The EU-wide stress tests: a storm before a “new order” of the financial market. The Italian Case.

 by Francesco Capriglione

Abstract: European banks have been recently evaluated by the ECB’stress tests, which verified their level of efficiency. The checks on the so-called ‘systemic’ credit institutions indicate their ability to face the difficulties caused by a possible new economic distress. Such an examination, designed ‘to evaluate the health of the banks’, was based on the measurement of the capital amount of the banks (i.e. amount of cash available for absorbing sudden losses), hired a benchmark for identifying the critical threshold to overcome risks. The analysis was not, however, purely a quantitative one; it also covered the quality of the assets held by the institutions at issue (the AQR). The estimates (linked to percentage calculations which’s evaluations reflect an suitable consideration of risks) allow to detect the capital increases needed to avoid impasse situations in the event of potential, future crises. Additionally, the so-called Comprehensive Assessment (CA), conducted by the ECB, was activated: it identifies an important step towards the definition and effective implementation of the ‘Single Supervisory Mechanism’; indeed,  this form of prudential analysis is indirectly aimed at the restoring of banking stability conditions deemed to be equal for all the Eurozone systemically important institutions. The prudential analysis of Italian institutions creates a banking system in which – among the 15 banking groups under examination- the majority of banks have passed the tests only with very tight margins while Monte dei Paschi and Carige did fail in doing so. Therefore, we are facing a delicate moment in the history of the Italian banking sector, as it can be seen, among other things, from the obvious difficulties faced by the industry’s incumbents forced (after the results were published) to proceed promptly to a large recapitalization.

Summary: 1. Introduction. – 2. The Stress Tests in the SSM logic … – 3. Continued: ... the objectivity of the assessments. – 4. The results of the tests: the Italian situation. – 5. Continued: The Montepaschi case. – 6. Continued: The insufficient recapitalization of the banks participated by banking foundations. – 7. The Stress Tests and the SRM perspective. – 8. Conclusions.

1.       The notification of the stress tests (on capital requirements of systemic banks) and of the AQR (concerning the qualitative evaluation of the assets) made by the ECB on the eve of the introduction of the SSM, has appeared to be catalyst for the growth of tensions that result in unjustified reactions of the domestic supervisory authorities, unwilling to accept a judgment that disapproves their agere. On the one hand, we know the results of the stock market trend, which in some countries (e.g. Italy) have shown significant (negative) differences in comparison to other European «Markets»;[1] on the other hand, we see the reactions of the national supervisory entities that may have felt the need to justify the adequacy of certain ‘supervisory policies’ adopted by them to face the «failures» of some credit institutions[2].

            For a complete evaluation of the importance attributed to the stress tests it is important to move from the identification of the objective to which are prearranged the checks imposed by the ECB at the base of its judgments on the so-called systemic credit institutions. In this regard, one should consider the need to assess the banks’ resilience to possible new economic crisis as one can acknowledge from the serious consequences of the recent financial breakdown that severely hit large part of the planet. We are in the presence, therefore, of an examination oriented towards «evaluating the health of banks, identifying those which are actually in distress»[3]; this evaluation focuses on the measurement of the amount of “capital” of the banks (i.e. amount of cash available and usable to absorb sudden losses), taken as a parameter for the identification of the critical threshold to overcome risks.

            This analysis, however, cannot be conducted purely in quantitative terms as it is extended to cover also the quality of the assets of the entities under observation (the above mentioned AQR). Such evaluations (consisting in percentage calculations in which risks are adequately weighted) allow a punctual identification of the capital increases that are necessary to avoid impasse situations in the event of possible future crises.

            Thus, the so-called Comprehensive Assessment (CA) is activated: controlled by the ECB, it identifies an important step towards the definition of an ideal framework for the ‘Single supervisory mechanism’, since it aims at creating positive conditions and solid capital assets, which shall constitute a ‘starting point’ for all the Eurozone systemic institutions. Hence the close link between the need to pass the stress tests with favorable results and the possibility of a correct adhesion to sound and prudent management standards that will be indicated by the competent authority.

            At the same time, there is no doubt that the evaluations in question become a crucial requirement (and appear destined to be an integral part) of the assessments designed for the proper adoption of those tools for bank crisis management and resolution set out in Directive BRRD (Bank Resolution and Recovery Directive) n. 59/2014/EU and Regulation n. 806/2014. It must be borne in mind that the European regulator has defined the link between the Single Resolution Mechanism and other measures preordained to verify the quality of the assets or the resilience of credit institutions in the event of financial and economic distress.[4] As noted elsewhere, we seem to refer to a single command center on banking and monetary areas, to which follows the expectation of an optimal design of banking supervision (i.e. able to guarantee the liquidity and resilience of credit institutions even in times of market distress).[5]

            That said, the concerns recently expressed by Angela Merkel, when evaluating the challenge faced by the ECB in assuming the burden of a valid check on the health of a large fraction of the Eurozone’s banks appear justified. Additionally one should consider the ‘reputational risk’ faced by that technical authority while performing these assessments; a risk that – according to the careful analysis of the German Premier – could adversely affect the «confidence of international markets in the European banking system».[6]

2.     The disciplinary provisions that identify the objectives of the stress tests and regulate their application methods clearly show that the assessments in question represent a preliminary phase of the so-called “common procedures” in which all European financial intermediaries are equally involved in view of the implementation of the EBU. Hence, we recognize the inescapable fil rouge that binds the outcomes of these investigations to the goals that the European regulator is supposed to reach with the implementation of the European Banking Union in order to make a decisive ‘turning point’ in the ongoing integration process.

            The in-depth analysis underlying the stress tests allow the ECB to improve the knowledge of the ‘adjustments’ made in the accounting departments of systemic banks and, therefore, the ‘amounts’ included in the balance sheets and/or capital requirements relevant for supervisory purposes[7]. It is clear how it becomes possible, in this way, to optimize the performance of banking supervision which ECB has undertaken since November 2014;[8] not surprisingly, in Council Regulation No. 1024 of 2013, among the tasks specifically assigned to it “concerning policies relating to the prudential supervision of credit institutions” the ECB is expected to assume – in coordination with the EBA – the evaluation of the «stress tests and their possible publication in order to determine whether the arrangements, strategies, processes and mechanisms put in place by credit institutions and the own funds held by these institutions ensure a sound management and coverage of their risks» (Art. 4, lett.f).

            On this matter we highlight that, in the disciplinary logic of the mentioned regulation, the prevention of stress must result in an intervention suitable to ascertain the availability of ‘liquid assets’ sufficient to overcome difficult situations to which credit institutions may be exposed (recital. 23); intervention that takes into account the need to provide «additional capital buffers», with anti-cyclical function «to ensure that credit institutions accumulate, during periods of economic growth, a sufficient capital base to absorb losses in stressed periods» (recital n. 24). The result is a close link between the perspective of configurable structural changes required to credit institutions for purposes of prevention and the enforcement to the same, in the outcome of the checks in question, of «specific additional own funds requirements, specific publication requirements, specific liquidity requirements and other measures» (art. 4, lett.f, last part).

