New rules for acquisitions in the financial sector - International Law Office

Introduction
Prior clearance
Clearance procedure
Acquisition of financial intermediaries

Introduction

Legislative Decree 21/2010, which entered into force on March 10 2010, implemented the EU Acquisitions Directive (2007/44/EC) in respect of acquisitions and increases in holdings in the financial sector.

Among other things, the new rules aim to increase transparency in the approval procedure for acquisitions of stakes in banks and financial intermediaries. In particular, the legislative decree makes significant changes to the Banking Law (385/1993) and the Consolidated Financial Law (58/1998), introducing: (i) new thresholds requiring prior clearance by the Bank of Italy for the acquisition of a stake or an increase in an existing holding in a bank or financial intermediary; and (ii) criteria by which the Bank of Italy will assess a potential acquirer before clearing the transaction.

Similar provisions have been introduced in connection with acquisitions of stakes in insurance and reinsurance companies under the Private Insurance Code (209/2005).

Prior clearance

Prior clearance from the Bank of Italy is required for an acquisition of a stake (in any form) in the corporate capital of a bank or its parent company if:

• the stake to be acquired would give the acquirer control of, or considerable influence over, the bank;
• the stake to be acquired represents at least 10% of the voting rights or corporate capital, taking into account any corporate capital already held by the acquirer; or
• the acquirer increases its stake in the bank so that its proportion of voting rights or capital reaches or exceeds 20%, 30% or 50% (or any other threshold beyond which the increase entails an acquisition of control).

Stakes held indirectly or by persons acting in concert must be taken into account.

The new law specifies in detail the elements that the Bank of Italy must consider. In particular, it may give clearance only once it has verified the existence of conditions necessary to guarantee the sound and prudent management of the bank following the acquisition. It must evaluate the acquirer's characteristics and the financial strength of the acquisition plan on the basis of:

• the acquirer's reputation - an assessment which must take account of the integrity requirements for bank stakeholders under the Banking Law;
• theexperience, integrity and independence requirements for persons holding positions of management, direction or control following the acquisition;
• the acquirer's financial position;
• the bank's ability to continue to comply with the rules regulating its activity after the acquisition; and
• the structure of the acquirer's group and the Bank of Italy's ability to exercise its supervisory authority.

Clearance may not be granted if there is a well-founded suspicion that the transaction is connected to money laundering or terrorism financing. Moreover, clearance can be revoked at any time if the conditions and requirements for its issuance are modified or cease to exist.

In the event of failure to obtain prior clearance, voting rights relating to the acquired holdings are frozen. The Bank of Italy will set a deadline by which the holdings must be sold. Further administrative penalties also apply.

Clearance procedure

The Bank of Italy has been delegated to implement the new rules on clearance proceedings; technical and procedural changes are expected to be approved soon. However, according to current procedure, an acquirer must file: (i) an acquisition plan detailing the main features of the transaction at least seven days before the board meeting at which the acquisition is to be approved (or, in the case of a public tender offer or public exchange offer, before the launch); and (ii) a notice requesting clearance before the transaction is completed, but in any case no later than 30 days after filing the acquisition plan (for transactions entailing acquisition of control).

The Bank of Italy's review period runs for 60 business days from receipt of the complete documentation. The review period can be suspended if (i) the documentation filed by the acquirer is inadequate or incomplete, or (ii) the Bank of Italy requests information or documentation from other (Italian or foreign) regulatory authorities.

Where the target bank is authorized in another EU member state, the Bank of Italy may authorize the acquisition only after consulting with the competent authorities in that member state.

Acquisition of financial intermediaries

Similar rules apply to the acquisition of a stake in a financial intermediary. The Bank of Italy must be informed in advance of the intention to acquire or sell a stake in a financial intermediary where the above criteria are met. Once notified, the Bank of Italy is authorized to prohibit an acquisition or sale on the same grounds that apply to banks. Similarly, the Bank of Italy is delegated to regulate the modalities and timing of the proceedings.

For further information on this topic please contact Mia Rinetti or Fabrizio Scaparro at Pavia e Ansaldo by telephone (+39 02 855 81), fax (+39 02 8901 1995) or email (mia.rinetti@pavia-ansaldo.it or fabrizio.scaparro@pavia-ansaldo.it).