Reserved Activities and Public Interest  in the Italian Financial Regulatory Framework

by Francesco Capriglione

ABSTRACT: The changing structure of markets affects the unity of the financial phenomenon, which must be reconsidered in a unitary sense. In particular, there is a weakening of the system of reserved activities and the distinctions between operators, who are now increasingly engaging in multifunctional operations.

The notion of reserved activity is no longer strictly tied to the definition of “banking activity” but extends to include other financial activities that can be carried out based on an enabling provision.In this context, public interest is identified in the protection of savers, which forms the basis of the regulatory framework concerning the oversight of entities engaged in reserved financial activities. These controls aim to ensure operations that do not harm the interests of savers. Consequently, this public interest is linked to maintaining the stability of the financial system—an objective that is also connected to the broader goal of ensuring economic development.

SUMMARY: 1. Introduction. – 2. Reserved activities: legal basis… – 3. Following: … their link to public interest… – 4. Following: … implications for banking supervision. – 5. Financial abuse and repressive measures. – 6. The issue of contractual invalidity.

1. Over the last two decades of the past century, a profound transformation of financial operations has occurred, affecting the notion of reserved activities, which for a long time had traditionally been limited to banking activities (Article 1 of the law of 1936 and now Article 10 of the Legislative Decree no. 385/1993) and stock exchange trading by brokers (R.D. 815/1932). The previous configuration, which limited its scope of application to banking activities and stock exchange trading, has then been surpassed.

New reserved activities have emerged, including those related to collective asset management, financial intermediation in a narrow sense, payment services, and electronic money issuance. More recently, the advent of digital means has further transformed market structures, through the availability of new technological mechanisms, particularly the use of platforms. This has led to the emergence of numerous market players.

The profound transformation of market structures in recent years has resulted in an operational expansion towards a variety of entities that integrate traditional reserved activities, forming the basis for this radical change.

This new phenomenon calls for the analysis of the principles governing the transactions that shape the economic reality within the market, broadly understood as a hub of production and labor, requiring adequate safeguards for “contracting parties, consumers, and investors […] permeating even private law institutions that serve as market instruments,” as Giorgio Oppo pointed out[1].

2.  As correctly noted in scholarly discussions, the aforementioned innovative process impacts the unity of financial phenomena, highlighting the need for a structural reconsideration of the entire system. Compared to the time when the Legislative Decree no. 385 of 1993 and the Legislative Decree no. 58 of 1998 were enacted, the system of reserved activities has changed and the distinctions between operators have blurred. Today, operators frequently engage in multifunctional activities; for instance, entities regulated by Article 106 of the Legislative Decree no. 385 of 1993 can, if authorized, issue electronic money and provide investment services, while payment institutions may grant credit related to their services (Article 114-octies of the Legislative Decree no. 385 of 1993 )[2].

At the same time, new forms of financing are provided by entities operating outside the banking regulatory framework (to avoid capital adequacy requirements while adhering to operational fairness principles established by law). This phenomenon, known as the shadow banking system, has been analyzed in its various components, leading scholars to define it as a regulatory arbitrage strategy aimed at countering declining profitability in traditional banking[3].

In this context, the notion of reserved activities extends beyond its traditional connection with the banking activity to encompass (other) financial activities requiring authorization. The mechanism of allowing the exercise of some activities only to authorised persons (reserved activities) indicates the exercise of specific freedoms and rights in conducting particular operational models. However, these innovations cannot disregard the public interest implications inherent in financial activities, which remain linked to Articles 41 and 47 of the Constitution, establishing the legal foundation for this area of the economy.

Article 41 of the Constitution mandates legislative oversight to establish programs and controls for economic activities with social purposes, implying a reference to entrepreneurial functions. Given the significance of the social interests involved, “the boundary between freedom and control shifts based on the actual evaluation of social utility.”[4]

The constitutional recognition of economic initiative freedom suggests a trend towards a competitive system. Thus, Article 41 legitimizes liberalization of operational forms, allowing for additional financial activities to be carried out provided they adhere to organizational criteria safeguarding economic efficiency and competition.