            Certainly, the prospective analysis of banks’ solvency – built with reference to a range scenario hypotheses and subject to the use of the information provided by AQR – contributes to the identification of the ‘prudential measures’ which are adopted by the European authorities. Undoubtedly, also the possibly positive future results of the efforts undertaken by the Single Supervisory Mechanism are linked to the success of this exercise!

            It goes without saying that, technically, the tests start from the rules of the regulatory package called CRD IV and CRR (consisting of the Directive 2013/36/EU and the EU Regulation no. 575/2013), in which we find the requirements imposed by Basel III (concerning capital, risk measurement, levels of leverage and liquidity, as well as organizational and management policies on the subject of governance and enforcement).[9] Similarly, the architecture of the European financial system, in doing these assessments, involves a variety of institutions (competent domestic authorities, the European Banking Authority and the European Central Bank), from whose ‘collaboration’ depends the successful conclusion of the scheduled assessments.[10]

            From another perspective, it should be noted that these assessments aim at increasing the transparency of the business reality, as it is given to understand from the ‘quality’ of the information (relating to the situation of credit institutions) taken as a requirement for the request (made by authorities) of corrective actions (necessary for the resolution of the problems identified). This hypothesis concerning the positive consequences of the stress tests is confirmed by the indications (in this field) provided by the EBA in the well-known document of the 26^th October 2014 disclosing the «results of 2014 EU‐wide stress test». Indeed, the abovementioned authority – after pointing out that this procedure allows «a rigorous assessment of banks’ resilience under stress» to be achieved following a «common methodology» for the definition of the ways in which «banks should calculate the stress impact of the common scenario bottom‐up» – points out that the stress test is focused «on providing consistent transparency as a complement» and, therefore, does not replace the prudential supervision «of banks’ internal models for the calculation of capital requirements».

            The verification of the ability to overcome situations of greater economic distress allows, in fact, the supervisory authority to evaluate in a more precise fashion the ‘truthfulness’ of the banks’ balance sheets. Having consolidated reports on the banks’ core components (i.e. the evolution of assets, credit flows, hedges) the Supervisory Authority can properly identify the total value of the exposures, the maturity and the combination of the products, activating an evaluation process that abandons the static calculus of the accounting data and uses a dynamic computation of information flows (in which the variations occurring in the presence of crisis events are reported). Hence the possibility of adopting specifically adapted prudential criteria, i.e. able to investigate connection between the projections prepared by the credit institutions and the effectiveness of the results achieved by them.

            Additionally, banks may recur to capital ‘adjustments’ resulting from the assessments that have highlighted the need for remedies to be adopted despite the non-compliance with the accounting rules for credit institutions. A large part of bank statements is subject to the accounting audits of the stress tests, which can be complemented by ‘additional measures’ ranging from the use of impairment to the calculation of specific provisions (made on an individual basis), to the valuation of the guarantees. In other words, room is given to additional protective measures, aimed at correcting the discrepancies related to possible, inadequate representations of accounting records.

            At a general level, there are favorable conditions for the harmonization of the ‘statistical reports’, due to the implementation of ‘unique management system of information flows’. Great importance is given to the role of the ECB, as head of the SREP (Supervisory review and evaluation process), allowing it to review the adequacy of the levels of capitalization and liquidity of banks and eventually request – if these levels are considered inappropriate – the assumption of appropriate corrections or directly impose (with apposite actions) corrections.[11] Then, we find the conditions for a renewed trust in the market by those who seek the introduction of market-securing protections for the management of adversities resulting from possible new financial crisis situations.

            It follows the positive importance attributable to the intervention in question, intended to fix the deficiencies of a company that fails in predicting the exposure to possible future risks. This identifies a further strategy to overcome the difficulties and diversities that, nowadays, characterize the European Union; and indeed, adds a significant element to the preparation of a technical project aimed at creating a banking supervision oriented towards the harmonization of operating situations and, therefore, suitable to strengthen and improve the coordination and cooperation between the Member States.

3.     The specific reference to the stress tests in EU Regulation n. 1024 of 2013 allows the identification of the latter as a structural component of the ‘single supervisory mechanism’, as we have tried to highlight in the previous pages. Therefore, the prudential estimates in question are designed to complete in the continuum the acquisition of the informational data provided by banks to the head-authority of the European financial system.[12]

            We have already pointed out the effects of this prospective analysis, highlighting how it becomes a primary factor in the judgments, which impose «specific obligations of additional capital» to credit institutions; hence its importance in the definition of the capital plan of those who do not pass the test. It is now important to emphasize the objective nature of the assessments made by the European authorities, to which must follow a ‘rightful’ acceptance by the institutions affected (and the competent national authorities) without unjustified concerns. However, banks have to consider that the methodology on which the tests are based reflects the criteria of uniformity and impartiality required for the construction of an advanced supervisory mechanism, as the one introduced with the EBU’s creation.

            Undoubtedly, the fairness in testing the systemic banks is guaranteed by the independence with which the central structures of the ECB conduct the assessments in collaboration with the NCA and the EBA, which has also defined the methodology jointly with the ECB and the European Systemic Risk Board (ESRB), as previously mentioned. Therefore, it can be said that the results are the outcome of a critical analysis in which all specific issues that may arise during the tests are taken into account. The highly skilled profiles of those professionals running the assessments should not cast doubts on the consistency between the tests’ outcomes and the real capital conditions of the banks under examination. Naturally, this form of control refers to the need for an operative logic oriented towards a correct agere which makes it possible to comply with the criteria of ‘management commitment’ specified by the European regulator and linked to a « banking supervision across the Euro area (that abides by high common standards».[13]

            This results into a disciplinary construction highlighting the need to align the activities of credit institutions to the criterion of the “sound and safe management” which – as widely acknowledged – aims at overall stability, efficiency and competitiveness of the financial system.[14] It goes without saying that – in relation to our discussion – systemic banks are eventually obliged to cooperate in both the assessment processes and results’ collection , by following homogeneous behavioral guidelines (i.e. equal for all, with no time limits or exceptions whatsoever). Hence, stress tests play a crucial role in a legal system that should rely upon the seriousness of the incumbents, and the intrinsic efficiency of the technical forms (i.e. the mechanisms at the basis of the procedures in question) needed for the attainment of the targeted objective (the sound and prudent management).

            In this context, it is clear how the checks in question have to capture the business reality of a specific bank only in terms of economic and capital-related data, without ; any ‘exception’.. Otherwise, the principle of equal positions of banks would be invalidated; these institutions – within the financial market outlined by the SSM – must pursue the objectives of uniformity and equality.Such a purpose relates to a prospective of higher ‘levels of competition’ (and of convergence), which should promote innovative sharing forms and, more in general, the creation of conditions of stability and progress.[15]

            It follows that the test, having objectivity as its main feature, must not certainly take into account the fact that some banks have been able to benefit, in past times, from government ‘aids’ which allowed their bailout, protecting them from possible failures in recent assessments provided by the European authorities.[16] Furthermore, the fact that certain banks have performed activities in an unfavorable macroeconomic situation cannot justify an hypothetical negative judgment (as contained in the test); this possibility definitely identifies the cause of a deep operative lack and cannot be taken into account in order to contain (or even exclude) a deterioration that the prudential analysis must calculate.

