals with distinctive experience and strong development skills. This enables us to further enhance the quality of the assistance we provide to our clients and to make our service offering increasingly comprehensive and responsive to changes in the economic environment. It is through this type of investment that we continue to evolve our advisory model, putting our expertise, vision and innovation at the service of our clients’ challenges.”

The measure introduces significant amendments to Law No. 130 of 30 April 1999 (the "Securitisation Law"), with the aim of expanding access to credit for Italian businesses through the monetisation of inventory.

The legislator’s stated intent is to enable companies to unlock the financial value of their inventory, promoting more efficient use of stock and making the securitisation framework more flexible, without altering the capital structure or corporate control.

1. Amendments and Innovations to the Securitisation Law

The legislative intervention focuses on three core provisions of the Securitisation Law — Articles 7, 7.1 and 7.2 — significantly redefining their scope and thereby allowing entities (including those other than banks and licensed financial intermediaries) to finance inventory monetisation by subscribing the notes issued by the securitisation vehicle, for the purpose, as applicable, of:

(i) financing a segregated pool (in the form of a designated pool (patrimonio destinato) or supporting vehicle companies) to which the inventory has been allocated; or

(ii) purchasing the inventory itself,

whose proceeds from sale and management will be applied to remunerate and redeem the issued notes.

First, Article 7, paragraph 1, letter a) is amended to specify that securitisation may concern "receivables, including future receivables". This is a systematic clarification that reflects what was already implicitly provided under Article 1 of the Securitisation Law. This amendment should also be read in conjunction with the "rolling" nature of inventory, whose monetisation through securitisation is subject to the further changes summarised below.

At the same time, letter b-bis) of the same paragraph is supplemented to extend securitisations to "non-registered movable goods" (beni mobili ner registrati), with a corresponding change to the heading of Article 7.2, now titled "Securitisations of Real Estate and Movable Goods, Including Registered Assets" (“Cartolarizzazioni immobiliari e di beni mobili anche registrati”). This amendment allows replication, for inventory and other non-registered movable goods, of the structure already provided for real estate and registered movable assets, opening the way to securitisations of industrial stock (destocking).

The most substantial change, however, appears to be that introduced in paragraph 2-octies of Article 7, which redefines the concept of designated pool (patrimonio destinato).

2. The New Concept of Designated Pool in the Context of Securitisations

In its original formulation, the designated pool could include only receivables and, as ancillary, assets or rights pledged as collateral for such receivables.

Under the new version, the financed entity may allocate not only receivables but also rights and assets related to those receivables, including products resulting from their transformation or combination, as well as substitute assets.

In this way, the designated pool assumes a dynamic configuration, capable of representing the company’s entire production cycle: from raw materials to finished goods, including substitute assets. This evolution makes it possible to include in the segregated pool all economic elements contributing to the generation of receivables, effectively making work-in-progress or transforming inventory in a securitisation product.

3. Supporting SPVs and New Operational Opportunities

The regulation introduces a significant procedural innovation: the possibility of establishing the designated pool also through transfer to a special purpose vehicle (“SPV”), pursuant to Article 7.1, paragraph 4 (without, however, having to comply with the condition set forth in paragraph 1 of the same article, which limited this option to non performing loans transferred by banks or financial intermediaries established in Italy).

In this way, even non-financial companies—such as SMEs—can access this tool to securitize ordinary receivables or inventory-related assets.

The transaction can benefit from the tax breaks provided for in paragraphs 4-bis, 4-quater, and 4-quinquies of the Securitization Law, which provide, among other things, for exemption from transfer taxes and the application of simplified regimes for direct and indirect tax purposes.

The SPV can thus be used to manage, enhance and segregate the assets involved in the transaction, similar to what is already provided for so-called ReoCo in real estate securitizations, but now also in ordinary transactions, strengthening the flexibility and efficiency of the model.

4. Clarification on the scope of Articles 7.1 and 7.2

It should be noted that the structure under Article 7.1 is particularly suited to transactions where, in addition to inventory stock, receivables (whether existing or future) are also included, thereby allowing goods and receivables to be combined within a single framework and optimising segregation and deconsolidation.

By contrast, Article 7.2 applies exclusively to movable goods, such as inventory stock, and offers the most straightforward solution for companies seeking to securitise only stock. The choice between the two structures will ultimately depend on the composition of the assets and the tax and regulatory efficiency objectives pursued.

5. Final Considerations

Overall, the measure – once the relevant approval process is concluded - will significantly expand the potential scope of the Securitisation Law and will introduce a specific mechanism for inventory monetisation.

This tool is undoubtedly more efficient than the structures seen so far in the market, which either treated inventory merely as "collateral" for financing or required the transfer of inventory to a third party under arrangements allowing continued management by the transferor. Moreover, the new structure substantially overcomes certain operational difficulties related to dispossession under inventory pledges or other types of hard security over inventory, which often created limitations or excessive management burdens for both the financing entity and the inventory owner — issues that even the introduction of the non-possessory pledge had not fully resolved.

Companies will thus be able to obtain financial resources through the securitisation of inventory stock, including not only existing receivables but also future receivables connected to the production and sale of goods. Conversely, financiers will benefit from the protections provided under the securitisation framework, including, inter alia, segregation of the financed pool in favour of the investor/noteholder, without the need to establish specific guarantees over the inventory.

Written by Roberto de Nardis di Prata, Matteo Gallanti and Luigi Dugato. 

Legislative Decree No. 116/2024 (the “Decree”) transposed in Italy Directive (EU) 2021/2167 (the “Directive”) on credit servicers and credit purchasers, aimed at standardise the rules governing servicers and purchasers of non-performing loans and to foster the development of a secondary market for non-performing loans in the European Union. The main contents and preliminary considerations on the transposition of the Directive in Italy were discussed in detail in our previous newsletter dated 19 February 2024. 

In particular, the Decree amended Legislative Decree No. 385 of 1 September 1993 (Consolidated Banking Act, “TUB”) by introducing a new Chapter II of Title V (Articles 114.1 to 114.10) entitled “Purchase and management of non-performing loans and non-performing loan servicers”, introducing a number of legislative changes with respect to the provisions of the Directive.

At the level of secondary legislation, Article 3(1) of the Decree assigned the Bank of Italy the task of issuing further provisions transposing the Directive and implementing the new Chapter II, Title V, of the TUB. In accordance with such task, on 13 February 2025, the Bank of Italy published on its website the new supervisory provisions (the “Implementing Provisions”) which include specific provisions for the management of non-performing loans, regulating in particular the role of the non-performing loan servicer, as a new entity supervised by the Bank of Italy. 

This analysis concerns the main changes introduced by the Decree and the Implementing Provisions, with particular reference to the new role of non-performing loan servicer.

2. Scope 

The Decree limits the scope of the new legislation to “non-performing loans”, defined by the Implementing Provisions as “all cash and off-balance sheet credit exposures to an entity in a state of insolvency (even if not legally established) or in substantially comparable situations, regardless of any loss forecasts made by the bank. Exposures whose anomaly is attributable to country risk profiles are excluded”. [1]

Contrary to the provisions of the Directive, not only all performing loans but also UTP (Unlikely to Pay) and past due loans, as well as commercial loans (e.g. utilities, loans deriving from business activities, etc.) must therefore be excluded.

Furthermore, national lawmakers have decided, in accordance with the Directive, to extend the scope of the Decree to include non-performing financial loans originated by non-bank entities registered in the register under Article 106 of the TUB, investment funds or securitisation special purpose vehicles (SPVs). 

However, the new legislation does not apply to the purchase and management of non-performing loans by: (i) managers of collective investment undertakings in relation to the funds they manage; (ii) banks (including in relation to loans granted or purchased by them); (iii) intermediaries registered in the register under Article 106 of the Consolidated Banking Act (including with regard to loans granted or purchased by them), if carried out in Italy[2].

Finally, the Bank of Italy has clarified that securitisation transactions characterised by risk segmentation (e.g., transactions with subordinated/senior tranches) are excluded from the scope of the new rules on the management of impaired loans: the decision to keep servicing activities reserved for supervised and qualified entities (i.e. banks and intermediaries under Article 106 of the TUB) is intended to protect the soundness and transparency of transactions, for the benefit of both investors and the entire financial system.

3. Purchasers of non-performing loans

The Decree and the Implementing Provisions, transposing the Directive, clarify that purchasers of non-performing loans may be either natural persons or legal entities, provided that they are not banks[3], and that they purchase non-performing loans as part of a commercial or professional activity, and not on a personal or occasional basis.

The legislation does not require purchasers to meet minimum capital requirements or obtain prior authorisation, but such entities must nevertheless act in compliance with the general rules of transparency, fairness and diligence.

4. Information for purchasers of non-performing loans 

As of 19 October 2023, Commission Implementing Regulation (EU) 2023/2083 of 26 September 2023 (the “Regulation”) applies, which lays down technical implementing standards for the application of Article 16(1) of the Directive with regard to the templates to be used by credit institutions for the provision to buyers of information on their credit exposures in the banking book.

Article 3 of the Regulation sets out the categories of information that must be provided (counterparty; credit agreement, guarantees and historical collection of repayments), the details of which are then contained in the annexes, which set out criteria, tables, definitions, data and instructions to be followed in providing the information. From a confidentiality perspective, the Regulation provides that credit institutions shall (i) identify the information that must be considered confidential under applicable EU law and (ii) ensure adequate protection of such information, including by putting in place appropriate confidentiality arrangements with transferees before sharing personal data prior to the conclusion of the contract.

The Regulation does not apply to the following:

(i) sales of non-performing credit agreements as part of sales of branches, sales of business lines or sales of clients’ portfolios which are not limited to non-performing credit agreements and transfers of non-performing credit agreements as part of an ongoing restructuring operation of the selling credit institution within insolvency, resolution or liquidation proceedings; 

(ii) sales or transfers of non-performing credit agreements through securitisation, where Regulation (EU) 2017/2402 applies and the provision of the related information is governed by Delegated Regulation (EU) 2020/1224 and Implementing Regulation (EU) 2020/1225;

(iii) sales of non-performing credit agreements pursuant to credit default swap, total return swap and other derivative contracts, contracts of insurance and sub-participation contracts; 

(iv) sales of non-performing credit agreements pursuant to a financial collateral arrangement or a securities financing transaction.

5. Non-performing loan servicers and authorisation to carry out management activities

One of the main changes brought by the Decree is the introduction of the figure of the non-performing loan servicer, who joins banks and intermediaries pursuant to Article 106 of the TUB as a person authorised to manage non-performing loans on behalf of their purchasers. 

Purchasers of non-performing loans cannot, in fact, manage the acquired loans directly, but must rely on a supervised entity to be identified among banks, intermediaries pursuant to Article 106 of the TUB or, precisely, managers registered in the special register established pursuant to Article 114.5 of the TUB and authorised by the Bank of Italy[4].

Unlike the provisions of the Directive[5], which requires the appointment of a person carrying out credit management activities only with regard to the purchase of non-performing loans owed by consumers, the Decree provides that the purchaser of non-performing loans is always required to appoint a non-performing loan servicer (i.e. a bank or financial intermediary pursuant to Article 106 of the TUB), thus regardless of the type of entities to which such non-performing loans are owed.

The Implementing Provisions[6] provide for the management of non-performing loans to include the collection and recovery of payments due from the debtor, the renegotiation of the terms and conditions of the agreement with the assigned debtor[7], the management of complaints from assigned debtors and the provision of information to the debtor with respect to any changes in interest rates and charges or any payments due.

In addition, pursuant to Part One, Chapter 4, Section II of the Implementing Provisions, the activities of an authorised servicer may include the outright purchase and management of non-performing loans for its own account, provided that this is done ‘'subordinately to the management of non-performing loans on behalf of third-party purchasers”.

The reason for such limitation lies in the lawmakers’ desire to ensure that the corporate purpose of the non-performing loan servicer (i.e. servicing on behalf of third-party purchasers) is consistent with the activities actually carried out (also in view of the absence of quantitative prudential requirements for servicers, which is based on the assumption that debt collection is carried out on behalf of third parties)^[8].

In order to be registered in the register of servicers, an adequate organisational structure, the adoption of effective operating procedures and an internal control system capable of ensuring the proper servicing of non-performing loans are required. Moreover, the servicer must be able to perform a significant part of the servicing activities directly, avoiding delegating them entirely to third parties without ensuring internal supervision. 

The Bank of Italy verifies the applicant's financial and managerial soundness, assessing its ability to operate sustainably in the long term, as well as the business plan submitted by the servicer, which must illustrate the operational strategies and methods of credit management. Applications for registration in the register of servicers by new entities must be submitted to the Bank of Italy, which has 90 days from receipt of the documentation to make a decision.

6. Protection of assigned debtors

One of the objectives of the Directive is certainly to ensure adequate and enhanced protection for assigned debtors. Such principle, endorsed by national lawmakers, is substantiated in specific individual information obligations. In particular, the servicer of non-performing loans, or the bank or financial intermediary pursuant to Article 106 of the TUB appointed by the purchaser to manage such loans, must directly and personally notify the debtor of the assignment of the debt.

The obligation to inform the debtor arises immediately after the assignment of the debt and, in any case, always before any recovery actions are taken against the debtor. The information to be provided to the assigned debtor must meet specific content requirements in order to ensure full transparency and protection of the debtor.

7. The role of licence holders pursuant to Article 115 of the TULPS

The new regulations introduced by the Decree and the Implementing Provisions also redefine the role of authorised entities pursuant to Article 115 of the Consolidated Law on Public Security (“TULPS”). Such companies, traditionally active in out-of-court debt collection, may now choose whether to apply for authorisation as non-performing loan servicers pursuant to Article 114.6 of the TUB or to limit themselves to carrying out collection activities on behalf of third parties or as providers of specialised services under the responsibility of a non-performing loan servicer within the framework of outsourcing agreements, it being understood that the servicer must in any case ensure compliance with the governance and supervisory rules set out in the Implementing Provisions.