It is in this logic that the last paragraph of Article 10 of the the Legislative Decree no. 385 of 1993 provides an explanation for the preservation of the ‘reserved activities provided for by the law’; this is in fact a provision that, on the one hand, right after the enactment of the Legislative Decree no. 385 of 1993, was indicated by scholars as conducive to the realisation of ‘specialisation choices’, in line with the need to ‘protect the neutrality of financial intermediation’[5]. 

It is against this backdrop that the results of the analysis conducted on the constitutional legislation and, in particular, on the provisions of Articles 41 and 47 of the Constitution, referred to above, should be examined. Legal scholarship has made efforts to reconcile the constitutional principles concerned with the indications coming from the society and with the rules transposing the directives, recognising in them the core of the so-called economic Constitution; a formula used in legal literature to indicate the complex arrangement that the Italian Constitution formally uses to govern economic relations (from enterprise, to property as well as from cooperation, to savings)[6].

3. Examining the crucial interaction between reserved activities and public interest, it is essential to define the latter in relation to societal principles and collective needs. Over time, the concept has evolved to include interests specific to various operational sectors, including finance.

The link between this area and public interest is evident primarily in the “protection of savers.” This underpins regulatory oversight of financial operators to ensure they do not harm savers. As scholars have noted, Article 47 of the Constitution constitutionalized the public interest in savings protection. This principle reflects a comprehensive reference to the savings-credit phenomenon, underpinning the legislative intent to assign to the Republic the duty of regulating banking through oversight of financial sector organization and operations.

As a result, the regulation of banking allows for administrative intervention tailored to economic-financial realities, legitimizing laws governing banking operations alongside other regulated activities.

Given the evolving financial landscape, constitutional savings protection now encompasses not only traditional banking but also financial markets, insurance activities, pension savings, and automated monetary transactions. This is true inasmuch as the affirmation of such principle would express a global reference to the savings-credit phenomenon, the legislative intention underlying the provision in question being to assign to the Republic the duty of regulating the banking sector through the supervision of the organisation and proper functioning of the financial sector. The reference to the coordination and control of the exercise of the banking activity points in this direction, hence the possibility of considering the provision as a ‘specification’ of the previous Article 41[7].

It follows that, with regard to the banking sector, administrative enforcement enables to adhere to the economic and financial reality on which it is intended to act.

It goes without saying that the transformed scenario that characterises the banking system interacts with the changed extension of the sphere within which the protection of savings envisaged by the constitutional legislature is articulated; such an extension shows a breadth which is larger than in the past. Indeed, in addition to the banking activity in the narrow sense, also all the forms of operation conducted within the financial market and, therefore, insurance activity, pension savings and the techniques of conferring monetary assets that pass through automated circuits fall under the regulatory perimeter.

Therefore, with good reasons, it can be considered that the provision of Article 47 of the Constitution assumes a founding character in the legislative construction aimed at ensuring the protection of savings and, more generally, at creating an adequate connection of the matter under examination with the principle of public interest.

As a necessary corollary of the principle of the protection of savings, the public interest in maintaining the stability of the financial system is then taken into consideration; an objective that is also correlated to the purpose of ensuring economic development. The latter requires, in fact, a comprehensive legal regulation aimed at overcoming the differences to be found in the financial market and creating a situation of operational equilibrium, which is necessary for the purpose of stability.

 4. Financial crises since 2007 have compromised stability, raising concerns about the build-up of systemic risks. Despite regulatory improvements, market tensions continue to pose financial stability threats, exacerbated by expanded operations amplifying economic shocks.

This highlights the need for regulatory mechanisms ensuring that financial activities are properly carried out, while preventing crises, and mitigating contagion when crises arise. It also requires effective supervisory action to prevent market distortions that could destabilize financial entities.