            In such a perspective, it must be considered that in the near future banks will no longer be permitted – as instead previously used to happen- to exploit estimate methods capable of avoiding a consistent (and sometimes penalizing) transposition of capital measurements into the financial accounts.[17] More broadly speaking, it should be pointed out how the rigorous orientation imposed, through the stress tests, by the European authorities , will mark a major ‘trend change’ in the supervisory policies so far followed by some Member States (see, in particular, the ‘Italian case’). The expectations for permissive treatments, sometimes practiced by some supervisory authorities in favor of certain credit institutions (due to their big size), seem to have finally failed! Therefore, the procedures we are dealing with are assumed to produce a clear beneficial effect when applied to the modalities of banking supervision thanks to which the industry’s incumbents will be able to benefit from a real fair treatment, no longer discretional and less linked to a slavish application of the too big to fail principle!

4.     In light of the foregoing it is possible to examine the reactions (that follow the notification of the results of the stress tests) encountered in the ‘Italian system’, that among the countries of greatest importance, recorded the highest number of failures.[18] Of course, a thorough analysis cannot ignore that the reations in question – though understandable for the emotional input caused by the critical level of the Italian banking sector (certainly higher than those of other Member States) – affect the way in which the national credit institutions participate to the ‘single supervisory mechanism’ .

            We have already mentioned the climate of unjustified fears (of the intermediaries subject to the new form of supervision) in the ‘Italian System’ just before the introduction of the SSM; fears that could have led to interpretation uncertainties regarding the legal criteria of the ‘Single Supervisory Mechanism’, so that the National Supervisory Authority felt the need to enact a special measure aimed at pointing out the terms of the important turning point that changed the order of the banking market.[19] Consequently, some considerations on the legislation adopted at European level were made in order to give an authentic interpretation, so as to clarify the change performed in the banking and financial sector.

            This measure – published after the announcement of the results of the stress tests – seems to be, in some ways, the answer of the National Supervisory Authority that, in all probability felt questioned, wherever there is the possibility of an inadequate preventive action taken by this authority. Maybe this is the answer to the question, raised by several parties, concerning the possibility to achieve a different ‘report card’ if the authority had intervened on time, avoiding that the ‘health’ of some banks degenerated to the point of not allowing them to pass the examination of the stress tests.

            For real, the subjective reference framework highlights a banking reality that is difficult to consider to be in «good health»! Although not agreeing with the critical remarks made on the subject in question, in which Italy is classified in a very negative way,[20] certainly one cannot fail to mention that the prudential analysis under examination establishes, as we have just explained, the creation of a banking system in which – from a complex of 15 banking groups monitored – in addition to the two failures of Monte dei Paschi and Carige, is detected the fact that other institutions have passed the tests only with very tight margins.[21] Therefore, we are facing a delicate moment in the history of the Italian banking sector, as it can be seen, among other things, from the obvious difficulties faced by the members of the industry forced (as a result of the publicizing of the test) to proceed promptly to a large amount of recapitalization.[22]

            In the outlined context the declarations made by members of the national supervisory authority, to which the press gave wide attention, take on the tones of an (unrequested) justification of the reasons that caused the fragility of the ‘Italian system’, characterized by a situation in which – it is good to recall it – «nine are the banks … initially shot down; they become four if you exclude those which have already strengthened their assets between January and September, and then down to two when considering other asset strengthening operations computed at national level by the Bank of Italy».[23] Hence, here is the perceived need to calm down, to point out that the results of the assessments in question are «overall reassuring», since the test imposed by the ECB and the EBA has regard for a «very unfavorable scenario», also considering the fact that it is «specially constructed to be a true resistance test for banks in extreme situations».[24]

            It does not seem like enough importance is given to the fact that the Comprehensive Assessment (CA) driven by the ECB identifies an important step towards the definition of conditions suitable for the activation of the ‘Single Supervisory Mechanism’; and indeed, as we have pointed out previously, through this form of prudential analysis there is an inclination towards the creation of banking stability conditions equal for all the Eurozone systemically important institutions. Similarly, the tacit reference to the government support received by some banks in EU countries appears scarcely convincing, whereas the Italian system «was able to stand on its own feet without the need for substantial public interventions»; certification that neglects the objective nature of the stress tests, in which is evaluated the current information of the credit institutions in observation, without any reference whatsoever to how and when the conditions that at present allow the formulation of a positive opinion towards them have been determined.

            Actually, such reassurances highlight the clear intent to instill credibility into the sector, that in itself is a difficult and problematic picture (regarding the link between the slowing down of growth and the capitalization of banks). The call for strictness in the criteria adopted towards the Italian macroeconomic reality – while responding to the ‘saving logic’ adopted on the occasion by the national supervisory authority – does not fully meet the needs of those who, conversely, appreciate the rigor of these tests, as a fundamental tool to adequately test the ability of credit institutions to achieve satisfactory levels of capitalization (and, therefore, their ability to overcome future crisis situations).

5.     The ‘Monte dei Paschi’ case represents the symbolic aspect of a banking system that – despite the morphological changes underwent by its members by the Europeanization process in the recent decades – was unable to promptly free itself from the obsolete pressures of the ‘politics ‘, which – in this situation – held steady over time a link with the ‘finance’, that only recently seems to have finally been broken.

            We hereby bypass any consideration on how the relationship between the MPS Foundation and the assignee banks has influenced the assumption by the latter of management strategies that have led to the deterioration of the economic and capital consistencies of this leading Italian banking group. We are in the presence of a story in which it is difficult to identify the responsibilities of those who have contributed to a complicated tangle that resulted in mala gestio, cause of imbalances and serious business losses; the fact that the behavior of some of the Monte dei Paschi exponents is still under judiciary review (which takes advantage of a close cooperation with the Bank of Italy) that identifies the sad ending of «an uncontrolled public-private mingling that ends at the same time with the enslavement of the public interest and denying market logic».[25]

            Conversely, we here want to consider the process of the events that underlie the negative results for MPS in the stress tests piloted by the European Central Bank.

            It is now necessary to take look at the evaluations made by the National supervisory authority regarding the lack of «requirements» for the compulsory administration of MPS; evaluations remitted by the Italian legislator to the technical discretion of the supervisory authorities, which shall ascertain their possible existence. On this point, are detected the indications contained in a statement that some time ago the Bank of Italy made on the subject; one refers to the implicit exclusion of the requirements of the procedure in question that can be deduced from the fact that the mentioned supervisory authority considered it to be adequate and sufficient, for what concerns MPS, to proceed to « in close cooperation with the new management, which is currently implementing a comprehensive restructuring with a view to boosting efficiency and restoring adequate profit levels. ».[26]

            It must be remembered, however, how this orientation of the Supervisory Authority dates back to November 2011, when the Board of the Bank of Italy, called the highest levels of the institution and of the foundation in order to make them face their responsibilities; the Bank of Italy asked these « to quickly and definitively turn around the way it conducts its business » and, therefore, to replace the top management of the bank; solution considered to be optimal in order to avoid the disruptions that would likely derive from a different interventional option.[27] Moreover, the decision to authorize the issuance of the so-called Monti Bonds was a confirmation of the will not to start the ‘special administration procedure’.; the issuance of these bonds was designed to support, technically, the operations of the bank and, therefore, to allow the directors to overcome the difficulties faced at that time.

