Italian Banking and Financial Law

The public interest in enhancing those key development factors consisting of savings and investments deeply influences the Italian law system on banking and financial markets in general as well as legislation on crisis prevention and management in particular. The ratio of a strengthened state intervention in this sector is aimed at reducing the probability of a systemic crisis, avoiding losses in economic welfare that follow a banking crisis, minimising taxpayer exposure and safeguarding the trust and confidence of investors and savers. Banks, as well as financial and investment intermediaries, are commonly considered not only — and not always — to be “too big”¹ (which is more true for multinational banks, less so for small domestic ones), but also — and more often — “too interconnected”, “too important” and “too complex” to fail.² Those are enterprises whose critical functions are such that their unexpected liquidation would cause severe adverse consequences for the rest of the financial system and global economy. Thus, the guiding regulatory principle of faith in the free market and its self-corrective nature, which was strong and pervasive in other systems during the last few decades,³ was therefore considered by the Italian legislator to be not sufficient alone to ensure the stability of the financial and banking system.

In Italy, the deposit guarantee schemes are regulated by Section IV — Title IV of Banking Law, Arts 96, 96-bis, 96-ter and quater.

Sanctions are an essential element to ensure the effectiveness of the legal system¹ as they are second level legal precepts aimed to promote adherence to primary legal precepts (those that define the conduct) through the provision of negative consequences for the offender; therefore, they have the purposes of prevention and repression of illegal behaviours. The recent financial crisis has led to reflection on a few aspects of the financial markets regulation including the adequacy of the regulatory framework of sanctions. Historically, there is a natural trend to tighten sanction regimes as a result of exceptional events, since the South Sea Bubble (terrorism, environmental alarms, financial scandals).²

Our country’s integration in the field of economic law with international financial systems has brought about a profound change in the world of banking, and within this, the adaptation of our institutions to current challenges has become of paramount importance. There has been a corresponding increase in companies which, on the one hand, has placed the search for suitable measures to safeguard the stability of the system in new terms and, on the other hand, requires the identification of more adequate ways to protect the interests of those operating in the market (financial intermediaries and customers).

Given the close correlation between corporate governance and financial stability, shown by the 2007–2008 great financial crisis, new corporate governance rules for banks and financial intermediaries aim to regulate the composition of company boards. It is now required, in particular, the appointment of non-executive independent directors to define and solve the problem of board loyalty, especially in cases of conflicts of interest.

The Italian banking system is strictly integrated with the tax regulation. Banks have different roles, all of which are governed by specific laws, administrative rules and accounting standards: Italian tax regulation on banks shows some peculiarities that are able to cause competitive disadvantages compared to the regulation in other countries.¹ According to the Italian Banking Association, the tax burden on Italian banks and on foreign banks in Italy is far higher (around 15 per cent more) than the average one in other European markets.² The high level of taxation has detrimental impacts on the real economy and consequences for jobs.³