According to the Bank of Italy’s guidelines, if the classification as non-performing occurs after the out-of-court collection activity has been entrusted to a person licensed under Article 115 of the TULPS, the latter may continue to manage such loans without requesting authorisation under Article 114.6 of the TUB. Conversely, if the debt is subsequently assigned to a purchaser of non-performing loans, the recovery activity falls within the scope of Chapter II of Title V of the TUB. The purchaser will therefore be required to entrust the management to a bank, an intermediary or an authorised non-performing loan servicer.

Furthermore, in the context of securitisation transactions involving exclusively non-performing loans carried out pursuant to Law 130/1999 and without risk segmentation, the master servicer (bank, financial intermediary or non-performing loan servicer) may, in compliance with the applicable sectoral regulations and on the basis of an outsourcing agreement, use entities licensed pursuant to Article 115 of the TULPS for the out-of-court recovery of securitised non-performing loans.

Regulatory references

• Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU.

• Implementing Regulation (EU) 2023/2083 of 26 September 2023 laying down implementing technical standards for the application of Article 16(1) of Directive (EU) 2021/2167 as regards the templates to be used by credit institutions for the provision to buyers of information on credit exposures in the banking book.

• Legislative Decree No. 385 of 1 September 1993 (Consolidated Law on Banking), Chapter II of Title V (Articles 114.1 to 114.10).

• Legislative Decree No. 30 of 30 July 2024, No. 116 implementing Directive (EU) 2021/2167 of the European Parliament and of the Council of 24 November 2021 on credit servicers and credit purchasers and amending Directives 2008/48/EC and 2014/17/EU.

• Consultation document containing the provisions of the Bank of Italy for the implementation of the Directive.

• Provisions of the Bank of Italy for the transposition of Directive (EU) 2021/2167 on purchasers and servicers of non-performing loans.

• Summary table of the public consultation launched on 24 July 2024 by the Bank of Italy, published on the Bank of Italy website.

• Workshop for operators interested in applying for authorisation as “non-performing loan servicers”, 6 March 2025, slides published on the Bank of Italy website.

Written by Matteo Gallanti and Stefano Padovani.

[1] The Implementing Provisions, in line with the provisions of the TUB, identify the scope of “non-performing loans”, the definition of which coincides with that contained in Circular No. 272 of 30 July 2008 (Accounting Matrix).

[2] Article 114.2, paragraph 1, of the TUB.

[3] Article 114.1 of the Consolidated Banking Act.

[4] Article 114.3, paragraph 2 of the Consolidated Banking Law.

[5] Article 17, paragraph 1, a) of the Directive.

[6] See the definition of “Management of non-performing loans” provided for in the Implementing Provisions.

[7] Such renegotiation shall not be considered a lending activity within the meaning of Article 106 of the Consolidated Banking Act; for such purposes, early repayment and postponement of payment terms shall not be considered lending activities.

[8] As emerged during the consultation by the Bank of Italy, the subordination criterion is considered as met if the gross book value of loans serviced on behalf of third parties exceeds 50% of the total gross book value of non-performing loans serviced, including those purchased for one’s own account. For the purposes of said calculation, both non-performing loans purchased before the entry into force of the legislation and those purchased at a later stage, provided they are still in the servicer’s portfolio, are to be included; non-performing loans managed out-of-court are excluded from the calculation.

Non-performing loan servicers must verify compliance with the subordination criterion on a quarterly basis, reporting any deviations to the Bank of Italy.

These appointments are part of the firm's internal growth strategy, aimed at enhancing its talents and building solid career paths. They represent a further step in strengthening ADVANT Nctm's competitiveness and professionalism.

Giuseppe Buono has extensive experience in banking and finance law and capital markets, with a particular focus on leveraged finance, real estate finance, project and corporate finance, as well as debt capital markets. He regularly assists banks, funds, and companies in both domestic and cross-border financing operations, overseeing their structuring and documentation. He has also managed numerous basket bond transactions in the Italian market.

Andrea Iovieno is an expert in corporate and capital markets law, with a focus on both equity and debt capital markets. He advises issuers, banks, and financial intermediaries on IPOs, capital increases, extraordinary transactions, and the issuance of debt instruments. He also provides legal assistance in public M&A transactions, as well as in matters concerning corporate governance and regulatory compliance.

Filippo Ughi has solid experience in corporate finance, M&A, private equity, and corporate law. He advises Italian and international industrial companies and investment funds in M&A, private equity, and corporate finance transactions, also offering ongoing corporate consultancy, from bylaws and governance to the operation of corporate bodies.

Riccardo Sallustio will participate in the conference organized by the LMA (Loan Market Association) dedicated to sustainable finance.

Event Focus:

• The Future of Finance: A discussion on sustainability and the role finance plays in supporting ecological initiatives.
• Sustainability in Supply Chains: How can finance promote sustainability in supply chain management?
• The Geopolitics of Sustainability: An in-depth analysis of how global political events – including over 70 elections scheduled for 2024 – may impact international sustainability efforts.

Featuring high-profile speakers, the event will explore diverse paths toward sustainable finance, highlighting multiple approaches to achieving “net-zero” goals. The event will underscore the importance of tailored strategies designed to meet the specific needs of different stakeholders.

Click here for more information

The promotion is part of ADVANT Nctm's internal growth strategy aimed at enhancing its talents.

Roberto de Nardis di Prata has more than 20 years of experience in the areas of banking and finance law and debt capital markets, focusing on acquisition, leveraged and real estate finance, corporate lending, basket bond issues and debt restructurings. Roberto assists both primary lenders - banks and debt funds - and sponsors and industrial companies in financing transactions as well as private debt operators.

Francesca Pittau is an expert in employment law and assists Italian and international clients in the management of human resources at every stage, with particular focus on corporate reorganization and restructuring processes. In addition, Francesca is involved in the development and implementation of incentive plans for key managers, welfare policies, and diversity and inclusion activities.Alessia Trevisan works in M&A and, in particular, private equity and venture capital.Alessia assists investment funds, both Italian and foreign, industrial companies, family-office, venture capital funds in investment and divestment transactions, as well as managers in structuring and implementing incentive plans.

Federico Vecchio works in both extrajudicial and judicial assistance to leading national and multinational groups in litigation including arbitration and extraordinary corporate transactions. In addition, Federico has also developed a deep knowledge of sports law thanks to positions held in the justice bodies of CONI and various national and international sports federations.   

1. Genesis of the Directive
2. Scope
3. Credit servicers and authorisation to carry out activities
4. Credit purchasers
5. Draft proposal for transposition

1. Genesis of the Directive

Directive (EU) 2021/2167 (the “Directive”) on credit servicers and credit purchasers, also known as Secondary Market Directive, published in the Official Journal of the EU on 8 December 2021, should have been transposed by Italian lawmakers by 29 December 2023.Pending the approval of the European delegation law 2022-2023, and precisely in consideration of the fact that the expiry of the above deadline set by the Directive requires the issuance of the implementing legislative decree as soon as possible, the Treasury Department has recently put out for consultation a draft proposal for the transposition of the Directive.As is known, the Directive is the end point of a path begun in 2017 with the Commission’s proposal - welcomed by the European Parliament and the Council - to complement the process for the completion of the Banking Union with measures to reduce non-performing loans, implemented through risk sharing and risk reduction[1], and with the development of the so-called “NPL Strategy”, revised in 2020 as a result of the pandemic crisis, which set the following goals:

(i) develop a secondary market for distressed assets, in order to allow banks to move NPLs off their balance sheets, while ensuring further strengthened protection for debtors;(ii) reform the EU’s corporate insolvency and debt recovery legislation, in order to harmonise the various insolvency frameworks across the EU, while maintaining high standards of consumer protection;(iii) support the establishment and cooperation of national asset management companies (AMCs) at EU level; and(iv) implement precautionary public support measures (so-called “asset protection schemes”) to ensure the continued funding of the real economy under the EU’s Bank Recovery and Resolution Directive[2] and State aid frameworks.

2. Scope

In terms of scope, the Directive applies to:

(i) credit servicers who act on behalf of a credit purchaser; and(ii) credit purchasers of a creditor’s rights deriving from a non-performing loan and/or from the non-performing credit agreement itself, issued by a credit institution established in the European Union.

3. Credit servicers and authorisation to carry out activities

Article 3 of the Directive defines a credit servicer as a legal person that, in the course of its business, manages and enforces the rights and obligations related to a creditor’s rights under a non-performing credit agreement, or to the non-performing credit agreement itself, on behalf of a credit purchaser, and carries out at least one or more credit servicing activities. “Credit servicing activities” means one or more of the following activities: (i) collecting or recovering from the borrower, in accordance with national law, any payments due related to a creditor’s rights under a credit agreement or to the credit agreement itself; (ii) renegotiating with the borrower, in accordance with national law, any terms and conditions related to a creditor’s rights under a credit agreement, or of the credit agreement itself, in line with the instructions given by the credit purchaser, where the credit servicer is not a credit intermediary as defined in Article 3, point (f), of Directive 2008/48/EC or in Article 4, point (5), of Directive 2014/17/EU; (iii) administering any complaints relating to a creditor’s rights under a credit agreement or to the credit agreement itself; and (iv) informing the borrower of any changes in interest rates or charges or of any payments due related to a creditor’s rights under a credit agreement or to the credit agreement itself.Pursuant to the Directive, the regulatory framework applicable to credit servicers includes, inter alia, the obligation to obtain prior authorisation for servicing activities from the competent national authority. More specifically, the procedure outlined by the Directive[8] requires a credit servicer to obtain an authorisation in a home Member State before commencing its activities. The authorisation will be granted by the competent authorities, identified in the national provisions transposing the Directive, if the requirements for the grant of authorisation set out in Article 5 of the Directive are met, authorities to whose supervision the authorised servicer is to be subject. 

4. Credit purchasers

Title III (Credit purchasers) of the Directive liberalises the assignment by credit institutions to “credit purchasers”, for whom no authorisation regime is therefore envisaged, with the credit institutions themselves being required to provide the purchaser with pre-negotiation and due diligence information[9]. In addition to the obligation to appoint a credit servicer, purchasers are subject to obligations to the supervisory authority for statistical and monitoring purposes[10]. 

5. The draft transposition proposal (the “Draft”)

The rules proposed in the Draft will be implemented through the introduction within Title V of the Consolidated Law on Banking (TUB) of a new Chapter II, dedicated to the activity of purchasing and servicing non-performing loans. This new Chapter II will include the provisions on the new figure of the “servicer of non-performing loans”, who will need to be authorised to carry out such activities - and consequently - supervised by the Bank of Italy. Further measures are also envisaged on transparency and relations with customers under Title VI as well as on sanctions under Title VIII. 5.1   Objective and subjective scopeIn accordance with the approach of the Directive, the new rules only concern the so-called “financial” credits, i.e., granted by banks and other entities authorised to provide loans (such as, for example, financial intermediaries pursuant to Article 106 of the Consolidated Law on Banking, investment funds, and securitisation special purpose entities). On the other hand, this does not apply to other types of loans, such as trade receivables, those arising from supply or tender contracts, utilities, etc.[11], for which the existing rules will continue to apply.Moreover, the Draft seems to take advantage of some of the flexibility spaces granted by the Directive to the Member States.A first choice in this sense, in implementation of the provisions of Article 2(3) of the Directive, is to limit the scope of the new rules, within non-performing loans, to only those loans classified as distressed loans under the Bank of Italy’s implementing provisions. Therefore, subject to specifically provided exceptions, the new rules refer exclusively to the purchase of non-performing loans by purchasers of non-performing loans in connection with the servicing of non-performing loans.Conversely, the new rules do not apply to the management carried out: (i) by managers of collective investment undertakings in relation to the funds they manage; (ii) by banks (with reference to the credits they grant and purchase); (iii) by intermediaries registered in the register provided for by Article 106 of the Consolidated Law on Banking (with reference to the credits they grant and purchase), provided that it is carried out in Italy.The Draft, in implementation of Article 2(4) of the Directive, further provides that the new provisions do not apply to the servicing of non-performing loans carried out as part of securitisation transactions pursuant to Law 130, when the purchaser of the loans is a securitisation special purpose entity under Article 2(2) of Regulation (EU) 2017/2402 (so-called “securitisation regulation”)[12].This should mean that the use, as a “master servicer”, of a bank or a financial intermediary pursuant to Article 106 of the Consolidated Law on Banking would remain mandatory for the management of credits classified as non-performing loans and acquired by securitisation special purpose entities under the “securitisation regulation”, while the activity of “special servicer” could be exercised - in outsourcing - as is the case today, and therefore without the “special servicer” having to obtain an authorisation under the new rules. This is particularly relevant for all “special servicers” only having an authorisation pursuant to Article 115 of the Consolidated Law on Public Security (TULPS), who could continue to carry out such credit management activities according to said authorisation.In order to provide for such exclusion, the Draft refers in a broad sense (in this respect echoing the Directive) to credit management carried out in the context of European securitisation transactions, but the text could better clarify that the exclusion applies precisely to both “master servicers” and “special servicers”.On the point, it is worth recalling a remark already made by early commentators of the Directive.Many Italian securitisation transactions involving non-performing loans are not among “European” securitisations and are subject only to Law No. 130/1999. This means that the so-called “domestic” securitisations do not fall within the exclusion set out in the Directive and the Draft, and consequently securitisation special purpose entities that purchase non-performing loans as part of such securitisations will be subject to the new rules, and therefore will have to entrust their management to an authorised servicer of non-performing loan, to a bank or to a financial intermediary pursuant to Article 106 of the Consolidated Law on Banking. At first glance, this raises a problem of coordination with Law 130/1999 (which apparently is not to be amended in the Draft), which in Article 2(6) currently lays down that the collection of assigned receivables is to be carried out by banks or financial intermediaries pursuant to Article 106, while the performance of such activities should in fact be permitted also to servicers of non-performing loans.On the other hand, when servicing non-performing loans of so-called “domestic” securitisations, the question arises as to whether “special servicers” having only the authorisation pursuant to Article 115 of the Consolidated Law on Public Security, in order to be able to carry out servicing  activities, must in any case obtain also the “new authorisation” or may only act as credit service providers on the basis of an outsourcing agreement in accordance with Article 12 of the Directive[13].It is also provided that a Decree of the Minister of Economy and Finance may indicate other entities that, in view of their activities, are excluded from the scope of application of the new rules. Such a provision is likely intended to implement the provision of Article 2(6) of the Directive, which expressly refers to credit servicing activities carried out by notaries, public bailiffs, or lawyers, when such servicing activity is carried out as part of their respective professions. 