            This guideline was not greeted with unanimous consent; in fact someone – since after the « highly critical » inspection report of the Bank of Italy (in which were contested to the bank, «serious shortcomings in its liquidity management») «a sanctioning procedure» started towards its management[28] – has severely criticized this behaviour. As it is easy to understand from the statements by Mr. Tremonti on the MPS case «there was neither deterrence nor repression. The judiciary… intervened, not the Bank of Italy. It is a very serious situation» as on a substantial level the Supervision «has denied being vigilant, has taken a minimalist profile»[29]; thesis to which seems to echo the survey, initiated by the judiciary, «for the possibility of failure of the vigilance by the Bank of Italy and Consob».[30]

            However, this decision not to proceed with the compulsory administration of MPS, despite its undeniable capital deterioration (today implicitly recognized by the rejection by the stress tests), was, as pointed out before, conditioned by the possible reference to the inevitable critical consequences that might have had on the entire Italian banking sector following the adoption of a special administration procedure; that with the result of an obvious reputational discredit of the entire national system, therefore, an increase in extra difficulties in addition to those induced by the recent financial crisis.

            That said, there is no doubt that, from the earliest evidence concerning the capital shortfall of MPS, the supervisory authority could have enabled different forms of reorganization from compulsory administration; encouraging , for example, a merger between this bank and other financial institutions adequately capitalized. As we have already pointed out, an intervention of moral suasion of the Bank of Italy in this situation would have been in line with other practices already tested in the past and, in all probability, would have proven itself suitable to permanently solve the problems that now afflict the Sienese bank, which (through the integration with some other institution) would have expanded its level of capitalization presenting itself to the market in new ways.[31]

            More complex is the position taken by the Supervisory Board in the assessment of the refinancing operation of MPS after the issuance of the so-called Monti bonds, as stated in .L. D.July 6^th 2012 n. 95, converted with amendments by the 7^th August 2012 Law, n. 135. In this regard it should be noted that, in accordance with art. 23-sexies of this decree, «the Ministry of Economy and Finance… on specific request by Banca Monte dei Paschi di Siena S.p.A…. and subject to the conditions laid down in Articles 23-septies, paragraph 1, 23-octies and 23-novies… subscribes, until the 31^st December 2012… financial instruments… computable within the  capital for supervisory purposes (Core Tier 1) up to the amount of two billion euro.         Moreover, are subscribed « new financial instruments for the additional amount of onebillionninehundredmillion euros to fully replace» the ones issued by MPS and «subscribed by the Minister accordingly to art. 12 of the .L.D. November 29^th , 2008, n. 185, converted, with amendments, by the Law 28^th January 2009 n. 2 ».

            The legislation just mentioned, in dictating the regulation of these «rescue tools», calls for the intervention of the Bank of Italy subordinating «procedurally, the subscription» in question to a «positive assessment» of the latter (art. 23-novies, paragraph 4). This assessment, as was pointed out by a careful doctrine, has a «complex content that invests profiles of legitimacy and intervention worthiness», having as an objective the ‘restructuring plan’ presented by Monte dei Paschi di Siena.[32] In particular,on one side, comes into consideration its compliance «to the European normative on State aid, as required by Article 23-octies and by the supervisory provisions» (see paragraph 2, letter. a); on the other, the appropriateness of the restructuring planrelated to’the risk profile of the issuer’ (art. 23 novies, paragraph 2, letter. c) and its ‘current and future capital adequacy’ (letter. b) is evaluated.

            It’s clear that the positive opinion by the Bank of Italy – on the feasibility of the restructuring plan – referring to the «current and prospective capital adequacy» of the credit institution, should have turned to an analysis intended to verify its ability to reabsorb «the capital gap… requirement for public intervention» whose «commensuration… (was in fact)… up to the Authority», as precisely noted by the doctrine mentioned.[33]

            In light of this legal framework – oriented towards ensuring the correctness of the MPS ‘restructuring plan’, and the modalities of its execution – it is not understandable why, at present, the stress tests indicate a situation still deteriorated; almost as if the first analysis taken at the beginning of the recovery program was not properly carried out, as if some deficiency occurred in the implementation of the ‘plan’ or in the following phase (concerning its regular execution and, therefore, the compliance with the regulatory requirements that have disciplined the means of its implementation). In both these cases the ‘complexity of verifications’ to be made – confirmed by the intense correspondence on the subject between the Bank of Italy and the MEF[34] – certainly cannot be considered an excuse for not taking the rightful responsibility for the tasks in this case attributable to the National Supervision Authority. The clear difficulties arising from the peculiar structure of the transaction in question do not seem to be able to justify an interventional guideline that has not produced satisfactory results, as it can be inferred from the outcome of the ‘tests’ arranged by the European authorities!

            But there is more. The convertibility of the securities in question – disciplined by the legislation for the case in which the Monte dei Paschi had not been able to return the loan underlying the subscription of the Monti Bonds – was an important way out of the impasse situation that characterized and characterizes the bank in question. Indeed, the possibility for the State to become a shareholder could have produced the beneficial effect of limiting the amount of liabilities (considering the size of the interest payable), and would have enabled a form (albeit partial) of recapitalization.

            The transformation of the MPS debt into a shareholding position introduced, therefore, an option that could solve the current problems (excessive leverage and lack of capital); hypothesis, moreover, clearly represented in literature highlighting that «Monti bonds provide an alternative solution to the research, on the market, for resources to strengthen the capital base of the Sienese Institute (and, in particular, the Core Tier 1 levels)»[35]. This suggests that the adoption of such a decision would have allowed the reach of the minimum capital required by EBA, in view of the concrete restoring of profitability. Conversely, the openness to a «nationalization» of part of the the bank- although it might have seemed anachronistic as against the evolutionary process of the Italian financial system[36] – would have been in accordance with what was experienced in similar interventions in some EU countries (for example, the nationalization of the Royal Bank of Scotland), as well as with some regulatory guidelines that provide for different «resolution plans» from the traditional procedures of extraordinary administration.[37]

            In light of what has been said on the Monte dei Paschi case the critical evaluations formulated by several parts regarding the ‘conditions’ of the Italian banking system are definitely justified. Conversely, it is certain that the intervention of those leading the European Financial System – in presence of obvious limits in the domestic supervision – is able to ensure the controls necessary to deal with the change that the evolution of the EU regulation has brought to the process of integration among the Member States.

            In this context, the stress tests seem to be needed; accepting their indications, following their suggestions, means expressing the knowledge that only the steadfast commitment to the results of the prudential analysis steered by the ECB may permit greater growth and cohesion within the Union. At the same time, it is understandable how such a behavioral guideline identifies a significant moment of the difficult path which, in the hopes of many, should lead to the essential cultural maturation for more intense forms of community participation, i.e. able to mark the transition from economic to social integration.