Public interest thus emerges as a key driver in defining regulatory responses to crises and supervisory innovations, guiding authorities to prioritize common well-being. The European Union has also increased its focus on systemic stability after the global financial crisis of 2007-2008, aiming to shape a modern economy fostering financial, technological, and industrial growth aligned with sustainability and intergenerational equity[8].

The connection between reserved activities and public interest can also be found in the prudential supervisory measures that supervisors use to urge financial players to achieve the goals set forth by the law. Prominent among these measures are those aimed at implementing forms of risk prevention (legal, operational and market risks) taken into consideration by the Basel Accords, as well as certain governance criteria involving the various aspects of financial enterprises’ life, imposing on the latter specific obligations aimed at ensuring high levels of efficiency and transparency in business operations.

It is evident how the functionality of the market is thereby pursued by counteracting its opacity, which is an impediment to the regular exercise of financial activities, an opacity that – as is well known – constitutes an obstacle to competition between operators and therefore also to their development; on top of this, the benefits deriving from the provisions relating to the so-called ‘transparency’ of contractual conditions, imposed by the law both in the sphere of banking and financial services and, in particular, investment and payment services are crucial.

On this point, it is worth recalling the attention devoted by the regulator to the clarity that must feature the relations between authorised members and their customers. This also refers to the presence in the Legislative Decree no. 385 of 1993 of provisions aimed at strengthening the safeguards for the protection of customers by emphasising, as has been pointed out in the literature, ‘the precise indication in the contract of all the economic conditions relating to it’, so as to achieve a graduation of the information to be provided, which must be correlated to the type of services offered and the characteristics of the customers[9].

In conclusion, it can be argued that the public interest, as I have tried to highlight, identifies a pillar of the regulatory framework set up to protect the integrity of the financial system; this is because the legislation offers a clear framework of the ways in which reserved activities, appropriately directed, are able to ensure their full compliance with the protection of the aforementioned interest, while ensuring the stability of the financial system. This assumption is confirmed by an examination of the disciplinary implications for those who, without any authorisation whatsoever, engage in banking or financial activities, thereby incurring the serious sanctions provided for by the legal system, which – in my opinion – attest, once again, the strong connection that this matter has with the protection of the public interest.

5. From the opposite perspective, then, the repressive intervention that can be taken against those who have illegally exercised financial activities without having obtained any authorisation is related to the effective application of the founding principles of the banking system relating to the protection of savings. Such intervention is envisaged by specific regulatory provisions that – in the face of the phenomenon of organised economic crime, assessed in its varied and multiple ramifications – reaffirm the culture of legality, while at the same time laying the legal foundations to bring financial market operators back to the observance of ‘values’ of an economic nature, to which our legal system recognises constitutional importance.

Articles 130 to 132 of the Legislative Decree no. 385 of 1993 and Article 166 of the Legislative Decree no. 58 of 1998, impose sanctions on financial misconduct, reinforcing economic legality and protecting savers from fraudulent operators. The legislator’s intent to protect savers is confirmed, while at the same time pursuing the objective of preventing the spread of unauthorised activities that could jeopardise confidence in the financial system and, consequently, the very stability of the latter.

These provisions deal with some of the most significant issues in banking and financial law, insofar as they relate directly to the identification of the basic principles of the system. In the face of conducts qualifying as criminal offences committed in the financial sector, the response of the legal system is not limited to the mere application of criminal sanctions, but is extended to an intervention aimed at ensuring the exit from the market of individuals who have entered it by circumventing the regulations and violating the rules safeguarding the ‘sound and prudent management’ of those who operate in it.

It follows from this premise that the primary purpose of the provisions in question is to ensure the protection of savers against unauthorised persons; a protection that is expressed by prohibiting the latter from exercising banking and financial activities.  Hence, this is the implicit affirmation of the ‘reserved activities’ regime as a criterion characterising credit and financial operations, which becomes a prerequisite for the ‘orderly and proper functioning of the market’, as is explained in the introduction of  Government Report to Article 31 of Legislative Decree No. 481/1992; the latter can be understood as a regulatory provision into which the contents of Article 96 of the 1936 Banking Law, which had first regulated the matter of unlawful trading, had been incorporated.          