5.2. The purchase of non-performing loans for consideration

5.3 Credit purchasers’ obligation to appoint a servicer

5.4   The issuance of the authorisation

5.5   The transitional regime

6. Conclusions

In conclusion, the analysis of the Draft shows a significant change in the scenario of non-performing loan acquisition and servicing. In accordance with the objectives of the Directive and thus aiming at the formation of an integrated market of debt collection services at European level, the Draft, on the one hand, makes the acquisition of non-performing loans more accessible, but on the other hand imposes a greater burden in the exercise of the activities for their servicing. This activity is indeed conditional on obtaining the Authorisation granted by the Bank of Italy and on the meeting of requirements in part similar to those necessary for the registration in the register pursuant to Article 106 of the Consolidated Law on Banking.Undoubtedly, in order to fully understand the impact of the new rules on the domestic market, it will be necessary to wait – not only for the publication in the Official Gazette of the legislative decree transposing the Directive – but also for the issuance of future Bank of Italy implementing measures, especially with reference to the assessment of the conditions for obtaining the Authorisation. The content of this document is for information purposes only and is not and cannot be intended as legal advice on the topics dealt with. For further information please contact Stefano Padovani or Andrea Bertoni.  [1] Communication of 11 October 2017, COM (2017) 592.[2] Directive 2014/59/EU.[3] The package included a proposal for a Regulation (proposed amendment to Regulation (EU) No. 575/2013, European Commission, 2018a) and a proposal for a Directive (proposed Directive on credit servicers, credit purchasers  and the recovery of collateral, European Commission 2018b).[4] Recital (1) of Directive (EU) 2021/2167.[5] Recital (9) of Directive EU/2021/2167.[6] More specifically, to AIFMs authorised or registered in accordance with Directive 2011/61/EU, to management companies and to investment companies authorised in accordancw with Directive 2009/65/EC provided that the investment company has not designated a management company under that Directive, on behalf of the fund it manages.[7] In this regard, early commentators have already had the occasion to outline how, in light of Recital (17) of the Directive,  such “double regime” will remain only in the event that at national level a harmonised regime for all type of credits is not adopted (see P. Carrière, “La Direttiva sui “gestori” e “acquirenti” di NPL: prospettive per il mercato italiano”, in Diritto Bancario.it, December 2021).[8] See Articles 4, 5, 7, 8 and 21 of the Directive.[9] Articles 15 (Right to information regarding a creditor’s rights under a non-performing credit agreement or the non-performing credit agreement itself) and 16 (Implementing technical standards for data templates) of the Directive.[10] Articles 17 (Obligations of credit purchasers), 18 (Use of credit servicers or other entities), 19 (Representative of a third-country credit purchaser) and 20 (Transfer of a creditor’s rights under a non-performing credit agreement, or of the non-performing credit agreement itself, by a credit purchaser and communication to the competent authorities) of the Directive.[11] See Article 1 (Subject matter) of the Directive.[12] Article 2 (Scope) of the Directive, paragraph 4: “This Directive shall not affect requirements in Member States’ national laws regarding the servicing of a creditor’s rights under a credit agreement, or of the credit agreement itself, when the credit purchaser is a securitisation special purpose entity as defined in Article 2, point (2), of Regulation (EU) 2017/2402 of the European Parliament and of the Council (20) as long as such national laws: (a) do not affect the level of consumer protection provided by this Directive; (b) ensure that competent authorities receive the necessary information from credit servicers”.[13] The Draft provides that the activity carried out, on the basis of an agreement for the outsourcing of corporate functions, by entities authorised pursuant to Article 115 of the Consolidated Law on Public Security, inter alia, in favour of servicers of non-performing loans, does not amount to the servicing of non-performing loans.[14] “Host Member States may extend the requirement provided for in the first subparagraph to other credit agreements”.

By Legislative Decree No. 207 of 7 December 2023 (“Legislative Decree 207/2023”), published in Official Gazette No. 300 of 27 December 2023, Italian lawmakers intended to follow up on the Recommendation of the European Systemic Risk Board (ESRB) dated 22 December 2011 (“Recommendation ESRB/2011/3”).By means of said working paper, the ESRB - then chaired by Mario Draghi - drew up a series of recommendations aimed at enhancing the effectiveness of national macro-prudential policies with a view to fully improving financial stability within the European Union.Indeed, the ESRB, despite providing that “the responsibility for the adoption of the measures necessary to maintain financial stability lies first within national frameworks”, has at the same time acknowledged  that the activity of national macro-prudential authorities (usually central banks or financial supervisory authorities) must be coordinated through the issuance of common guiding principles such as to ensure “balancing the need for consistency among national approaches with the flexibility to accommodate national specificities”^[1].Recommendation ESRB/2011/3 pursues the objective of doing such coordination work, while still leaving to Member States the responsibility to take the necessary measures to maintain financial stability in the EU through the implementation, in the respective national regulatory frameworks, of the individual macro-prudential mandates.In Italy, the principles laid down in said European legislation were recently accepted and implemented through the enactment of Legislative Decree 207/2023. Among the novelties introduced by Italian law-makers is, first of all, the establishment of an independent authority designated to conduct EU macro-prudential policies within the national territory: the Committee for Macro-prudential Policies (“Committee”).The Committee includes the Governor of the Bank of Italy, as a chairman, the President of Consob, the President of Ivass and the President of Covip, representing their respective authorities and, in accordance with the provisions of the EU Recommendation concerning the transparency and accountability obligations of national macro-prudential authorities, is required to submit an annual report on its activities to the government and the Houses of Parliament by March 31 of the year following the year in question^[2].

2. The changes made to the Consolidated Law on Banking

The implementation of the national macro-prudential mandate under Legislative Decree 207/2023 also has significant effects on insurance, banking and financial sector regulations, by introducing and/or amending certain provisions contained, respectively, in Legislative Decree No. 209 of 7 September 2005 (Private Insurance Code, CAP), Legislative Decree No. 385 of 1 September 1993 (Consolidated Law on Banking, TUB) and Legislative Decree No. 58 of 24 February 1998 (Consolidated Law on Finance, TUF).As far as  the changes to the Consolidated Law on Banking are in particular concerned, such changes provide, in accordance with the provisions of Regulation (EU) 2016/1011 (“Benchmark Regulation”), specific indications as to the possibility that a financial benchmark applied to contracts entered into by banks and financial intermediaries with clients be substantially changed or fully ceased^[3].Let’s proceed in order. The Benchmark Regulation places on administrators and users of benchmarks the obligation to monitor the risk that their change and/or cessation may cause damage to clients and, more generally, pose a threat to financial stability.In particular, administrators of financial indices are required to prepare suitable procedures setting out the actions to be taken if a benchmark deviates radically from the reference values and/or has to be discontinued, and to update such procedures whenever there are material changes to the indices (or families of indices) to which the procedure refers[4].In addition, supervised entities (other than administrators) that use financial benchmarks in their contracts are required to adopt, according to the procedures prepared by the administrators, robust written plans (so-called replacement plans) specifying the operational procedure to be implemented in the event that a benchmark materially changes or ceases to be provided. Such plans, if appropriate in the case at hand, shall also nominate one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives.Finally, the obligated parties are required to provide, upon request, the Authority with the procedures and replacement plans adopted and any updates thereof, without undue delay, and to reflect them in their contractual relationship with their clients.In the wake of the provisions of the Benchmark Regulation, Legislative Decree 207/2023 introduces an ad hoc provision in the Consolidated Law on Banking laying down the obligations that banks and non-banking financial institutions are required to comply with in the event of a material change or cessation of a benchmark used in their respective contracts. Such provisions, summarised in new Article 118-bis of the Consolidated Law on Banking, must be complied with by the obligated parties for the entire duration of the contractual relationship with the client, and the rules included therein will apply to all contracts concerning transactions and services governed by Title VI of the Consolidated Law on Banking (i.e. banking and financial transactions and services, consumer credit and payment services), on the transparency of contractual terms and conditions and customer relations, even where different from the financial contracts referred to in Article 3(1)(18) of the Benchmark Regulation[5].Banks and intermediaries, in particular, must publish on their website the replacement plans adopted pursuant to the Benchmark Regulation and bring them (and their updates) to the attention of clients at least once a year, or at the earliest opportunity, in the manner provided for periodic reporting during the course of a relationship (see Article 119 of the Consolidated Law on Banking).It is also necessary that contractual clauses concerning interest rates be drafted in such a way as to identify changes in the benchmark or substitute index that will be used in the event that the benchmark originally provided for in the contract is ceased or materially changed.Obligated parties must necessarily notify the client within thirty days of the occurrence of a material change or cessation of the benchmark of the changes they intend to make to the index or the replacement index that will be used. The (unilateral) change proposal concerning the financial benchmark is to be considered as approved by the client if the latter does not withdraw, without charge, from the contract within two months of receipt of the communication.If, following the aforesaid communication, the client expresses, within two months, its intention to withdraw from the relationship, the banks and financial intermediaries, on termination, shall have to apply the contractual terms previously established, taking into account, with regard to the interest rate, the last available value of the benchmark.Finally, new Article 118-bis of the Consolidated Law on Banking Law confirms the ineffectiveness of benchmark changes and/or replacement adopted without complying with the procedure described in such provision.Banks and financial intermediaries are required to comply with the above requirements within one year of the date of entry into force of Legislative Decree 207/2023 (i.e. by 10 January 2025):

1. informing their clients about their replacement plans; and
2. introducing in the contracts - by means of a unilateral amendment proposal - the provisions necessary to implement the provisions of Article 118-bis of the Consolidated Law on Banking.

Hence, the amendments made to the Consolidated Law on Banking by Legislative Decree No. 207/2023 have a significant impact on banks and financial intermediaries, which will have to plan and implement the initiatives necessary to achieve the timely implementation of the safeguards imposed by new Article 118-bis of the Consolidated Law on Banking also on contracts relating to existing relationships. The content of this document is for information purposes only and is not and cannot be intended as legal advice on the topics dealt with. For further information please contact Danilo Quattrocchi, Eugenio Siragusa e Giuseppe Buono.  [1]  See Recital 4 of Recommendation ESRB /2011/3.[2]  See Article 1, paragraph 9, of Legislative Decree 207/2023. In this regard, Recommendation ESRB/2011/3 recommends to Member States to make the macro-prudential authority ultimately accountable to the national parliament. Again as regards the transparency and accountability provided for national committees for macro-prudential policies, it is provided that Member States ensure that macro-prudential policy decisions and their motivations are made public in a timely manner, unless there are risks to financial stability in doing so, and that the macroprudential policy strategies are set out and published by the macro-prudential authority. Furthermore, Recommendation ESRB/2011/3 entrusts the macro-prudential authority with the power to make public and private statements on systemic risk and ensures legal protection for the macro-prudential authority and its staff when they act in good faith.[3] As regards the changes made by Legislative Decree 207/2023 to the Consolidated Law on Finance, new paragraph 5-bis of Article 4-septies.1, merely specifies that the Committee is the competent authority to assess whether “a reserve clause of a specific type of agreement originally agreed upon no longer reflects, or reflects with significant differences, the market or the economic reality that the benchmark being discontinued was intended to measure, and whether the application of such clause may pose a threat to financial stability”, in addition to requiring the Committee to make public the elements considered at the basis of the mentioned assessment referred to in the first sentence.[4] See Article 28(1) of the Benchmark Regulation.[5] I.e. any “financial contract” within the meaning of EU consumer credit regulations.

Law No. 213 of 30 December 2023 (the “2024 Budget Law”), published in Official Gazette No. 303 of 30 December 2023, provides for the possibility for SACE S.p.A. (“SACE”) to issue a new type of guarantee. More specifically, pursuant to Article 1, paragraph 259, of the 2024 Budget Law, “in order to support infrastructural and productive investments made in Italy, including in areas characterized by conditions of partial market failure and sub-optimal levels of investment, related to the high riskiness also associated with medium- and long-term exposures, the use of innovative technologies or the limited offer of financial products, SACE is empowered to issue, until 31 December 2029, guarantees related to investments in the sectors of infrastructure, including of a social nature, local public services and industry and processes of transition to a circular economy, sustainable mobility, adaptation to climate change and mitigation of its effects, environmental or climate sustainability and resilience as well as industrial, technological and digital innovation of businesses” (“Garanzia Archimede”). 

1.1 Addressees of Garanzia Archimede

(i) parties identified as implementing partners under the InvestEU program referred to in Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 ([1]);(ii) banks, domestic and international financial institutions and other entities licensed to engage in lending in Italy;(iii) domestic and international insurance companies, licensed to conduct credit and surety business in Italy in connection with sureties, guarantees and other signature commitments; and(iv) subscribers to bonds, promissory notes, debt securities and other financial instruments, whether equity- or non-equity-based, convertible, including subordinate ones.

1.2 Scope, term and amount of Garanzia Archimede

1.3 Materiality thresholds for MEF intervention

• whose maximum guaranteed principal amount exceeds 600 million Euros and exceeds 25 percent of the turnover of the beneficiary company, or of the consolidated turnover of the reference group([2]), if any, considering the data from the latest approved financial statements;
• if the maximum guaranteed principal amount exceeds (i) 1 billion Euros or, (ii) for guarantees on individual loan portfolios, the amount guaranteed in relation to the portfolio exceeds 3 billion Euros,

is subject to a declaration of non-impediment by the Minister of Economy and Finance adopted on the basis of the inquiry forwarded by SACE for loan portfolio guarantees. 

1.4 Next steps

2. Garanzia “Futuro”

In order to support technological innovation and the digitalisation process, to invest in infrastructure and sustainability, in strategic supply chains and economically disadvantaged areas, and also to support the development of female entrepreneurship, SACE is offering Italian companies a new guarantee instrument with the characteristics outlined below (“Garanzia Futuro”). 