6.     The rejection of Banca Carige (ordered by the stress tests) identifies a situation in which the current capital shortage faced by this credit institution (due to a previous mala gestio) has its roots in the degenerative aspects of the linkage that – following the so-called ‘Reform of the public bank’ – has characterized the relationship between the ‘foundations’ governed by the Carli-Ciampi Law (L.D.. no. 153 of 1999) and their ‘assignee’ banks.[38] In the previous chapter we have already mentioned the ‘strange story’ (as defined by Giorgio Oppo) of these entities and, in particular, the negative implications of the link between politics and finance. Now should be examined the way in which these foundations – based on a distorted interpretation of their role – keep ending up with conducts that do not accord with the capitalization requirements of the ‘assignee’ banks and, therefore, become, albeit indirectly, draining factor of their development.

            We do not consider at this moment the causes which, in the recent past, have determined serious problems for Banca Carige, due to a management characterized by the hegemonic role of the chair (currently being examined by justice).[39] Conversely, it is noticeable that, according to the assessment of large losses,[40] the banking supervision authority has forced this credit institution to proceed promptly to a significant amount of capital strengthening;[41] to which, in view of such recapitalization, corresponds the proposal by the Carige Foundation to give priority to a «disposal plan», foreordained to «minimize the effort required for members to reach … (the goal) … imposed by the Bank of Italy», as pointed out by the press.[42] Therefore, the outcome was a renovation project of the ‘assignee’ bank, correlated to the expectation of a gradual reduction of its ownership shares held by the Foundation; reduced, at first, from 46% to 19% («to participate in the Carige capital increase of 800 million), whereas more recently it was suggested to «place a further 7% (already approved by the MEF) on the market, but possibly … (a larger share) …right up to 14 % ».[43]

            The circumstance described above allows us to identify the details of a situation – unfortunately very common- which sees the banking foundations outstretched towards the preservation of an important position in the ownership of their bank, with the purpose of affecting its governance. This objective is vigorously pursued; i.e. without taking into account the difficulties which they may meet (because of their limited financial resources) or, therefore, an eventual reduction in their shares, in order to reinvest the results of the dismissing in the operations of capital increase, rather than in the reduction of existing debts (assumed with a plurality of creditor subjects).

            It is clear how, in such cases, the strategic decisions to be taken are guided by the intention of exercising one’s own opinion in the selection of the members of the ‘assignee’ bank (if necessary through ‘shareholder agreements’ with the purchasers of the shares sold or with subjects in possession of equally relevant investments). However, the fact that we are in the presence of options destined inevitably to conflict with the principle of ‘separateness’, referred to in Law n. 218 of 1990 (and in the relative implementing decree n. 356), considered by the Italian legislator as crucial in order to prevent foundations from influencing assignee banks ; principle then reaffirmed in special regulation with Legislative decree n. 153/1999 that – in completing the privatization of public banks – linked it to the way by which the foundations are placed in a reality aimed at balancing the relationship between market economy and social rights protection.[44]

            More specifically, one should consider the inconsistency of these strategic decisions with the disciplinary logic of decree n. 153, in which particular importance is given to the assets of the foundations in its (functional) connection to the purposes that they pursue and, therefore, to their operations. According to a relevant doctrine, in referring to the so-called banking foundations, «the composition of the assets and the destination of the income, as well as… (the) … administration and management criteria are defined by law» regard the fact that the application of common law rules alone would not have assured the punctual realization of their institutional goals, nor the disposition of the assets to the latter.[45]

Undoubtedly, the legislator – while regulating the foundations – wanted to assure them a financial autonomy enabling them to promote their social activities. For this reason, they are obliged to diversify «the composition of their activities»; and recently also the Governor of the Bank of Italy stressed that the foundations must accomplish such a duty even when they participate « capital-raising operations, thereby contributing to the solidity of the banking system in the most difficult phase ».[46]

            Consequently – and regardless of the evaluations regarding the economic rationale of the sale operations made by the institutions in question – we cannot agree upon the choices of a foundation that, arranging the sale of part of its shares (held in the assignee bank) has the objective of maintaining however a residual part (of any importance) for the purposes indicated above. . This holds true especially when that strategic line is applied in a context that does not observe the criterion (arranged by special legislation) to exclude forms of substantial ‘centralization’ of the capital (of these institutions) in the sole banking participation; in fact, often in disregard of the above-indicated principle of diversification, one fails to consider the obligation to consider for all the components of the balance sheet (without excluding the negative implications arising from debt exposures that may exist, with obvious, heavy impact on the assets).[47]

            In this context, the Supervisory Authority was proven to have a ‘wait and see’ approach. Such an authority, in fact, in the Carige Bank case, should have indicated, already at the first request for a capital increase, a different, larger amount of capital (in line not only with the actual consistency of the financial statements, but also with the new AQR and stress tests’ perspective ). Instead, by overlookingsuch a request, the Foundation wasindirectly allowed to postpone the solution of the problem (i.e. the recapitalization of the bank), with the consequences today highlighted by the stress tests.

            The shortcomings of the supervision system of banking foundations, due to the limits of the legal framework in force (oriented, predominantly, primarily towards the verification of the modalities with which the foundations pursue the statutory purposes) are to be considered. The legislator will have to intervene, in the short run, in order to avoid misleading interpretations concerning the relationship between the so-called banking foundations and their assignee banks . The events herein examined urge a more complete definition of this relationship, so as to prevent unacceptable discordances of the agere of the foundations and conform actions to guidelines more consistent with the objectives targeted by the Italian legislator since twenty years ago, when the reform of public banks was launched.

7.     A theoretical link between the assessments carried out by the stress tests and the application of the management and resolution tools for banking crisis, as said in Directive BRRD (Bank Resolution and Recovery Directive) n. 59/2014/EU and Regulation No. 806/2014, has already been discussed. At this point, It must be explain the way in which, according to the European legislation, the ‘assessments’ at issue assume a correct use of the aforementioned procedural schemes.

            In this regard, it is necessary to keep in mind that the resolution mechanism set out by the latest EU regulation is designed to outline the different reactive capabilities of credit institutions, by using a range of tools against actual events of pathological situations encountered among the EU Member States. As pointed out elsewhere, the European regulator aimed at preventing that the domestic nature of the authoritative interventions might be indirectly cause of their inadequacy in addressing the criticalities of an operational reality predominantly consisting in a cross border arena. In the light of this perspective, the setting up of a unified guidance appears makes possible the achievement of the enforcement of the crisis prevention options.[48] Therefore, the SRM plays a major role amongst those regulatory innovations that, through the harmonization of practicable procedures, redefine the prevention techniques, ensuring greater stability to the financial markets.

            Besides these premises, we acknowledge how the systemic setting up of such remedies is based upon the identification of certain scenarios, characterized by events of crisis, in order to «minimize the negative repercussions», as stressed in recital. 41 of Directive BRRD. Not surprisingly, the legislation provides that the mechanism at issue can only be started when the competent authority assesses that «the institution is failing or likely to fail»; and that the implementation of alternative measures will allow to avoid «in a reasonable timeframe» this possibility (recital n. 41). Hence, on one hand, it follows the specification of factual hypotheses in which situations of instability can be figured out , as well as the representation of a wide range of cases (arranged to give substance to the objective of outlining a «credible recovery framework») where a number of difficulties in which a credit institution may incur are highlighted (i.e. the possible violation of the requirements to maintain the authorization, the likelihood in the near future of being unable to pay its outstanding debts; need for an extraordinary public financial support, etc.). On the other hand, it is now possible to figure out scenarios that justify the application of such instruments .