As has been emphasised by scholars, the rationale of the offences provided for in the provisions in question must be considered to be correlated to the identification of the elements integrating the notions of banking and financial activities; this is because the content of the prohibition refers not only to ‘the collection of savings from the public without authorisation … (but also) … to the allocation of the money collected to credit activity, … (both) … aspects inextricably linked to the functioning of a bank … (and therefore) … common object of the offence’[10]. It follows that there is a need to clarify the objective element of the criminal offences under examination; a need felt by the scholarship that has paused to analyse the variegated hypotheses of unlawful conduct that give content to the forms of abuse concerned[11].

Therefore, a form of savings protection has been implemented that, as has been pointed out in the literature, ‘is based on the integrated intervention of administrative and criminal instruments’. The objective element of the criminal offences under consideration, according to the scholarship, requires a recurrent repetition of the operational abuses; this is an argument that finds confirmation in the orientation of the Supreme Court that in this regard has pointed out that the activity performed must be of a professional nature, i.e. carried out by means of an adequate organisational apparatus and with economic management criteria. In this context, the role played by the sector authorities assumes specific relevance.

6. Lastly, my investigation focuses on the ‘relationship between reserved activities and mandatory rules, within the meaning of Article 1418 of the Italian Civil Code’. In the operational interventions carried out by non-qualified subjects – or who operate outside of regulatory perimeter – towards savers/investors, in fact, the problem of verifying the validity of the acts performed by such players arises since their activity could fall under the scope of Article 1418 of the Italian Civil Code, which provides for the nullity of the contract if it is contrary to mandatory rules.

Nullity, being an exceptional remedy, requires explicit legal provisions. Scholars acknowledge scenarios where nullity under Article 1418 is not absolute. Over time, the legislator has introduced protective nullities in investors’ exclusive interest, who alone can invoke them[12].

A recent 2024 ruling by the Court of Cassation clarified that “the economic relevance of banking activities alone does not suffice to render all Legislative Decree no. 385 of 1993 provisions mandatory.” Therefore, the lack of a license does not automatically invalidate transactions, though it may have regulatory or criminal implications.

This solution aligns with the need to prevent the use of nullity (which entails an obligation of restitution) from adversely affecting weaker contracting parties. The same need had previously been acknowledged by the Court of Cassation in a 2007 ruling[13]. On that occasion, the Supreme Court, based on the traditional distinction between rules governing contractual conduct and rules concerning contract validity, clarified that “the violation of the former, whether at the pre-contractual stage or during the execution of the relationship, does not affect the formation of the contract and is not capable of causing its nullity.”

From the reflections outlined above, it follows that it is essential to assess whether, despite the conditions justifying the existence of a cause of nullity, the idea of automatically annulling the irregular contract should be accepted or whether it is necessary to consider an alternative evaluation aimed at preserving the contractual relationship, avoiding its complete invalidation. Growing recognition of “selective nullity” as a protective measure suggests a shift towards investor protection. Judicial precedents, including those of the European Court of Justice, reinforce this approach.

It should be noted that dealing with the issue of contractual nullities highlights a specific connection to the “legal-economic structure of the market.” This is because the negative implications arising from potential regulatory criteria allowing generalized forms of contractual invalidity ultimately undermine market confidence. This consideration calls for further reflection on the interaction between this matter and market stability, given that the latter is closely linked to the peculiar nature of the contractual relationship —namely, the “provision of financial services”—which, in its various forms, acts as a catalyst in shaping market development trends and, more broadly, those of the economic system.      