2.1 Requirements for accessing Garanzia Futuro

• be set up as corporations, including in cooperative form. The FAQs published on SACE’s website (the “FAQs”) also show that, the companies in question must have been operating for at least three years and can be either SMEs or non-SMEs;
• have their registered office or branch office in Italy;
• on the date of the loan application, not be in difficulty within the meaning of European Commission Notice 2014/C 249/01;
• on the date of applying for Garanzia Futuro and based on the findings of the audits conducted by the lender in accordance with its internal credit-granting procedures, (a) not be, or not have been in the last 5 years, subject to bankruptcy proceedings, (b) not be subject to enforcement proceedings commenced by the lender or real estate enforcement proceedings commenced by a third party (such as, but not limited to, a supplier to the beneficiary company or a third-party lender) that adversely affect the assessment of the creditworthiness of the beneficiary company; (c) not have negative reports in the Central Credit Register([3]); and (d) not be in default of any repayment obligation to the financing party, unless the beneficiary companies reimburse any unpaid amounts by the relevant disbursement date; and
• have, on the date of applying for Garanzia Futuro, a credit rating within the thresholds indicated in Appendix 2 of the general terms and conditions of Garanzia Futuro (Special Terms and Conditions)([4]).

2.2 Addressees of Garanzia Futuro

• domestic banks;
• foreign banks; and
• Italian or foreign financial operators,

that comply with appropriate organisational, supervisory, capitalisation and operational principles. 

2.3 Requirements of the loan

• tangible and/or intangible fixed assets abroad or in Italy;
• financial fixed assets abroad; and
• working capital requirements.”

Should the loan be intended to finance costs and expenses for the preparation of a supply of goods and/or services, such supply must not fall within the scope of (a) the regulations concerning dual-use items and/or technologies or military items subject to licensing under the relevant national, European Union and United States of America regulations (e.g. EU Reg. No. 821/2021, Law 185/1990, Legislative Decree 221/2017, EAR, ITAR); (b) national and European Union export/import control provisions([7]). 

2.4 Characteristics of Garanzia Futuro  

3. Reconfirmation of the “Green” Guarantee

The 2024 Budget Law (Article 1, Paragraph 269) also provided for the reconfirmation for the year 2024 of the so-called “Green” Guarantee established by Article 64 of Decree-Law No. 76 of 16 July 2020, converted with amendments by Law No. 20 of 11 September 2020 (within the commitment limit that can be assumed by SACE equal to Euro 3 billion).  The content of this document is for information purposes only and is not and cannot be intended as legal advice on the topics dealt with. For further information please contact Roberto De Nardis di Prata, Giuseppe Buono and Davide Brollo.  News([1]) Among others, Cassa Depositi e Prestiti S.p.A., CDP Equity S.p.A., the European Investment Fund, the Council of Europe Development Bank and the European Investment Bank were deemed suitable for the management of European programmes whose implementation is delegated by the Commission to implementing partners.News([2]) Please note that the 2024 Budget Law does not provide information on whether the consolidated turnover of the group to which the beneficiary company belongs (with reference to the MEF materiality thresholds) should be only at Italian level or include any foreign companies. In this regard, it will be necessary to wait for the adoption of the rules governing the grant of Garanzia Archimede by SACE.News([3]) This is any reporting by the lender or other credit institutions to the Central Credit Register of the Bank of Italy in any of the following Census Categories or Classification Variables (as provided for in Bank of Italy Circular No.139/1991): (i) “non-performing loans”; (ii) “loans turned to loss”; (iii) “persistent defaults”; and (iv) ratio of “total cash overdrafts” and “total operational cash loans granted” greater than twenty percent; and (b) reporting by the lender to the Bank of Italy’s Central Risk Service in the Classification Variable “probable defaults”.News([4]) In addition to the above, where the repayment of the loan (for which the guarantee is requested) is fully covered by a guarantee issued by a third-party legal entity, for the purposes of calculating the remuneration due to SACE in relation to Garanzia Futuro, reference shall be made to the credit rating assigned by the lender to the guarantor, if better than that of the beneficiary company provided that (i) the guarantee issued by the guarantor is an autonomous first-demand guarantee and results in the full transfer of risk from the beneficiary company to the guarantor; (ii) the guarantor meets all the requirements provided for beneficiary companies under Article 2.1 (Type of Beneficiary Companies and Characteristics of the Loans) of the general terms and conditions of Garanzia Futuro; and (iii) the guarantor is not a natural person or a partnership.News([5]) To date, it is reported that some leading banks have already signed an agreement with SACE in order to use Garanzia Futuro for financing transactions in favour of client companies.News([6]) In the FAQs of Garanzia Futuro  it is stated that loans intended to support expenses incurred no more than 18 months prior to the date of the loan application are also eligible for coverage, for the residual amortisation value and to the extent that additional operating and/or maintenance and/or realisation costs not yet incurred at the date of the loan application exist or are expected.News([7]) By way of example, hazardous chemicals, cultural heritage, drugs and psychotropic substances, radioactive substances, waste, products containing dog and cat fur, endangered wildlife, ozone depleting substances, products and equipment containing fluorinated greenhouse gases, food and food additives and genetically modified organisms.News([8]) With reference to such latter aspect, it should be noted that pursuant to Article 5.5 (Remuneration of the SACE Guarantee) of the general terms and conditions governing Garanzia Futuro Light, any amounts indicated by SACE prior to the issuance of each guarantee, including through computer applications and/or online platforms, amount to estimates of the potentially applicable remuneration and are merely preliminary and informative in nature. Such amounts may, therefore, vary depending on the outcome of the preliminary investigation necessary for the granting of Garanzia Futuro Light and, moreover: (i) are provided without prejudice to the possibility to reject the transaction in the event of a negative outcome of the verifications carried out by SACE, and (ii) do not amount to a contractual proposal or offer, and shall not result in any obligation for SACE to issue any guarantee.

The following table looks at the key features of the non-possessory pledge (pegno mobiliare non possessorio), a security interest introduced in Italy by Law Decree no. 59 of 3 May 2016. Its regulation has long remained unfinished, pending the adoption of implementing legislation. The table analyses the non-possessory pledge in the context of the approval of the technical specifications for the submission of applications for registration with the Register of Non-Possessory Pledges approved by the latest measure of the Italian Tax Authority of 12 January 2023. The non-possessory pledge is undoubtedly one of the most significant innovations of recent years when thinking of security interests and may significantly affect the structuring of 'security packages' in the future.

Although the Italian Tax Authority’s measure has finalised the implementation of this security in the Italian legal system, full operation of the Register remains subject to the publication of a specific press release on the Italian Tax Authority’s website. However, such press release is not yet available on the Italian Tax Authority’s website.

1. Definition of gold plating

Gold plating means the process whereby EU Member States (at a State, regional or local level) – at the time of adopting regulations and directives – go beyond the minimum level of regulation provided for by EU law, imposing costs and burdens upon undertakings (and citizens) (so-called over-compliance).As highlighted by an in-depth study on the matter by the European economic and social committee (1), the definition of gold plating should be understood broadly so as to also include: (a) not taking advantage of any derogation allowed; (b) retaining national regulatory requirements that are more comprehensive than EU-law requirements; (c) introducing new burdens that fall outside the aim of EU law; (d) implementing EU law before it comes into force; (e) applying sanctions or other enforcement mechanisms stricter than required for proper implementation of the EU law.It should be noted that gold plating cannot be regarded as a transposition measure in open conflict with EU law and, thus, unlawful and subject to infringement procedures, but can trigger regulatory arbitrage, competition between legal systems and races to the bottom (or to the top) (2), thus becoming an attraction or a deterrent for business establishment, financial investment as well as for the attractiveness of the domestic market. Gold plating can ultimately be a serious obstacle to the creation of a true single capital market (3). 

2. UE and gold plating: between harmonisation and soft law

As properly noted by the Italian Supreme Court (4), gold plating is not a principle of EU law, which, certainly, binds Member States to the implementation of directives, while leaving them free to choose the most appropriate means of achieving the intended result, except for self-implementing rules (where, however, there is no shortage of gold plating cases).The absence of a specific EU legal instrument to address said problem, therefore, places on Member states the burden of identifying and removing the cases of gold plating, which is a major disruptor to the smooth functioning of the single market.According to the EU Commission, indeed, gold plating not only unfairly disadvantages businesses (and, particularly, SMEs (5) and citizens, but also reduces the competitiveness of the European Union as a global player, given the increase in administrative costs, and is an undesirable element of fragmentation of the internal market (6).The EU might of course remove or at least radically reduce gold plating by moving from minimum harmonisation directives to maximum (or full) harmonisation directives or regulations. However, as is known, the terrain of company law is particularly complex, as has also emerged from the speeches before me, and there are several voices suggesting that we should proceed very carefully and cautiously in the pursuit of harmonisation at all costs (7).On the other hand, it should be emphasised that significant steps have been taken towards the maximum harmonisation of some areas of financial market law, which has direct relevance to the internal market, by regulations on: accounting information (Regulation 1606/2002), market abuse (Regulation 596/2014) and prospectus (Regulation 1129/2017), which, however, are also often marked by gold plating.And perhaps further steps can be taken. One of these could be the introduction, which seems to be approaching, of a common framework for multiple voting rights in listed companies (8). As for the latter, the hope is that the Listing Act being drafted by the Commission will lead to bold simplification illuminated by proportionality for SMEs.In addition to harmonisation by legislation, the reduction of gold plating phenomena can be the subject of soft law actions by EU institutions, aimed at guiding domestic legislators through recommendations and guidelines, which, however, in order to be truly effective, should be accompanied by systematic monitoring by Member States through, for example, comply or explain processes.In our field, it is worth mentioning the Recommendations on Remuneration and Duties of Directors of Listed Companies (9), on remuneration policies in the financial sector and on the quality of corporate governance reporting (comply or explain principle).I will not go further into this topic as it is beyond my assigned task. This afternoon we will hear some extensive reports on the directives to be implemented and the work in progress. 

3. Domestic rules

The prohibition on gold plating was codified in Article 14, paragraphs 24, bis, ter and quater, of Law 246/2005 (introduced by Law 183/2011 “2012 Stability Law”), which requires avoiding:

• the introduction or maintenance of requirements, standards, obligations and burdens that are not strictly necessary for the implementation of directives;
• the extension of the subjective or objective scope of application of the rules compared to the provisions of the directives, where resulting in increasing the administrative burdens for the recipients;
• the introduction or maintenance of sanctions, procedures or operational mechanisms that are more burdensome or complex than those strictly necessary to implement the directives.

Subsequently, Article 32, paragraph 1(c), Law 234/2012, was introduced, which included, amongst the criteria for the exercise of the legislative powers granted to the government for the adoption of EU rules, the prohibition of gold plating, which could have, according to some, a peculiar relevance in the area of enforcement (10).There is, in addition, the 2018 Guide to Regulatory Impact Analysis and Verification, which sets out provisions for regulatory inquiry with a particular emphasis on gold plating, SMEs, and proportionality (11).Lastly, let us recall that the administrative action of the Bank of Italy and Consob in the sphere of the regulation of market law must be oriented by the “recognition of the international character of the financial market and safeguarding of the competitive position of Italian industry” under Article 6, paragraph 1, (c) of the Consolidated Act on Finance. In this regard, one should also look at the more general system of public administration and governance of the Supervisory Authorities, which can no longer be a source of competitive disadvantage vis-à-vis other countries (12).Primary and secondary legislation is fully aligned with the guidelines of the EU Commission and clearly converges towards countering and eliminating gold plating in order to provide a competitive and attractive regulatory framework for businesses and, in particular, SMEs. 

4. Cases of gold plating

Despite the clarity of the Italian regulatory framework, are there cases of gold plating? Are they justified because of specific requirements of the Italian market? Here are a few examples (I counted over 40):

• Some aspects of company law (Directive 1132/2017) - share capital - see Article 2327 of the Italian Civil Code, now €50,000 for S.p.A. (joint-stock companies) can a proportional criterion be adopted for SMEs S.p.A.? I must point out that the minimum threshold is €25,000 (Article 45(1) of Directive 1132/2017) and the rules governing extraordinary transactions such as the raising of risk capital (quorum to be reduced, Article 2368, paragraph 2, of the Italian Civil Code), voluntary capital reduction (quorum to be reduced and terms, Article 2445 of the Italian Civil Code), reduction for losses (which, as highlighted by Prof. Ferri just now could be revised from a “vintage” perspective) contributions in kind (subject to several uncoordinated interventions and lack of derogation pursuant Article 49(4) of Directive 1132/2017), mergers/demergers (time limits and procedure, e.g. 60 days to oppose creditors or publication in the OJ), treasury shares (Article 2357 of the Italian Civil Code), and the quantitative limit to be increased, Article 2368, paragraph 2, of the Italian Civil Code, quantitative limit to be increased, the issue of manipulation is largely superseded by the MAR and the extension of the maximum length of the authorisation to 5 years, see Article 61 of the Directive).
• Shareholder Rights Directive - (EU Directive 2007/36) - extension of the rules on transactions with related parties to issuers of financial instruments widely distributed among the public pursuant to Article 2391-bis of the Italian Civil Code.; binding vote on remuneration policy (Article 123-ter, paragraph 3-ter, TUF, indication of remuneration to affiliated companies (Article 123-ter, paragraph 4(b), TUF);  identification of shareholders at the request of minority shareholders (83-duodecies, paragraph 3, TUF) (13); and see also the concerns expressed by authoritative scholars on Consob’s control of the substantial correctness of RPTs, which may pave the way for an administrative scrutiny of the business judgement rule (14)
• Takeover bid (OPA) - (Directive 25/2004) broader offer document content (see Annex 4, Issuers' Regulation vs. Article 6, paragraph 3, TD); squeeze-out from 95% to 90% (111 TUF, see Article 15, Directive 25/2004), see Loi Pacte (2019) which reduced the threshold from 95% to 90% to limit opportunistic behaviour of a small minority; consolidation takeover bid (106, TUF, not provided for by Directive 25/2004, should it be reconsidered?).
• Transparency (Directive 109/2004): quarterly reporting obligations of transactions carried out with the dissenting opinion of the RPTs Committee (Article 7, paragraph 1, letter (g), Consob RPTs Regulation vs. Article 5, paragraph 4 TD and Article 4, paragraph 1, Directive 2007/14/EC); calling of the shareholders' meeting through notice published in the press (Article 2366 of the Italian Civil Code and Article 113-ter, TUF, with respect to the disclosure obligations of regulated information see Article 21, paragraph 1, and recital 8 TD); content of the notice of calling (Article 127-quater, TUF vs. Article 17, paragraph 2, letters (a) to (d) TD); liability of the manager in charge of drawing up the corporate accounting documents pursuant to Article 154-bis TUF (see Article 7, TD, but Article 3, paragraph 1, which allows for extension but only 5 Member States have extended liability); significant shareholdings thresholds not perfectly overlapping (Article 117, Consob Issuers’ Regulation and Article 9, TD, 3% (discouraging institutional investors) and 90%); methods of disclosure of relevant shareholdings to Consob (see Annex 4 vs. Article 12, paragraph 1, letters (a) to (d)); sanctioning system (192-bis, 192-quinquies, 193 TUF, which seems not proportionate, as required by Article 28, TD).
• MAR (Regulation EU 596/2014) - double track of administrative and criminal sanctions (but see Supreme Court 149/2022 on copyright, which hopefully could lead to a profound rethinking of the sanctioning system); Article 114, paragraph 7, TUF with respect to the application of MAR to controlling shareholders or shareholders with more than 10% (certainly not applicable to MTF issuers but the point should be clarified, see Article 114, paragraph 12, TUF), which could perhaps be reconsidered in light of the gold plating permitted by the Transparency Directive (see Article 120, 4-bis, TUF, and Recital 12 on declaration of intentions); Articles 110 and 111 of the Issuers' Regulation, which, perhaps due to a lack of coordination, apparently impose additional disclosure requirements on MTF issuers;
• Prospectus - (Regulation 2017/1129) liability of the person responsible for the placement (Article 94, paragraph 7, TUF); application of Consob's powers under Article 115 TUF to the issuer's controlling and controlled entities and to the offerors or persons requesting admission to trading (Article 97, paragraph 1 and Article 113, paragraph 1, letter f, TUF) (Assonime). See, however, Consob Resolution No. 22423/2022 of last July (prospectus in English, prefiling also on indications (15);
• Financial Statements - Prohibition to adopt IFRS for companies that may draw up simplified financial statements (16).