            As a matter of fact, this legislation is clearly focused on the effectiveness of cognitive processes that allow the collection of informational data to which is the activation of the procedure at issue is reconnected. In the same direction is oriented the timely provision of art. 32 of the Directive n. 59/2014, in which the concrete satisfaction of the procedural requirements is subject to the acquaintance (by the authority) of the ‘conditions for its resolution’. In particular the fourth paragraph of that provision is deemed to specify the variegated ‘situations’ that make it possible to consider an «institution failing» or exposed to this risk; situations characterized by the presence of objective factors triggering (in perspective) possible violations of the requirements needed to maintain the authorization, thereby justifying the authority intervention for revoking.

            There is no doubt that, once faced this disciplinary reality, the stress tests application assumes special significance. Indeed – as it can be understood from the previous pages –the prudential analysis, underlying them, brings a significant contribution to the cognitive process referred to above. This is further confirmed by the European regulator itself, given that the use of such tests is even recalled in its capital adequacy assessments to prevent the likely risk of «instability».

            In other words, it appears likely that in the regulatory order of the SRM the reference to the scenarios drawn by the tests is at the basis of the assessments needed for the application of the ‘single resolution mechanism’ and ending with the adoption of the latter. But there is something more. The insights giving substance to the ‘assessments’, according to the objective that qualifies its essence, are – in our opinion – an inescapable prius in the research (belonging to the macro-prudential authorities) of measures (or rather: tools) capable to preserve the financial stability in the context of systemic crisis, which results in the possibility of a negative impact on the solvency of credit institutions.

            On a general level, the link between the stress tests and the new legal framework arranged by the EU regulation for the resolution of banking crisis, allows for a further enhancement of the positive impact that these are able to exercise on the balance sheets recovery of those institutions belonging to the financial sector. This applies, specifically, to the possibility, allowed by the SRM, to use alternatively the «sale of business tool» , the « asset separation tool» (bad bank), the establishment of a «bridge institution» (bridge bank) and the adoption of the «bail-in» (art. 37 of Directive no. 59/2014); all these measures are applied independently from any interventional logics based on the discretion of the supervisory body; this consideration proves alone the conceivable benefit disposed by the application of these remedies in helping to depict the objective reality of the credit institutions business under observation.

            The above innovations brought by the European legislation to manage banking dysfunctions denote a significant convergence with the object of our examination. Indeed, the latter – being intended to survey the operational distortions that may determine capital deteriorations – responds to a purpose mostly similar to the one underlying the regulatory mechanisms of the SRM; that is, the aim to limit the externalities of mala gestio and, therefore, «to restore its economic sustainability after its re-organization and restructuring».[49] This means taking a significant step forward in getting rid of those ‘events of socialization of losses’ that, characterized, in the past, the ways in which the Italian supervisory authority used to close the procedures of banking crises management!

8.     At the beginning of the 1980s, in addressing the issue of ‘Banking Supervision’ and assessing its purpose in the pursuit of «optimal functioning forms» for the credit system, I stressed the need for an adequate «coordination between the interventional instances and the respect of the autonomy of the banking business» as essential corollary of a viability consistent with principles of the competitive environment.[50]

            At that time, it seemed to me that this objective had to be related to the exercising procedures of the supervisory power, stressing the need to firmly grasp «a principle of non-interference of the Bank of Italy within the choices of the banker». In an historical moment characterized by a significant incidence of supervision «on the overall subjective position» of those institutions belonging to the Italian banking sector, I considered it only right for a researcher (at that time ‘lawyer’ of the mentioned institution) to exclude the possibility of authoritative interventions capable to leave room for some sorts of «direct interference» in the management of banking institutions; this behavioral principle is still valid if one considers that the operational independence of these institutions is linked to it and, more generally, to the balance of the overall financial organizational arrangements (based on the free choice of corporate management criteria).

            That said, it is clear that many things have changed over time in the evaluation of the guidelines on the supervisory function ascribed to the aforementioned national supervisory authority. Indeed, as it is inferable from the above consideration, while in the past Bank of Italy played its role in a way to some extent pervasive of the subjective realities subject to its supervision, today – in the light of the indications provided by the stress tests – a different interventional orientation is to be registered; this orientation could be considered as opposing the one adopted by an high exponent of the central bank when clarified that the supervisory activity «cannot fail to reverberate… its effects both on business management and on the organizational structure»[51] of its recipients.[52]

            The scenario highlighted by the stress tests is characterized by the referability to a supervisory action that was not, perhaps, sufficiently severe in respect of certain ‘big banks’! As pointed out in the previous pages, if compared with an attitude that appears too permissive in some cases, a delaying logic in other circumstances can be found; this guideline–without mentioning otherwise – is perplexing, not convincing, especially where it is compared to the results of a systemic rationalization, that the Bank of Italy today seems determined to implement through the use of regulatory instruments relating to banking crises (project clearly deductible from the significant number of ‘extraordinary administration procedures’ recently issued by the Italian supervisory Authority against banks of medium/small size).[53]

            Hereby are identified the conditions to obtain a gradual erosion of trust in a system of interventions that shows itself to be ‘weak with the strong and strong with the weak’. We are questioned about the reasons for this change, perhaps due to the feeling of identity loss that this institution is experiencing as a result of the ongoing Europeanization process and, more fundamentally, to the loss of monetary and banking supervisory powers.[54] The belief that only the application of the SSM will ensure those forms of banking supervision aspired by those caring about the fortune of the Italian financial System is spreading. In the meantime we can only turn our thoughts, with a hint of melancholy, to the words pronounced by Aeneas from the walls of Ilium: Hei mihi, qualis erat! Quantum mutatus ab illo Hectore.

***

[1] See also the steep fall of Mps (-21.5%) and Banca Carige (-17.2%), to which the ECB has asked to find 2.1 billion and respectively 814 million euro of capital; see, in this regard, some of the editorials of the specialized press (in which, in fact, is highlighted the thud of the banking sector) including «Borse negative dopo i risultati degli stress test. Crollano Mps e Carige, Milano è maglia nera» viewable at http://www.lastampa.it _2014_10_27 and «Piazza Affari chiude a -2,4%. Mps cede il 21,5%, vietate le vendite allo scoperto», viewable at http://www.ilsole24ore.com_ 2014_10_27.

[2] See for example, the Bank of Italy’s provision «Entrata in funzione del Single Supervisory Mechanism. Effetti sui procedimenti amministrativi di vigilanza di competenza della Banca d’Italia», . n. 1088399/14 of the 04/11/2014.

[3] See Cosa sono gli “stress test” by the ECB, published by Il Post on October 30^th 2014, viewable at http://www.ilpost.it_2014_10_27stress-test, where it is highlighted how the four banks that, at European level, did not pass the stress tests two are Italian.

[4] See recital n. 6 of Directive 2014/59/EU

[5] See CAPRIGLIONE – TROISI, L’ordinamento finanziario dell’UE dopo la crisi, Kluwer-Utet, Turin, 2014, p. 90

[6] See – on this argument – ENGELEN, Stress Test Blues. The trials and tribulations of European banks, in The international economy, 2014, p. 38 ff, in which are contained certain considerations made by A.Merkel while speaking in Berlin in the “Conference of German Co-operative Banks”.