Specifically, nullities impact the relationship between the parties, as defined by the legal synallagma (bilateral exchange of obligations). Thus, legal scholars have inferred, with reference to investment contracts, that these do not conform to the ordinary principles of contractual relationships, as one party, the intermediary, is legally required to act in the exclusive interest of the other, the investor[14]. Along these lines, scholars previously noted that the legislator intended to protect “the investor’s freedom of self-determination and their negative interest of not entering into a contract with an altered or even invalid content.”[15] Ultimately, determining nullity’s scope remains complex. Solutions must balance legal effectiveness and contract preservation principles, as seen in Article 1424 of the Civil Code, which allows for substantial contract conversion.

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[1] See Principi, in AA.VV., Trattato di diritto commerciale, edited by Buonocore, Turin, 2001, Sec. I, Vol. I, p. 47.

[2] See SEPE, Integrazione orizzontale: verso un testo unico delle attività finanziarie, in Quaderni di ricerca giuridica della Consulenza legale della Banca d’Italia, no. 100, p. 78 ff.

[3]  See LEMMA, The shadow banking system, England, London, 2016, p.16, where it is pointed out: “another risk profile concerns the possible elusive nature of the shadow banking operations and, therefore, the possibility that they are incorporated in a given country for the sole purpose of obtaining the benefits of a circumvention of rules and, then, a regulatory arbitrage.”

[4] See OPPO, Commento sub art. 41 Cost., in AA.V.V, Codice commentato della banca, edited by Capriglione and Mezzacapo, Milan, 1990, I, p. 6.

[5] See LAMANDA, La società per azioni bancaria, Rome, 1994, Chapter II.

[6] See among others FERRARI, Il diritto pubblico dell’economia: oggetto, modelli ed evoluzione storica, in AA.VV., Diritto pubblico dell’economia, Milan 2019, p. 9 ff.; AA.VV., La nuova costituzione economica, edited by Cassese, Rome-Bari, 2021; AMOROSINO, La “costituzione economica”, in AA.VV., Diritto pubblico dell’economia, edited by Pellegrini, Milan, 2023, p. 95 ff

[7] See, in this regard, PREDIERI, Pianificazione e costituzione, Milan, 1963, p. 353 ff.; CAPRIGLIONE, Intervento pubblico e ordinamento del credito, Milan, 1978, p. 47 ff.; PORZIO, Lezioni di diritto e legislazione bancaria, Naples, 1985, p. 55 ff.; differently MERUSI, Rapporti economici, in AA.VV., Commentario della Costituzione, edited by Branca, Rome – Bologna, 1980, sub art. 47, p. 153 ff.

[8] See regarding this matter the considerations made by DRAGHI in the well-known report titled The future of European competitiveness – A competitiveness strategy for Europe, September 2024.

[9] See URBANI, La «trasparenza» nello svolgimento dell’attività, in AA.VV, Manuale di diritto bancario e finanziario, Milan, 2024, p. 608.

[10] See ANTOLISEI, Manuale di diritto penale, Milan, 1999, vol. I, updated and integrated edition by Conti, p. 399.

[11] See SALOMONE, I reati della legge bancaria, in AA.VV., I reati bancari, edited by Agostino, Salomone, Santoriello, Padua, 2004, p. 222 ff.

[12] See LENER, Dalla formazione alla forma dei contratti su valori mobiliari (Prime note sul neoformalismo negoziale), in Banca borsa titoli cred., 1990, I,p. 780 ss.;PELLEGRINI, Le controversie in materia bancaria e finanziaria, Padua, 2007, p. 171.

[13]  See judgment n. 26724 of 2007.

[14] See MAFFEIS, Discipline preventive nei servizi di investimento: le Sezioni Unite e la notte (degli investitori) in cui tutte le vacche sono nere, in Contratti, 2008, p. 404.

[15] See SARTORI, La (ri)vincita dei rimedi risarcitori: note critiche a Cassazione, (SS.UU.) 19 dicembre 2007, n. 26725, in http://www.ilcaso.it, documento n. 92, p. 4.