In my opinion, almost all of such cases seem to be the result of an excess of tutiorism. Often, a spontaneous instinct of precaution seems to prevail in the Italian legislator, with provisions introduced into the legal system in a non-systematic way but, rather, by means of occasional and non-organic legislative initiatives, sometimes in response to crises and scandals of various kinds and media coverage (17). 

5. Quo vadis?

How to intervene in order to eliminate gold plating so as to comply with one of the cardinal objectives of the company law reform, namely “to encourage the creation, growth and competitiveness of companies, including through their access to domestic and international capital markets” (see Article 2, 1, (c), of Law 366/2001?The solution can only be a robust, rapid (and courageous) legislative intervention (18) aimed at modernising and simplifying company and financial market law, and we hope that this will be one of the priorities of the next government. In 2023 the reform of the Italian Civil Code will be twenty years old, while the Consolidated Law on Finance will be twenty-five years old.Pleas to such effect follow one another and were also the subject of an article in Monday's Financial Times (19).To tell the truth, in our country, much of the work has already been done by the current Government and, in particular, by the Fifth Division - Regulation and Supervision of the Financial System of the MEF, directed by Stefano Cappiello, who published at the beginning of the year a Green Paper entitled La competitività dei mercati finanziari italiani a supporto della crescita (Competitiveness of Italian financial markets in support of growth) (February 2022), which obtained broad market consensus (20).The Green Paper, drafted with the participation of Consob, Banca d'Italia, Borsa Italiana and various trade associations, mentions numerous micro-regulatory measures (21) aimed at eliminating the legislative and regulatory provisions issued over the years in breach of the prohibition on gold plating Their full adoption would lead to a significant simplification (and strengthening) of company law (22).As stated therein, there is an urgent need for an organic and systematic review of the regulatory and institutional frameworks in the sphere of capital market regulation and company law "which - as a result of the stratification of primary and derived legislation, listing rules and administrative practices - lead to stricter constraints and higher costs than those required by harmonised European law (so-called “goldplating” cases) and are not supported by adequate justification, representing exceptions when compared at European level".The report, prepared by the MEF in compliance with the EU better regulation principles, is characterised by several action guidelines: (a) zero impact in terms of costs for the State; (b) simplification, always keeping in mind the protection of minority shareholders and/or creditors; (c) proportionality for SMEs; (d) analysis of best practices developed in other EU Member States (23), taking up, in the latter, the suggestion formulated by Klaus Hopt at the opening of the millennium, namely see looking beyond frontiers/learning from the neighbour's experiences (24) or by Paolo Montalenti when he speaks of spontaneous adaptation of national laws to similar rules and principles (25).So, the path seems set out and, looking beyond gold plating, an organic legislative intervention can no longer be postponed. It is therefore essential that politics and the Government focus without delay on the most appropriate instruments to ensure the competitiveness of Italian companies on national and international markets.As Piergaetano Marchetti (2022) pointed out in a recent seminar, “our system must be competitive with European systems: not competitive in the sense of a more permissive system, but also not competitive in the sense of a more onerous, more limiting system” (26). This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For any further information please contact Lukas Plattner. (*) Report on XXXV Workshop “Adolfo Beria di Argentine” on current civil procedural law issues. Il diritto societario europeo: quo vadis? Courmayeur, 23-24 September 2022, being printed, in Quad. di Giur. comm.(1) Smart governance of internal market for business (2014).(2) Enriques e Zorzi, Armonizzazione e arbitraggio normativo nel diritto societario europeo, Riv. soc., 2016, page 775 et seq.(3) Marchetti, Il crescente ruolo delle autorità di controllo nella disciplina delle società quotate, Riv. soc., 2016, page 33 et seq.(4) Italian Supreme Court, judgment No. 100 of 27 May 2020.(5) Small and medium-sized enterprises (SMEs) are the backbone of Europe's economy. They represent 99% of all businesses in the EU. They employ around 100 million people, account for more than half of Europe’s GDP and play a key role in adding value in every sector of the economy (EU Commission, Entrepreneurship and small and medium-sized enterprises (SMEs))(6) Communication Better regulation: joining forces for better laws (2021); Communication on Identifying and Addressing Barriers to the Single Market (2020). The EU Commission, also with specific reference to SMEs, has not failed to emphasise the difficulty for it to identify and remove national implementing provisions affected by gold plating while recommending that member states to take steps in this regard (see also Communication Identifying and Addressing Single Market Barriers (2021).(7) Enriques, 2006, 2015, 2016; European Company Law Expert, Ferrarini et al. 2012. It should also be recalled that the negotiations on minimum harmonization directives are often inevitably influenced by the opportunistic behavior of Member States that may be pressured to accept a (minimum) harmonisation level, already knowing that, having failed to persuade other Member States to agree to more stringent standards, they will adopt more stringent requirements domestically or maintain existing ones, Commission Staff Working Document – “Report on more stringent national measures” concerning Directive 2004/109/EC”.(8) See Reccomendation TESG in Empowering EU Capital Markets- Making listing cool again Final report of the Technical Expert Stakeholder Group (TESG) on SMEs (2021), further references available at ssrn.com/abstract=3858732, 2021 subsequently submitted for consultation under the Listing Act, available at finance.ec.europa.eu/regulation-and-supervision/consultations/finance-2021- listing-act-targeted_en; see also German government proposal of  26 June 2022, Eckpunkte für ein Zukunftsfinanzierungsgesetz available at  www.bundesfinanzministerium.de/Content/DE/Downloads/Finanzmarktpolitik/2022-06-29- eckpunkte zukunftsfinanzierungsgesetz.html; in Francia Rapport sur les droits de vote multiples du Haut Comité Juridique de la Place Financière de Paris, 15 September 2022; in UK see introduction, of the dual class share onto the LSE premium segment (December 2021)(9) Recommendations 2004/913/EC, 2005/162/EC, supplemented by Recommendation 2009/385/EC, as well as Recommendation 2009/384/EC and Recommendation 2014/208/EU.(10) Rivellini, Il divieto di gold plating e il problema della sua giustiziabilità in Italia, in Riv. trim. dir. pub., page 815 et seq.(11) Dipartimento per gli affari giuridici e legislativi Presidenza del Consiglio dei Ministri (DAGL) (2018).(12) See lastly in relation to Consob governance, contributions by Costi and Vella and of  Plattner and Vismara, Consultazione Libro Verde MEF (2022), available a  https://www.dt.mef.gov.it/it/dipartimento/consultazioni_pubbliche/consultazione_libro_verde.html; see also ESMA, peer review ESMA, 21 July 2022, on balloting and approval of prospectuses.(13) See Assonime and Confindustria, Osservazioni di Assonime e Confindustria alla consultazione del Ministero dell’economia e delle finanze, Dipartimento del tesoro, sullo schema di decreto legislativo per l’attuazione della direttiva (UE) 2017/828 che modifica la direttiva 2007/36/CE per quanto riguarda l’incoraggiamento dell’impegno a lungo termine degli azionisti (Observations of Assonime and Confindustria to the consultation of the Ministry of Economy and Finance, Department of Treasury, on the draft legislative decree for the implementation of Directive (EU) 2017/828 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement), 2019, see for further Assonime cases, Risposta a consultazione Consob sul recepimento della direttiva (UE) 2017/82 (Response to Consob Consultation on the Transposition of (EU) Directive 2017/828) (Shareholder Rights Directive) (2019) and Risposta Assonime alla Consultazione UE (Assonime Response to the EU Consultation) “Listing Act: making public capital markets more attractive for EU companies and facilitating access to capital for SMEs” (2022).(14) Marchetti, op. cit., page [•].(15) ESMA peer review ESMA, 21 July 2022, on scrutiny and approval of prospectuses by the NCA, where some simplifications are recommended with respect to the operation of the Supervisory Authority where several recommendations are made with respect to the prospectus approval procedure in Italy and to the governance of Consob.(16) Legislative decree 38/2005, Article 4, paragraph 6.(17) SICLARI, European capital markets union and national legislation, in BBTC, I, 2016, page 482 et seq.(18) In some Member States, this process has already been started: see Anti-Gold-Plating-Gesetz of 2019 in Austria (financial information); Projet de loi portant suppression de sur-transpositions de directives européennes en droit français of 2019 (simplification of mergers).(19) Sciorilli Borrelli, Italy under pressure to boost appeal of Milan stock exchange, 19 September 2022(20) See post-consultation explanatory report of 1 July 2022.(21) Some suggested by the OECD in the report Capital Market Review Italy (2020).(22) As previously pointed out (Marchetti 2016), the prohibition on gold plating can also be extended to the already transposed EU rules and be a reason for reflection in order to expel from the system drifts of overcompliance to which we have succumbed in the past and from which we are constantly at risk of being seduced.(23) See, for example, Article 45, draft relaunch decree (May 2020), where interesting comparative insights into the extension of multiple voting rights to already listed companies are to be found.(24) (Hopt, Modern Company Law Problems: A European Perspective Keynote, Company Law Reform in OECD Countries A Comparative Outlook of Current Trends, 2000.(25) Montalenti, Il diritto societario europeo, in AA.VVV, Il Nuovo Diritto delle Società, Le società, IV, edited by Montalenti, in Trattato Diritto Privato dell'Unione Europea, directed by Ajani and Benacchio, Turin, 2022, page 963 et seq.(26) Marchetti, Intervento al seminario istituzionale sulla presentazione di liste di candidati da parte dei consigli di amministrazione uscenti delle società quotate (Speech at the institutional seminar on the presentation of lists of candidates by outgoing boards of directors of listed companies), Senate of the Republic, 6th Committee on Finance and Treasury, 16 June 2022.

1. retail investors, in the context of the provision of investment advisory services, for an amount not less than Euro 100,000 (provided that, as a result of the subscription or purchase, the total amount invested in reserved AIFs does not exceed 10% of their financial portfolio);
2. persons qualified to provide portfolio management services, in the context of the provision of such services, for an amount not less than Euro 100,000, on behalf of retail investors;
3. the “personnel” of asset management companies.

As concerns the categories referred to in A and B, the amendments introduced are clearly aimed at favouring the subscription or purchase of reserved AIFs through “private banking” networks, thus allowing the investment in reserved AIFs to bank customers benefiting from typical private-banking investment consulting  or portfolio management services under favourable conditions compared to other retail investor, by a reduction of the minimum investment threshold.As concerns the category referred to in C, while in the regulatory regime applicable before the changes the units of reserved AIFs could only be subscribed for by “directors and employees” of the asset management company, the new notion of “personnel” introduced now includes, besides employees, all “those who in any event operate under a relationship involving their inclusion in the company organisation, even in forms other than on an employer-employee basis”.In nutshell, as a result of the above-mentioned changes:

• the limit of investment in reserved AIFs for retail investors is reduced from EUR 500,000 to EUR 100,000 when the subscription or purchase takes place in connection with recourse to investment consulting services (in such case, subject to the concentration limit mentioned above) or portfolio management services;
• all personnel of the asset management company can subscribe for or purchase units in managed AIFs, even if they are not formally employed by the company.

 This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Giovanni Giuliani e Jacopo Pisani.

• the first aspect relates to lack of transparency and fairness towards the clients served. In the Authority’s opinion, clients are very often inadequately informed of the fact that comparison is, as a matter of fact, confined to products distributed by the platform's partner lenders. So, the product recommended to the client might in practice not represent the best solution available on the market or the one that best meets the user's needs;
• the second aspect relates to the circumstance that, while some of the platforms providing the above services are managed by credit intermediaries and/or lenders, other platforms are operated by persons who are not in the financial sector and, therefore, not subject to control by the relevant supervisory authority.