[7] See extensively on this issue the ’Aggregate Report on the Comprehensive Assessment’, published by the European Central Bank, October 2014, pp. 3 and 4, viewable at www.ecb.europa.eu/pub/pdf/other/aggregatereport onthecomprehensiveassessment.

[8] See among others WYMEERSCH, The European Banking Union. A first Analysis, Universiteit Gent, Financial Law Institute, WP, 2012-07, October 2012, p. 1; VV.AA. Dal testo unico bancario all’Unione bancaria: tecniche normative e allocazione di poteri (Proceedings of the conference organized by the Bank of Italy, Rome, September 16, 2013), in Quaderni di ricerca giuridica della Banca d’Italia, n. 75; SARCINELLI, L’unione bancaria europea e la stabilizzazione dell’ Eurozona, in Moneta e credito, 2013, p. 7 ff; CAPRIGLIONE, L’Unione Bancaria Europea, Turin, 2013; ID., L’ applicazione del ‘Meccanismo unico di supervisione’ bancaria: una vigilia di ingiustificati timori, in Aperta contrada of October 10th 2014.

[9] See ECB, Guida alla vigilanza bancaria, September 2014, where for the implementation of the SSM, the new Financial Supervision System is outlined, highlighting both its architecture (European Central Bank and national central banks), and the operative forms (as the ones defined by the CDR IV).

[10] See on the subject the Preface of the ’Aggregate Report on the Comprehensive Assessment’.

[11] See FERRANDO, Banche, BCE vuole i conti in anticipo, published in IlSole24Ore of November 27^th 2014.

[12] It is surprising, therefore, the reaction – as described by the specialized press (see. FUBINI, BCE, in rivolta le banche di nuovo sotto esame, viewable at http://www.repubblica.it of the 22^nd November 2014) – of some systemic banks, which after the recent stress tests see as a threat the prospective of new ECB interventions, highlighting a climate of tension that is ill concealed with the transition to the forms of supervision of the ‘Single Supervisory Mechanism’.

[13] See Report on the proposal for a regulation of the European Parliament and of the Council , document COM(2012), par. 1;

[14] See on the issue MOTTURA P., Modelli di governance e sana e prudente gestione, Report held at the ADEIMF (Associazione Docenti Economia Intermediari Mercati Finanziari), Bergamo, January 2009; BRESCIA MORRA, La disciplina dei controlli pubblici sulla finanza, in Vv. AA., L’ordinamento finanziario italiano, Padova, 2010, first book , pp. 303 ff; CAPRIGLIONE, Commento sub art. 5 tub, in Vv. AA., Commentario al testo unico delle leggi in materia bancaria e creditizia, Padova, 2012, first book, pp. 49 ff.

[15] See CAPRIGLIONE, L’applicazione del ‘Meccanismo unico di supervisione’ bancaria: una vigilia di ingiustificati timori, in Apertacontrada, 10^th October 2014.

[16] See Bankitalia: “Banche italiane penalizzate in stress test Bce. E non hanno avuto aiuti”, viewable at www.ilfattoquotidiano.it of 24^th October 2014, in which is remembered that, unlike Italian banks, German ones «since the crisis have received government aid for nearly 250 billion».

[17] See FUBINI, BCE, in rivolta le banche di nuovo sotto esame, where with regard to the position of MedioBanca is argued that «in 2015 the stress tests of the ECB will be repeated, and so in 2016. Piazzetta Cuccia is risking.. to be asked by the Eurotower to recapitalize itself ».

[18] See «Gli stress che non stressano: come stanno davvero le banche italiane?», viewable at www. vincitorievinti.com/2014/10/gli-stress-che-non-stressano, where is stated: “The ECB’s results show that Italian banks are those that have mostly suffered the stress simulation conducted by the ECB.. In fact, one should notice that –among the banks which failed the test – 9 are Italian, while only 3 banks are Greek, 3 are Cypriot, 2 are Slovenian, 2 are Belgian, one each from Germany, France, Spain, Portugal, Ireland and Austria”. On the subject, among others, see also GRASSIA, La Bce: Mps e Carige devono ricapitalizzare, viewable at http://www.lastampa.it/2014 /10/26/economia; VERGINE, Stress test, banche italiane peggiori d’Europa. Bocciate Mps e Carige. “Ma sistema è solido”, viewable at www.ansa.it/sito/notizie/economia/2014/10/26.

[19] See Provvedimento della Banca d’Italia. Entrata in funzione del Single Supervisory Mechanism. Effetti sui pro­cedi­menti amministrativi di vigilanza di competenza della Banca d’Italia, n. 1088399/14 of the 4^th November 2014, viewable at www.bancaditalia.it, for a commentary to this rules see CAPRIGLIONE, Considerazioni a margine di un provvedimento della Banca d’Italia sull’«entrata in funzione del Single Supervisory Mechanism», in Apertacontrada of 18t^h November 2014.

[20] See for all «Stress test, Bce boccia 25 banche europee: per l’Italia anche Mps e Carige», viewable at www.ansa.it/sito/notizie/economia/2014/10/26, where is stated: «the Frankfurt’s tests show a gap in Europe that – caused also by the recession in South and the presence of State bonds in the bank’s financial statements – made Italy, Greece and Cyprus the most affected countries».

[21] See GRECO – RICCIARDI – SCOZZARI, Stress test: le pagelle di tutte le italiane. Bocciate Mps e Carige,viewable at http://www.repubblica.it_economia_2014_10_26.

[22] See on the subject the Editorial published by La Stampa with the title: ‘Bce: Mps e Carige devono ricapitalizzare’, viewable at www.lastampa.it/2014/10/26/economia where it is argued that the results of the stress tests indicate that «Siena is missing 2,1 billion, Genova 814 million» whereas «Italy..(has).. the European record for AQR devaluations: 12 billion»

[23] See GRECO – RICCIARDI – SCOZZARI, Stress test Bce: a 13 banche mancano 9,5 mld di capitale. In Italia chiesti 2,9 miliardi a Mps e Carige, at http://www.larepubblica.it of the 26^th October 2014.

[24] See GRECO – RICCIARDI – SCOZZARI, Bankitalia, Panetta: “Scenario italiano degli stress test molto severo”, viewable on www.repubblica.it_economia_2014_10_26.

On the subject see the comments of BOERI, Le tre regole per stare in Europa, in La Repubblica of the 6^th November 2014, where this scholar highlights: «even if we assume that the tests were artificially made in favour of Germany, where our supervisory authorities and ministerial practitioners were when these rules were defined and adopted? ».

[25] See CAPRIGLIONE – MONTEDORO, Brevi note sulla vicenda MPS e sul ruolo delle cd. fondazioni bancarie, in Apertacontrada of 7^th February 2013.

[26] See BANCA D’ITALIA, Research note transmitted to the Minister of Economy and Finance, in relation to the testimony given on 29t^h January 2013 by the Minister before the Finance Committees of the Chamber and the Senate in joint session.

[27] See BANCA D’ITALIA, Main supervisory activities with regard to the Monte dei Paschi di Siena Group, document available at http://www.bancaditalia.it/media/approfondimenti/documenti/Interventi_MPS_en.pdf?language_id=1

[28] See BANCA D’ITALIA, Main supervisory activities with regard to the Monte dei Paschi di Siena Group, loc. cit.

