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05 March 2010
Italy has recently implemented the EU Payment Services Directive (2007/64/EC) by Legislative Decree 11/2010, which entered into force on March 1 2010.
Among other things, the decree introduces a new category of payment services provider: the 'istituto di pagamento' (the 'payment institution' referred to in the directive). These entities can provide payment services exclusively or alongside other business activities (eg, operating telecommunications services or chains of petrol stations or supermarkets). This represents a significant innovation in the framework of the Italian market, in which payment services have traditionally been reserved for banks, other financial institutions and public or state entities.
The directive aims to provide a basis for the creation of an open single market for payments and for the operation of the Single Euro Payments Area. It provides rules for all payment services in the European Union in order to establish an efficient and secure cross-border payment system, while improving competition by opening payment markets to new participants.
According to Article 114-6 of the Banking Law (as amended by the decree), banks, e-money institutions and the newly defined payment institutions(1) are entitled to provide payment services. The provision that such payment institutions can engage in payment services exclusively or in addition to other activities is expected to open up the payment services market to companies in unrelated areas, in line with the directive's rationale.
The performance of payment services activity by an Italian payment institution is subject to prior authorization from the Bank of Italy in its capacity as the supervisory authority for the financial sector. Such authorization additionally entitles payment institutions to carry out operational and other ancillary activities, including: (i) providing credit in connection with the payment services that they provide (subject to limitations and specific regulations); and (ii) operating payment systems and providing foreign exchange and safeguarding services.
The Bank of Italy must verify that applicants meet all of the requirements and conditions specified in the amended law, including:
In the case of payment institutions that also conduct other business activities, additional safeguards apply. For example, the payment institution mush create and maintain a dedicated fund that is used exclusively for payment services activity and is overseen by one or more independent persons with direct responsibility for it. The Bank of Italy will withhold authorization if, as a result of the examination that it undertakes as part of the authorization process, it has reservations about the correct and prudent management or operation of the applicant's payment system. Once authorized, payment institutions must be enrolled in a public register maintained by the Bank of Italy. Payment institutions are subject to reporting requirements and ongoing supervision, both overseen by the Bank of Italy.
A payment institution that is authorized in another EU member state and wishes to provide payment services in Italy for the first time can: (i) establish a branch in Italy to provide such services, subject to (among other things) prior notice to the Bank of Italy from the competent authority in the payment institution's home state; or (ii) provide such services in Italy from abroad, subject to the Bank of Italy's prior receipt of certain information from the competent authority in the payment institution's home state. If an EU payment institution wishes to provide payment services in Italy through agents, additional prior notice from the competent authority in the institution's home state is required. The agents must be authorized financial agents and must be enrolled in a register maintained by the Bank of Italy.
The decree sets out specific requirements and rules for payment institutions - and, in general, for payment services providers - in the performance of payment service operations. The terms and conditions of payment services must appear in a written framework agreement between user and provider, which must disclose the costs and charges for the services and the applicable interest and exchange rates. Amendments to the agreement or the terms and conditions of service are subject to specific limits and procedures under the law. Users can terminate the agreement at any time and without penalty or charge. Service providers wishing to terminate an open-ended agreement must give at least two months' notice.(2)
The decree follows the directive in providing rules regarding other aspects of payment services activity, including:
On February 15 2010 the Bank of Italy issued implementing rules for the decree, providing a more detailed treatment of its provisions.
For further information on this topic please contact Mia Rinetti or Carlo Trucco at Pavia e Ansaldo by telephone (+39 02 855 81), fax (+39 02 8901 1995) or email (email@example.com or firstname.lastname@example.org).
(1) Additional providers of payment services are the European Central Bank, the central banks of EU member states, the Italian state and other EU member states, regional or local public authorities and the Italian post service.
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