Concerning the first of the two aspects highlighted, in concluding the Communication, the Authority describes the corrective measures deemed necessary: the platform must inform users that it does not provide a comparison of the full range of offers available on the market and, therefore, does not propose the absolute most convenient product. Furthermore, the platform must inform clients that the conditions of the offer proposed at the end of the simulations may vary as a result of the lender’s assessments of the client's specific position.Finally, the Authority recalls that the OAM has the responsibility checking due application of the above-mentioned transparency rules as well as of preventing and combating any unlawful exercise of the activity of credit intermediation, pursuant to Article 140-bis of Legislative Decree No. 385 of September 1, 1993 (“Consolidated Law on Banking”).Concerning the second of the above-mentioned aspects, the Communication on the other hand specifies which activities can also be carried out by platforms not registered with the OAM and which ones must instead be considered reserved for authorised persons.According to the Authority, “the use of websites or web marketing tools - the purpose  of which is to encourage users to provide their data in order to facilitate contact with lenders for the purpose of credit promotion -, if implemented by persons not subject to Supervision, should  be limited  to  the collection of personal and contact data of anyone who may be interested in credit products, excluding any - even minimal - data collection or profiling regarding the user's financing needs and any form of  promotion or analysis, preliminary investigation and information on the product”.The perimeter of the reservation is  thus identified in the type of information collected as a result of the interaction with clients. Personal and contact data can be requested from the users reached without the need to be registered with the register of agents and brokers. Data collection or further profiling must indeed be deemed an activity subject to reservation.From the Authority’s perspective, the profiling of the potential client’s  financing needs is decisive in bringing the activity provided within the scope of the reservation.When a platform has such a purpose, also the activity of collecting information (other than personal and contact data) or any activities involving product promotion and description or preliminary assessment operations for potential customers will, according to the OAM, fall within the scope of the reservation.In that regard, however, it should be noted that, after the so-called “lead generation phase”, two further phases can be theoretically identified, by nature conceptually and chronologically autonomous.Indeed, one can first identify an activity of mere (material) collection of information from clients, not necessarily limited to their personal and contact data, but potentially concerning also further circumstances.Such activity, when involving the mere provision of a questionnaire and the storing of the client’s answers, in the absence of any form of promotion or analysis, preliminary assessment operations and provision of information in respect of credit products, should in our opinion not be deemed as falling within the scope of credit brokerage.Different and ideally subsequent to the above phase would be, instead, the phase of processing/aggregation of the data and information collected, which is actually aimed at identifying a commercial proposal that meets the client’s financing needs and which may well be carried out by a different person from the one who provided the questionnaire.While the latter activities can certainly be considered as falling within the scope of credit brokerage, thus subject to reservation (and therefore exercisable only by persons authorised to carry out brokerage activities, as being registered with the OAM), we are however of the opinion that the mere collection of “raw” information (possibly through the provision of a questionnaire including information relating also to the potential client’s credit needs), not accompanied by any further processing and assessment of the information provided, does not in itself require registration with the register of agents and brokers.Finally, the Authority describes a further category of services, common in practice, normally associated with the circumstance of  subject operating as a mere “advertising showcase”, which it considers to fall outside the scope of reserved activities.Reference is made in particular to the activity of those platforms which - having a completely different core business than credit and financial brokerage - display a mere banner/advertisement that links directly to a website and/or to an operating branch managed by a subject registered with the OAM or by a qualified banking and/or financial intermediary.Similar to the case described above is the activity of those who limit themselves to carrying out abstract creditworthiness simulations or reporting a list of lenders who offer financing, without collecting any data on credit needs nor providing quotes concerning specific products and directly directing the potential client to a subject registered with the OAM or to an authorised banking and/or financial intermediary.In conclusion, even subject to the above-mentioned specifications - on which we hope the OAM will take a favourable stand -, we believe that the Communication provides significant clarification for the operators in the sector, removing some of the interpretative uncertainties that would now seem capable of altering the “level playing field”.

1. dialogue with third parties outside the loan relationship for the collection of the instalments (the employer/pension fund, the so-called " assignee third-party administration" (amministrazione terza ceduta))
2. suitable IT systems for managing and monitoring the collection of loan instalments;
3. management of dealings with the insurance companies for the stipulation and any payment of claims on insurance policies covering the risk of premature death and job loss of the borrower;
4. management of any early repayment of the loan, with the consequent obligations to reduce the total cost of the credit pursuant to Article 125-sexties of the TUB;
5. provision of effective and efficient forms of control over the distribution network employed [9].

Specific legal and reputational risk profiles are typically associated with the use of external networks of agents, brokers and other financial intermediaries authorised to distribute the product to the public, in order to adequately monitor any breaches of rules or improper conduct of the network.Particular attention should also be paid to the definition of internal rules on remuneration and incentives so as not to encourage, directly or indirectly, the placement of products that are inconsistent with the economic and financial situation of customers [10].Finally - also taking into account the constant development of the credit process through IT platforms - the Communication draws the attention of banks and financial intermediaries to the compliance risks associated with the use of digitalisation processes in the relationship with customers (increasingly accelerated by the current pandemic), both in the phase of onboarding customers and in the phase of disbursing amounts and managing the relationship with them.From dirittobancario.it  This article is for information purposes only and  is not, and cannot be intended as, a professional opinion on the topics dealt with. For any further information please contact Danilo Quattrocchi. [1] As is well known, the aforementioned transactions are typical forms of credit granted to (public or private) employees and pensioners, with a maximum duration of ten years and the amount of the repayment instalment not exceeding one fifth of the net monthly salary (or pension), which is withheld by the employer (or pension body) and paid directly by the latter to the financial institution on the basis of a mechanism similar to the delegation of payment. A further peculiarity of the institution is the requirement for credit guarantees, in the form of insurance policies to cover the risk of premature death and job loss of the borrower.[2] Reference is made in particular to the Bank of Italy's communications of 19 November  2009, 7 April  2011 and, more recently, Resolution 145/2018, setting out “Salary and pension-backed loans supervisory guidelines”.[3] So-called “CRR Quick-fix”, which, on the basis of the lower credit risk connected with the peculiarities of the institution, reduced the weighting factor applicable to such form of loan in terms of capital absorption from 75% to 35%.[4] Available on www.dirittobancario.it/wp-content/uploads/2022/01/Comunicazione-Banca-dItalia-12-gennaio-2021.pdf and on www.bancaditalia.it/compiti/vigilanza/normativa/archivio-norme/comunicazioni/com-20220112/op-finanziamento-contro-CQSP.pdf.[5] See, in particular, Title VI of the TUB and the Bank of Italy’s Order of 29 July 2009 on “Transparency of banking and financial transactions and fairness in the relations  between financial intermediaries and customers”.[6] In the communication accompanying the aforementioned Resolution 145/2018, the Authority notes that in 2017 there were almost 22,000 appeals to the Banking and Financial Arbitrator on the subject of CQS/CQP, an increase of over 40% compared to the previous year and such as to represent 72% of the litigation brought before the Arbitrator.[7] In Section I of the Supervisory Guidelines on the transfer of salary- and pension-backed loans issued by the Bank of Italy in 2018, the Authority for example specifies that “it is good practice to also consider, while respecting privacy, the household' s condition, in cases where it is relevant to assessing the reliability of the debtor and the sustainability of the debt”.[8] See Decree Law No. 137 of 28 October 2020 (so-called “Ristori Decree”), converted with amendments into Law No. 176 of 18 December 2020.[9] The above-mentioned requirements seem even more evident with reference to the so-called "originate-to-distribute" business models, in which the disbursing intermediary (typically a subject under Article 106 TUB) periodically and systematically transfers without recourse to third parties the CQS/CQP loans granted to its customers. Indeed, in such cases, although the originator/assignor often retains responsibility for the management of collections and any early repayments, the fulfilment of periodic reporting obligations to customers and the management of any complaints, the acquiring intermediary must adopt suitable systems to control the work of the originator, also through suitable information flows and periodic and structured checks. In this respect, the due diligence carried out by the purchaser should not be limited to examining the credit risk inherent in the portfolio being acquired but should also extend to the legal and reputational risks connected with the originator' s work.  In this regard, see also Section IX of the Supervisory Guidelines on salary- or pension-backed loans issued by the Bank of Italy in 2018. Again with reference to "originate-to-distribute" models, the Authority also draws attention to the need to guarantee an effective management of the liquidity and market risks that might arise to assigning intermediaries from: a) any difficulty with transferring their portfolios to third parties, for example, in the event of contingent adverse market situations; b) sale of the receivables at prices lower than the current market value.[10] In this respect, the Communication first refer to Section VII of the Supervisory Guidelines on salary- and pension-backed loans issued by the Bank of Italy in 2018, but the provisions on  “Product oversight and governance procedures” contained in Section XI, paragraph 1-bis of the Bank of Italy’s Order of 29 July 2009 on “Transparency of banking and financial transactions and fairness in the relations between financial intermediaries and customers”.

I. Firstly, it is clarified whether the start of the calculation of days overdue in the case of trade receivables whose debtor is a public administration starts from the conclusion of the public expenditure procedure (e. from the issue of the payment authorisation by the debtor administration) or from the due date of the individual payments.

In this regard, it is noted that:

(i) under the EBA LG, days in arrears are counted from the time they become due under the law applicable to them[6];

(ii) with reference to exposures towards public administrations, the EBA LG grant a term of 180 days (instead of 90 days) under certain conditions[7], but they do not provide for exceptions or further specification.

Consequently, the date for calculating the days in arrears starts from the due date of the individual payments[8] unless specific laws provide otherwise. Moreover, the calculation does not change if the receivable has been acquired pro soluto as part of factoring transactions, in accordance with the provisions of Paragraph 28 of the EBA LG.

The Bank of Italy's clarifications, recalling Paragraph 18 of the EBA LG, confirm that it is possible to take account of any extension periods provided for by law in favor of the public administration, including any moratoria provided for by law.

II. Secondly, for the purposes of applying the definition of default, the aforementioned clarifications of Bank of Italy specify that:

(i) the Ministries must be considered as a single central government debtor in view of the public accounting rules from which the unity of the State budget and assets derives (and, therefore, the unity of the debt position of these entities);

(ii) public debt securities held by the bank (or banking group) in the banking book must be included in the total amount of their exposures for the purposes of calculating the materiality threshold (“relative”[9] and “absolute”[10]) according to the rules of the new definition of default.

The clarifications provided by the Italian Supervisory Authority make it possible to mitigate the impact of the new definition of default on financial intermediaries’ exposures towards public administrations. The possibility to include also public debt securities in the calculation of the relevance threshold results, in fact, in a greater overall exposure to the central government, implicitly reducing the value of the so-called relative threshold.

(a) Law Decree no. 50 of 24 April 2017, converted into Law no. 96 of 24 April 2017, introduced a specific discipline for the securitisation of non-performing receivables, providing, among other things, the possible creation of an ad hoc special purpose vehicle aimed at purchasing, managing and fostering real estate assets securing the securitised receivables, including the assets subject to financial lease agreements, in the sole interest of the securitisation;

(b) Law no. 145 of 30 December 2018 introduced certain provisions dedicated to (i) securitisation with underlying bonds; (ii) loans made available by the securitisation SPV; (iii) synthetic securitisations; e (iv) securitisations of income deriving from ownership of real estate assets;

(c) Law Decree no. 34 of 30 April 2019, converted into Law no. 58 of 28 June 2019 (so called Decreto Crescita) made few amendments to receivables securitisation such as: (i) with reference to securitisations of receivables deriving from credit lines and classified as UTPs, the possibility of transferring the commitments or the right to disburse them to a bank or financial intermediary separately from the account to which the credit line is linked but maintaining the domiciliation of the account; (ii) the possibility of setting up several support vehicle companies for the acquisition, management and enhancement of real estate or registered movable property and to apply article 58 of the Italian Financial Consolidated Act to transfers to support vehicle companies of such real estate or registered assets even in the absence of the identification of a pool;

(d) Law Decree no. 162 of 30 December 2019, converted into Law no. 8 of 28 February 2020 (so called Decreto Milleproroghe 2020) has (i) governed in greater detail the so called “direct lending”; (ii) widened the scope of the rules that facilitate the securitisation of receivables deriving from credit lines; and (iii) completed the rules on securitisation with financing (so called sub-participation).

• before the entry into force of Budget Law 2021, sums paid by the assigned debtor/s were intended exclusively, by the transferee company, to the satisfaction of the rights incorporated in the notes issued by said transferee or by another company to finalise the purchase of the receivables, as well as to pay any transaction costs;
• after the entry into force of Budget Law 2021 (e. 1 January 2021), any sums (a) paid by the assigned debtor/s or (b) in any case received in satisfaction of the assigned receivables, are intended exclusively, by the transferee, to the satisfaction of the rights incorporated in the notes issued by said transferee or by another company, or to the satisfaction of rights deriving from the loans made available to the transferee by authorised entities to finance the purchase of the receivables, as well as to pay any transaction costs. It is also clarified that, in case of granting of loans, any reference contained in Law 130 to the notes issued for the securitisation shall refer to loans and any reference to noteholders shall also refer to lenders.

Therefore, paragraph 214 of article 1 of 2021 Budget Law, by amending article 1, paragraph 1, lett. (b) of Law 130, has:

(a) introduced the possibility of structuring securitisation transactions according to a simpler operational and managerial level when compared to bonds issues, as it introduced the possibility for securitisation SPVs to finance the acquisition of receivables also through loans made available by authorised entities. Under the previous regulatory framework, SPVs were instead allowed to finance the purchase of receivables exclusively through the issue of notes (save for certain exceptional cases);

(b) extended assets segregation, by providing that - not only sums paid by the assigned debtor/s (as already provided in the past) - but also sums “in any way received in satisfaction of the assigned receivables” may be intended to satisfy the rights incorporated in the notes issued or in the loan granted, as well as any transaction costs.

1. Introduction

This contribution analyses the main aspects of the rules on calendar provisioning and the intended effects of the system on management of positions classified as non-performing - including given the impact of the Covid-19 pandemic.Calendar provisioning refers to a set of European source rules introduced with the aim of improving the quality of banks’ assets, reducing non-performing exposures in a sustainable way, through a gradual and prudential provisioning plan. 