[29] See, «Quattro ore di scambi d’accuse. Tremonti attacca Bankitalia» published on January 30th 2013, viewable at http://www.ilsole24ore.com/art/notizie/2013-01-30/quattro-scambi-accuse-tremonti-063741.shtml.

[30] See «Mps: procura Trani indaga per omesso controllo», published on January 30^th 2013, viewable at http://www.ilsole24ore.com/art/notizie/2013-01-30/procura-trani-indaga-omesso-160217.shtml.

[31] See CAPRIGLIONE- MONTEDORO, Brevi note sulla vicenda MPS e sul ruolo delle cd. fondazioni bancarie, in Apertacontrada 7^th February 2013, par. 2.

[32] See SEPE, La sottoscrizione dei ‘monti bond’. Ruolo delle autorità e compatibilità con la disciplina comunitaria degli aiuti di stato, in Riv. trim. dir. ec., 2013, II, p. 53.

[33] See SEPE, La sottoscrizione dei ‘monti bond’. Ruolo delle autorità e compatibilità con la disciplina comunitaria degli aiuti di stato, in Riv. trim. dir. ec., 2013, II, p. 55.

[34] See SEPE, op. cit., p. 54, where the m.d.. MEF 26.02.2013 n. 14729 is recalled, «in which’s premises, with reference to the positive opinion released by the Bank of Italy, it is mentioned a prolonged correspondence between it and the Ministry ».

[35] See LEMMA, La vicenda Mps. L’acquisto di Antonveneta tra regolarità degli adempimenti e problematicità degli esiti (ord. TAR Lazio, 8^th February 2013) in Riv. trim. dir. ec., 2013, II, p. 20.

[36] Herein we consider the disciplinary system that starting from Law. n. 218 of 1990 defined the process of privatization of public banks, at first only formal and, then, with the legislative decree. n. 153 of 1999, also substantial; see – for all- TROIANO, Gli intermediari finanziari, in Vv AA, L’ordinamento finanziario italiano, edited by Capriglione, Padova, 2010, second book, p.513 ff.

[37] See. infra paragr. 7.

[38] See for all I.M.F. Reforming the Corporate Governance of Italian Banks Prepared by Nadège Jassaud, working paper, September 2014, where it is stated: «Foundations are major shareholders in Italian banks, either through large participations or the capacity to appoint the majority of the Board.. However, the financial position of several foundations has weakened, raising concerns about their capacity to provide further support. As foundations are also subject to political influence, their ownership in banks influences the composition of the decision-making bodies and banks’ activities».

[39] See on the subject the work by GRAZIANI, entitled Un’operazione trasparenza che il mercato apprezzerà in Ilsole24ore of the 23^rd May 2014.

[40] Relevant on this subject are also the evaluations by Consob that according to what the press said (see. Advisor of the 5^th February 2014) – would have shown «624 million more losses… in the financial accounts of Banca Carige, relating to the financial statements of 31^st December 2012 and the interim condensed consolidated financial statements as of 30 June 2013», in addition to including «among the allegations also that of having violated international accounting standards».

[41] See, among the other indications given by the press on this subject, ‘Carige, oggi lo scontro sul patrimonio’, published by Il secolo XIX of 20^th February 2014, where is stated that «what said by Bankitalia imposes Banca Carige with a capital reinforcement of 800 million».

[42] See FERRARI, Patrimonio, braccio di ferro in Carige, in Il secolo XIX 19^th February 2014.

[43] See de FORCADE, Fondazione Carige pronta a scendere nella banca, in IlSole24Ore 27^th November 2014.

[44] See CAPRIGLIONE, Commento del decreto lgs. 17 maggio 1999, n. 153, in Commentario breve al codice civile, Leggi complementari, edited by Alpa e Zatti, Padova, 2009, third book, p. 1042 ff.

Recently, in subiecta materia has emphasized the need to « to reinforce the separation between foundations and banks », the Governor of the Bank of Italy, see. Report of the Bank of Italy for 2013, Concluding remarks, p. 18.

[45] See ALPA, Il patrimonio delle fondazioni bancarie, in Various Authors, Le fondazioni bancarie, a cura di Amorosino e Capriglione, Padua 1999, p. 48 ff; ID, Realtà economica e forme giuridiche. Interrogativi su classificazione e qualificazione delle fondazioni di origine bancaria, viewable at http://www.consiglionazionaleforense.it.

[46] See Report of the Bank of Italy for 2013, cit. p. 18.

[47] See BOERI – GUISO, Fermateli, viewable at http://www.lavoce.info/archives/31254/ fondazioni-bancarie where is stated: “If Carige Foundation had followed the directions of the Ciampi Law instead of concentrating 90 percent of its assets in Banca Carige, if had not indebted itself rather than come down below 46 per cent of the capital for many years, today we would have a well capitalized bank, open to accommodating a modern management rather than leadership imposed by the foundation, of strict political appointees. Instead, the foundation is so determined to oppose itself to the increase of capital required by the EBA putting at risk the survival of the institution».

[48]See CAPRIGLIONE – TROISI, L’ordinamento finanziario dell’UE dopo la crisi, cit, p.87.

[49] See on the subject the Report on the proposal for a directive COM(2012) 280 final (so called BRRD), p. 14.

[50] See CAPRIGLIONE, Controllo bancario e stabilità delle strutture finanziarie, in Foro it., 1980, V, c. 169 ff., where in referring to the indications of general theory offered by GIANNINI M.S. (Controllo: nozioni e problemi, in Riv. trim. dir. pubbl., 1974, p. 1263 ff) there is an attempt to reconstruct the pattern of ‘control’ in the credit system, re-defining a specifc direction.

[51] See CASALINO, Simulations and Collective Environments: New Boundaries of Inclusiveness for Organizations?”, International Journal of Advances in Psychology (IJAP), Science and Engineering Publishing, USA, vol. 3, issue 4, pp. 103-110, 2014.

[52] So DESARIO, Controlli di vigilanza e loro riflessi sulla organizzazione delle aziende di credito, book n. 14 of the of the Associazione per lo sviluppo degli studi di banca e borsa , p. 20 ff.

[53] We refer, in particular, to the significant number of “procedures of extraordinary administration” existent as of 29^th September 2014, as it is shown at http://www.banca ditalia.it/vigilanza/avvisi/elenco/ Amm_straord.pdf

[54] See CAPRIGLIONE, Considerazioni a margine di un provvedimento della Banca d’Italia sull’«entrata in funzione del Single Supervisory Mechanism», cit., par. 4.

Author

Francesco Capriglione is Full Professor of Banking Law and Financial Regulation and Dean of Law Faculty at Guglielmo Marconi University of Rome. Besides, he is President of Fondazione Gerardo Capriglione Onlus and Director of Master in Regulation of the Activities and the Financial Markets at LUISS Guido Carli University. His research interest areas are European banking law, institutional assets of financial top management, regulation of banking and financial markets, banking supervision and operations of financial intermediaries. He is author of over 300 peer-reviewed scientific public ations and fifteen books (e-mail: fcapriglione@luiss.it).