2. The regulatory framework

The current rules governing the minimum coverage of non-performing exposures were introduced with the “Guidelines on non-performing loans” of the European Central Bank (ECB) of March 2017 [1], supplemented in March 2018 by the “Addendum to NPL Guidelines” (the Addendum) [2] which for the first time has issued a series of guidelines (the so-called supervisory expectations), operational from 1 April 2018, concerning the prudential coverage of exposures classified as non-performing exposures (NPE).In its press release of 11 July 2018, the ECB [3] set out the supervisory expectations for provisioning outstanding amounts of non-performing loans (NPLs), which it is anticipated will become significant within the framework of the dialogue between the supervising and supervised entities through the sending of SREP letters to the individual banks, which therefore will have the possibility of justifying the legitimacy of certain deviations - and avoid imposition by the ECB of a second pillar supervisory measure.Regulation (EU) 2019/630 of the European Parliament and of the Council (Regulation 2019/630) [4] was published on 17 April 2019 and partially amended by Regulation (EU) 2013/575 of the European Parliament and of the Council (“CRR”) [5] laying down prudential requirements for credit institutions and investment companies, introducing new rules on minimum coverage for NPEs, which provide for a system of deduction from the bank’s Tier 1 common equity (CET1) insofar as certain minimum coverage levels provided for in the new legislation have not been reached. This regulatory framework, included in Pillar One, provides no room for flexibility and applies only to NPEs generated by loans disbursed from 26 April 2019.With a view to harmonising the system of rules laid down in the Addendum with those established in Regulation 2019/630 [6], in August 2019 the ECB again issued a “Notice on Supervisory Expectations for NPE Coverage” [7], clarifying aspects of the EBA’s guidance on NPEs, providing more detail on the ECB’s supervisory expectations for provisioning the solidity of NPEs, and illustrating the interaction between the ECB’s expectations for NPE coverage under Pillar II and Pillar I prudential rules.In accordance with the ECB's statement of 20 March 2020 [8], Regulation (EU) 2020/873 of the European Parliament and of the Council (Regulation 2020/873) was published on 24 June 2020 [9], which in the scope of a series of measures to amend the CRR to address the emergency caused by the spread of Covid-19, amended Regulation 2019/630, specifying the role of public guarantees within the Pillar 1 framework (on this point see below). 

3. The regulation of calendar provisioning

In light of the above, the scope of application of calendar provisioning may be tripartite depending on the characteristics of the NPEs [10]. In particular, if the NPEs in portfolio have reached the non-performing stage:

(i) from 1 April 2018 onwards and with a date of origination on or after 26 April 2019, the minimum level of coverage will be governed by Regulation 2019/630 (Pillar 1 Perimeter);

(ii) from 1 April 2018 onwards and with a date of origination before 26 April 2019, the minimum level of coverage will be governed by the Addendum (Pillar 2 Addendum);

(iii) prior to 1 April 2018, the minimum level of coverage will be managed in the context of the annual SREP letter sent by the ECB to the individual banks (Pillar 2 Stock Perimeter).

4. The impact of the Covid-19 pandemic

It is reasonable to assume that the economic crisis triggered by the Covid-19 pandemic will have a significantly negative impact both on the number of non-performing exposures (including in the light of the new definition of default in effect from 1 January 2021 [15]) and on credit recovery time-scales; it suffices to consider the effect of certain (albeit temporary) measures adopted by the emergency legislator, such as the suspension and deferral of enforcement proceedings involving the debtor’s main residence and/or the automatic staying and/or deferral of trial deadlines.As is well known, in order to cope with the liquidity crisis affecting households and businesses, individual Member States have taken action by preparing a series of public measures aimed at supporting and relaunching the economy.In this context, the ECB [16] made provision for a specific exemption from supervisory expectations for MLCs on NPEs, accompanied by public guarantees as part of efforts to contend with the Covid-19 emergency situation, establishing that in such cases there will be no minimum coverage requirements for the first seven years from classification to credit default [17].The ECB has made it clear that NPE stock pre-dating the outbreak of the pandemic will not benefit from ad hoc measures; however, given that the expected market conditions are unlikely to allow banks to meet the agreed targets for reducing these stocks, the ECB has stated that flexibility margins will be assessed on a case by case basis within the supervisory dialogue.Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 [18] setting forth anti-pandemic measures, introduced a series of amendments to Regulation 2013/575 (the Quick fix) [19]. In particular, Article 47-quater, in addition to the provisions already made by the ECB, treated the guarantees and counter-guarantees granted by national governments or other public entities, which were assigned a weighting of 0% in accordance with the provisions of the CRR [20] (the so-called standardised method), as guarantees provided by export credit agencies, thereby equating state guarantees and guarantees of export credit agencies due to their asserted substantive similarity in terms of the ability to mitigate risk.Finally, to complete the overview, reference may be made to some measures that may have an indirect impact on calendar provisioning.At European level, the flexibility aspects introduced by the ECB in the classification of loans as unlikely-to-pay if the loan is backed by public guarantees established as part of interventions related to the Covid-19 emergency merit a reference; these are the subject of public or private moratoria granted due to the crisis caused by the pandemic [21]. In this regard, the EBA recently clarified that the suspension of the write-down of loans subject to a public moratorium will take effect until 21 March 2021 [22]. The interpretation was necessary because initially the EBA, in providing for the exemption from the reclassification to non-performing of loans subject to a moratorium until 21 March 2021, had at the same time adopted a mechanism whereby the exemption itself could not go beyond nine months. In the case of moratoria guaranteed by the Italian state, however, the nine months ended up expiring - at least for the first moratoria - as early as the first week of February. The last interpretation adopted by the EBA therefore allows the reclassification of loans subject to a public moratorium to be postponed until 31 March 2021.With reference to the actions of the Italian legislator, consider Article 55 of Decree-Law of 17 May 2020 (the “Cura Italia” Decree), No. 18, as converted into law, which provided, inter alia, for the possibility of converting into tax credits some deferred tax assets (Deferred Tax Assets – DTAs) deriving from tax losses and ACE surpluses following the transfer of non-performing loans, with effect from the date of their transfer. Such loans may be offset without limits on amount and time if the non-performing loans were transferred by 31 December 2020, or repayment may be requested. As a result of the transfer the DTAs converted into credits will be re-classified for supervisory purposes as DTAs that do not depend on future profitability [23]. 

5. The potential effects of calendar provisioning on the management of NPEs

The new regime, imposing higher capital and/or income statement charges on banks, will lead them to revise their strategies and methods for managing non-performing loans, moving from a wait and see model to a proactive and all-pervasive approach.In this context, with a view to reducing the level of provisions, it will become fundamental for banks to analyse the existing NPE portfolio, identifying potential impacts according to, inter alia, (i) whether the exposure is secured or unsecured, (ii) the geographical location of the debtor (to which the time-frame for the recovery of the credit is closely related), (iii) the type of debtor, (iv) the time elapsed since the classification as in default, (v) the level of provisions already made and (vi) the stage at which the possible credit recovery process takes place.For each cluster, it will then be necessary to identify the optimal strategy in order to minimise the economic and financial impacts arising from calendar provisioning, for example, by deciding whether to accelerate the credit recovery activity or transfer the credit. In the first case, it is essential that debt recovery processes facilitate - as far as possible - alignment between the actual time-frame and that provided for by calendar provisioning, including by using the logic of management by objectives and enhanced integration between internal structures, servicers and external legal counselThe new rules could also affect policies on the granting of new loans, for example, inducing an even greater preference for the financing of sectors with a stable risk profile and/or a positive outlook.Such considerations will become increasingly urgent given that the current scenario of economic crisis risks expanding the scope of NPEs.Moreover, the effect of the rules on calendar provisioning risks being further magnified by interaction with other regulations that directly and/or indirectly affect non-performing loans or the variables that result in their emergence, first and foremost the new definition of default introduced by the European legislator. Considering that the new definition of default will contribute to the increase of NPEs and, consequently, the banks will face higher minimum levels of coverage, this could make it more convenient, from a management perspective and making use of the options provided for in IFRS 9, to transfer their bad loans to third parties.In addition, the combination of rules on the default classification of exposures and those on calendar provisioning could also have an impact on debt restructuring processes.In concluding restructuring agreements, even where they involve loan write-offs, banks must, in fact, take due account of the prospects for credit recovery provided for in the plans underlying the agreements themselves, so that they are consistent with the MLC imposed for that specific credit category by calendar provisioning.Finally, the situation in which the debt restructuring involves various creditor banks could also present some problems: in fact, any application not identical to calendar provisioning by all the banks involved - especially with reference to the Pillar 2 rules, which, as mentioned above, do not provide for binding rules but rather supervisory expectations based on the principle of comply or explain - could lead to the most disadvantaged creditors not to accede to the agreement [24]. This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Stefano Padovani and Anna Guadagnin.  [1]https://www.bankingsupervision.europa.eu/ecb/pub/pdf/guidance_on_npl.it.pdf.[2]https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.npl_addendum_201803.it.pdf.[3]https://www.bancaditalia.it/media/bce-comunicati/documenti/2018/ecb2018.07.11.it.pdf.[4]https://eur-lex.europa.eu/legal-content/IT/TXT/PDF/?uri=CELEX:32019R0630&from=EN.[5]https://eur-lex.europa.eu/legal-content/IT/TXT/PDF/?uri=CELEX:32013R0575&from=IT.[6] The method of calculation, reporting and interaction with the supervisory entity has been defined in a number of subsequent initiatives, among which the following merit a mention: (i) the publication of the first proposal for COREP tables to report the deductions made to CET1 in application of Regulation 2019/630, with effect from 30 June 2021, which was followed by (ii) the publication of the Final Report “Draft Implementing Technical Standards on supervisory requirements for institutions under Regulation (EU) No 575/2013”, currently under examination by the European Commission, and (iii) the sending in December 2019 by the ECB to institutions subject to supervision of the reporting schemes (the so-called templates) and technical compilation notes for NPE clusters subject to the SREP process (“Instructions for Short Term Exercise”, or for brevity, “STE”).[7]https://www.bankingsupervision.europa.eu/press/letterstobanks/shared/pdf/2019/ssm.supervisory_coverage_expectations_for_NPEs_201908.it.pdf.[8]https://www.bankingsupervision.europa.eu/press/pr/date/2020/html/ssm.pr200320~4cdbbcf466.en.html.[9]https://eur-lex.europa.eu/legal-content/IT/TXT/PDF/?uri=CELEX:32020R0873&from=IT.[10] See AIFIRM, Position Paper No. 23 “Implement Calendar Provisioning: rules and impacts”, in www.aifirm.it.[11] See the Compromise text of the European Council of 14 March 2019 approving the introduction of minimum loss coverage.[12] Article 47-ter of Regulation 2019/630 defines concession measures (so-called forbearance) as follows “A forbearance measure is a concession by an institution towards an obligor that is experiencing or is likely to experience difficulties in meeting its financial commitments. A concession may entail a loss for the lender and shall refer to either of the following actions: (a) a modification of the terms and conditions of a debt obligation, where such modification would not have been granted had the obligor not experienced difficulties in meeting its financial commitments; and (b) a total or partial refinancing of a debt obligation, where such refinancing would not have been granted had the obligor not experienced difficulties in meeting its financial commitments”. The rule goes on to list situations that are considered concession measures.[13]AIFIRM, Position Paper n. 23 “Implementing Calendar Provisioning: rules and impacts”, op.cit.[14] See footnote 18.[15] See the note published by the Bank of Italy on 15 October 2020 (https://www.bancaditalia.it/compiti/vigilanza/normativa/archivio-norme/circolari/c285/risposte_domande_applicativi/Nota-di-chiarimenti-2020.10.15.pdf?pk_campaign=EmailAlertBdi & pk_kwd=it.).[16] ECB press release of 20 March 2020, followed by a “question and answer” document.[17] This derogation applies to both first and second pillar measures.[18] eur-lex.europa.eu/legal-content/IT/TXT/PDF/.[19]It should be noted that the Bank of Italy published its Communication of 23 December 2020 implementing the Guidelines of the European Banking Authority on reporting obligations relating to the provisions contained in Regulation 873/2020 for financial intermediaries.[20] Part 3, Title II, Chapter 2 of the CRR.[21] ECB press release of 20 March 2020, followed by a “question and answer” document.[22] www.eba.europa.eu/eba-provides-additional-clarity-implementation-selected-covid-19-policies-0.[23] AIFIRM, Position Paper n. 23 "Implement Calendar Provisioning: rules and impacts", op.cit.[24] AIFIRM, Position Paper n. 23 "Implement Calendar Provisioning: rules and impacts", op.cit.

(i) objective condition (“past-due criterion”): the obligor is past due more than 90 days [5] on any material credit obligation to the institution by taking into consideration all the obligations of the same to the intermediary;

(i) in absolute terms: the materiality threshold is set at € 100 for retail exposures and € 500 for other exposures;

1) SACE Garantee

SACE Guarantee: scope and temporal limitation of the programme

SACE Guarantee: objective scope of application of the Liquidity Decree

• 25% of the undertaking's annual turnover in 2019, as resulting from approved financial statements (or, alternatively, from tax declaration) e
• 200% of the undertaking's employee-related costs for 2019, as resulting from approved financial statements (or, alternatively, from certified data - if the undertaking’s financial statements have not been approved yet)[3].

Above thresholds must be calculated according to the criteria set out in the Liquidity Decree, pursuant to which reference must be made to turnover value and personnel costs that the company has, respectively, produced and incurred in Italy, while, if the company belongs to a group, calculation must be made on a consolidated basis.Financings eligible for SACE guarantee:(i) shall have been granted after the entry into force of the Liquidity Decree;(ii) shall have a duration not exceeding 6 years, eventually with a pre-amortisation period (if so requested by the borrower) not exceeding 24 months;(iii) shall be used to support personnel costs, investments or working capital involved in facilities and activities located in Italy, as documented and certified by the legal representative of the borrower;(iv) shall increase borrower’s debt exposure (consequently, refinancings shall be deemed to be excluded from the scope of SACE guarantee)[3].In case the borrower has been granted with several financings secured by SACE guarantee, or by other public guarantees, the amounts of such financings must be aggregated. In the same way, if other companies belonging to the same group of the borrower have been granted of more financings secured by SACE guarantee, the relevant amounts must be aggregated too.

SACE guarantee: subjective scope of application of the Liquidity Decree

• for enterprises with less than 5000 employees in Italy and a turnover value up to EUR 1.5 billion, SACE guarantee covers up to 90% of the residual amount of the loan;
• for enterprises with a turnover value between EUR 1.5 billion and EUR 5 billion or with more than 5000 employees in Italy, SACE guarantee covers up to 80% of the residual amount of the loan (which can be increased up to 90% by a decree of the Ministry of Economy and Finance (“MEF”), as will be explained below in paragraph concerning the application procedure); e
• for enterprises with a turnover value exceeding €5 billion, SACE guarantee covers up to 70% of the residual amount of the loan (which can be increased up to 80% by the MEF decree, as will be explained below in paragraph concerning the application procedure).

Enterprises shall undertake - together with any other company based in Italy belonging to the same group - not to distribute dividends and not to repurchase shares during 2020, and to manage employment levels through trade union agreements. The financing, as mentioned above, must be used to support personnel costs, investments or working capital involved in production plants and activities located in Italy, and the legal representative of the company must provide evidence of such use.These are provisions which could be included in the documents governing the financing, and which must be properly assessed before applying for the guarantee. It cannot be excluded that the borrower and, where relevant, the members of its group, may be required to (a) keep suitable documentation in this regard, in the event of any further audits, or (b) provide the lender with such documentation upon request or during following disbursements (as in the case of "Stato Avanzamento Lavori" financings).

SACE guarantee: costs

• as per SME financings, 25 basis points during the first year, 50 basis points during the second and third year, 100 basis points during the fourth, fifth and sixth year; and
• as per Mid-Cap financings, 50 basis points during the first year, 100 basis points during the second and third year, 200 basis points during the fourth, fifth and sixth year.

Although the guarantee is not granted free-of-charge, the legislator aims to achieve a reduction in the cost of the financings - thanks to SACE's support. Indeed, in order to benefit from the guarantee, the lender is required to provide evidence that the cost of the financing covered by the guarantee is lower than the cost which the same would have required for the same financings, but without SME guarantee. This should lead to significant cost savings compared to financings not covered by SACE guarantee, especially in the first years, when the cost of the guarantee is lower.

SACE guarantee: application procedure

• request for financing guaranteed by SACE must be submitted to a lender (or a pool of lenders), together with evidence that relevant requirements are met by the applicant company;
• in the event of a positive resolution to grant the financing, the lender shall transmit the request to SACE, also providing evidence that:
  • fees are limited to the amount necessary to cover incurred costs;
  • the cost of the financing covered by the guarantee is lower than the cost that the lender would have required for financings with the same characteristics, but without SACE guarantee; and
  • following the disbursement of the loan, the total amount of borrower's debt exposures towards the bank is higher than the exposures held by the same at the date of entry into force of the Liquidity Decree (adjusted for the reductions in exposures that occurred between the two dates as a result of the contractual settlement established between the parties, before the entry into force of the Liquidity Decree).
• Following lender’s resolution, SACE grants the guarantee and the lender disburses the requested financing.

In case the borrower has employees or turnover exceeding the abovementioned thresholds, issuance of the guarantee is also subject to a decision taken through a decree of MEF. Indeed, it is provided that:

• once SACE has completed its assessment, the request shall be transmitted to MEF;
• on the basis of the assessment carried out by SACE, and taking into account the role that the enterprise has with respect to the Italian economy (technological development, logistics and supply network, critical and strategic infrastructure, impact on employment levels and labour market and/or relevant influence within a strategic production chain), MEF, having heard the Ministry of Economic Development, issues a decree deciding whether or not to grant the guarantee;

through such decree, MEF may decide to raise the guarantee thresholds up to the percentage limit immediately above (i.e. up to 80% or 90%, depending on company’s employees and turnover value), on condition that specific commitments and requirements are met by the company, in relation to strategic areas and profiles.

2) SME Guarantee fund

SME Guarantee Fund: extension to non-performing enterprises

• enterprises whose exposures towards the lender, as of the date of application for the guarantee, are classified as "unlikely-to-pay"[7] (inadempienze probabili) or "past due or impaired”[8] (scadute o sconfinanti deteriorate) (but not as "non-performing”[9] (sofferenze)), provided that such classification is not earlier than 31 January 2020; and
• enterprises which, after 31 December 2019, were admitted to a concordato con continuità aziendale (article 186-bis of the Italian Bankruptcy Law), entered into an accordo di ristrutturazione (article 182-bis of the Italian Bankruptcy Law) or submitted a piano attestato di risanamento (article 67 of the Italian Bankruptcy Law). However, an adequate performance of the relevant enterprise during the execution of such recovery measures is required, since, on the date of entry into force of the Liquidity Decree (i) its exposures shall no longer be classified as impaired (esposizioni deteriorate); (ii) there must be no amounts in arrears after the application of the measures; and (iii) the bank must be able to reasonably assume that, on the basis of prudential supervision rules, exposures will be repaid in full at maturity.

SME guarantee fund: increasing coverage percentage

• the total amount of the guaranteed financing cannot exceed, alternatively:
  • twice the annual salary costs (including social security contributions and the cost of personnel working on the company's site but formally on the payroll of subcontractors) for 2019 or the last year available [11];
  • 25 per cent of total turnover for 2019; o
  • working capital costs and investment costs expected for the following 18 months, in the case of SMEs, and for the following 12 months, in the case of Mid-Cap (in both cases to be self-certified pursuant to Presidential Decree 445/2000);
• financing duration cannot exceed 72 months.

c) only for enterprises with an amount of revenue not exceeding 3.2 million euros, and provided that the direct guarantee is aggregated with an additional guarantee granted by the Confidi or any other authorised entity, an increase of the coverage percentage of the direct guarantee (referred to under point b) above) up to 100% of the amount of each financing. However, such provision is still subject to specific authorization from the European Commission;d) subject to authorisation by the European Commission (the percentages set out in the Cura Italia Decree - Healing Italy Decree remain applicable until such authorisation), an increase in the reinsurance coverage percentage up to 100% (compared to 90% in the Cura Italia Decree - Healing Italy Decree) of the amount guaranteed by Confidi or another guarantee fund, provided that the guarantees granted by the latter do not exceed a maximum coverage percentage of 90%, and do not provide for fees that represent a consideration for the credit risk.e) an increase of the maximum guaranteed amount per enterprise up to 5 million euros, subject to the limits indicated above.Major amendments also concern the guarantees granted by the Fund on loan portfolios, which already included Mid-Cap. As per guarantees related to loan portfolios (even without amortisation plan) dedicated to companies damaged by COVID-19 emergency, whose 20% (at least) is composed by enterprises with a rating not higher than Standard's and Poor's class "BB" (the valuation is to be made by the lender), the following provisions have been set forth by the Liquidity Decree:

• eligible portfolios have been increased up to 500 million euros;
• the guarantee is eligible also for financings (having the characteristics referred to in point (b) above) which have been already disbursed before the former being requested (but after 31 January 2020);
• an increase in (i) the coverage percentage up to 90% of the junior tranche of the loan portfolio, within the limits, also increased, (a) of 15% of the amount of the loan portfolio, or (b) 18% in the case of loans granted for research, development and innovation projects and/or investment programmes;
• with reference to single loans, the coverage percentage is increased up to 90% of the recorded loss;
• no creditworthiness assessment by the Fund is required (but lenders’ valuation is still required);
• a simplification for the assessment of the "detachment point and thickness" (punto di stacco e spessore)[12], that can now be made according to the internal models of the financing entity.

For loan portfolios dedicated to enterprises with different rating, but damaged by COVID-19 emergency, or that are dedicated to specific sectors/branches affected by the epidemic for at least 60%, the provisions of the Healing Italy Decree have not been amended (increase of the Fund guarantee granted to cover the junior tranche up to 50% - increasable by a further 20% in case of multiple guarantors).

SMEs Guarantee Fund: extension of the guarantee to existing financings and to renegotiation and consolidation transactions

Conversion of deferred tax assets into tax credits following the transfer of non-performing loans

• as per open-ended credit facilities (aperture di credito a revoca) and advances on receivables (anticipazioni su crediti) outstanding as of 29 February 2020 (or for the higher amount outstanding as of the date of publication of the Healing Italy Decree), the amount granted (importo accordato), both for the portion drawn (utilizzato) and the portion undrawn (non utilizzato), cannot be revoked – in whole or in part – until 30 September 2020;
• as per non-amortizing financings elapsing before 30 September 2020, the relevant maturity date is extended until 30 September 2020, at the same terms and conditions, together with the related accessories and without formalities; and
• as per amortizing financings (including leasing agreements), repayment of instalments falling due before 30 September 2020 (including leasing payments) is suspended until 30 September 2020. Therefore, the relevant amortization plan shall be extended in a manner which avoids any additional burden for both parties, together with accessories and without formalities. Upon request of the applicant, suspension can be limited to the principal amount.

Access to the measures is allowed only to SMEs[3] that apply for them, by means of relevant communication, to which must be attached a self-certification attesting that the company has suffered a temporary liquidity shortage as a direct consequence of the spread of the COVID-19 epidemic.Another requirement is that applicant SME’s shall have no debt exposures classified as non-performing as of the date of publication of the Decreto Cura Italia-Healing Italy Decree.In respect of these measures, credit institutions will benefit from the support of a special section of the Guarantee Fund, which - as the case may be - will guarantee an amount equal to 33% of the additional utilization of non-revocable credit facilities, of the extended loans or of the amount of instalments whose repayment has been suspended.The measures also apply to loans granted by means of third parties funds and to subsidised loans (finanziamenti agevolati), in the latter case upon specific notice to be sent to the promoting entity.The strengthening of the SME Guarantee Fund: standstill for subsidized export financingsFor subsidized loans granted for the internationalization of companies (through Fund 394), Decreto Cura Italia-Healing Italy Decree also provides that – until 31 December 2020 – they may benefit from a suspension for up to twelve months of the repayment of principal and interest on installments falling due during 2020, with a subsequent extension of the relevant amortization plan for a corresponding period.The strengthening of the SME Guarantee Fund: support for new financingHealing Italy Decree also increases resources allocated to the Guarantee Fund for SMEs, on the basis of what was already provided by Law Decree no. 9 of 2 March 2020, whose application was however limited to municipalities located in the "red areas" as of 1 March 2020.The Law Decree adopted by the Government for enterprises with registered offices or local units located in the municipalities of the "red areas" provided a strength support of the Guarantee Fund for SMEs, which is now extended to the whole Italian territory for 9 months, starting from the date of entry into force of the Healing Italy Decree. Guarantee Fund's support is granted free of charge, and the amount which can be guaranteed by the Fund has been doubled for each SME (now increased up to Euro 5 million).There is also a significant increase in the maximum coverage percentage, which:- as per direct guarantees (garanzie dirette) has been raised up to 80% of the total amount of each financing, for a maximum guaranteed amount of Euro 1,5 millions for each SME; and- as per reinsurance operations (riassicurazioni) has been raised up to 90% of the total amount guaranteed by Confidi or any other guarantor, for a maximum guaranteed amount of Euro 1,5 millions for each SME and provided that the guarantees issued do not exceed the maximum coverage percentage of 80%.Moreover, renegotiation and consolidation carried out with the same bank are now eligible for Fund coverage, provided that the relevant lender grants new financing for at least 10% of the residual outstanding debt; while in case of suspension and extension of loans which were already guaranteed by the Fund, the relevant guarantee is automatically extended.With respect to hotellerie and tourism sectors – which were, and are likely to be, most affected by the outbreak of the COVID-19 pandemic – combination of Fund's guarantee with other kind of guarantees is now allowed, as an exception to the current limits laid down in Fund's regulation, provided that the relevant financing has a duration of at least 10 years and is granted for an amount exceeding Euro 500,000.Fund's action has been reinforced also with respect to guarantees granted for specific financing portfolios dedicated to SME’s damaged by COVID-19 emergency, or – but for an amount at least equal to 60% of the whole portfolio - to specific sectors/supply chains (filiere) affected by the same. For these categories, Fund's coverage related to the junior tranche of the portfolio has been increased up to 50%, and is increasable by a further 20% in case of multiple guarantors.Cassa Depositi e Prestiti guarantee: support to enterprises different from SMEsThe support of enterprises other than SMEs is entrusted to Cassa Depositi e Prestiti S.p.A., backed by a significant State guarantee. The Decreto Cura Italia-Healing Italy Decree provides that CDP's exposures towards enterprises affected by the COVID-19 emergency may be covered by the State guarantee for a maximum amount equal to 80% of the covered exposure.The State guarantee covers exposures assumed by CDP towards enterprises that have suffered a reduction in turnover as a result of the epidemiological emergency and which operate in specific sectors to be determined by a decree of the Ministry of the Economy and Finance. In any case, the identification of such areas of activity must ensure complementarity with the categories of firms eligible for Guarantee Fund for SME.CDP's action is not limited to certain forms of financing, as it may also involve the granting of first loss guarantees on loan portfolios, and is carried out indirectly, by means of support to banks and other entities authorized to carry out lending activity in Italy.In any case, the definition of the relevant criteria, modalities and conditions for granting the State guarantee, as well as the economic sectors to which the beneficiary companies shall belong to, is delegated to a further decree of the Minister of Economy and Finance, to be issued in accordance with the Minister of Economic Development. The content of this article is for information purposes only and does not constitute professional advice.For further details please contact Giovanni de' Capitani or Paolo Porena.[1] An updated list of the banks which joined the program is available at this link. [2] According to the definition provided in the Commission Recommendation of 6 May 2003 n. 2003/361/CE, are considered SME the enterprises which (i) employ fewer than 250 persons and which have an annual turnover not exceeding Euro 50 million, and/or an annual balance sheet total not exceeding Euro 43 million; instead, a small enterprise is defined as an enterprise which (i) employs fewer than 50 persons and (ii) whose annual turnover and/or annual balance sheet total does not exceed Euro 10 million; at last, a microenterprise is defined as an enterprise which (i) employs fewer than 10 persons and (ii) whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million.[3] As defined in the Commission Recommendation of 6 May 2003 n. 2003/361/CE. Reference is to footnote no. 2 above.

Recent updates on the securitisation of proceeds arising from ownership of real estate assets introduced by Italian Budget Law 30 December 2018, no. 45 and Law Decree 30 April 2019, no. 34 (so called “Growth Decree”).

The role of ReoCo in the assignment of non-performing loans

The new securitisation of proceeds arising from ownership of real estate assets

Tax updates

New case law

Practical legal implications