financial markets and institutions of italy

7/31/2019 Financial markets and institutions of ITALY

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Can You guess the country ?


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The country which

known for their music

such as the piano and

opera (very popular)and sometimes theyre

known for there

amazing art such as the

one above.


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Financial Institutions and Market

(ITALY)

Presented By :

Anuj Goyal

Shyam Nayma


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Economy of ItalyRank 8

th(nominal) / 10

th(PPP)

Currency Euro (EUR), except in Campione d'Italia(CHF)

Trade organisations EU, WTO (via EU membership) and OECD

GDP $2.198 trillion (2011) (nominal; 8th

)

$1.846 trillion (2011) (PPP; 10th

)

GDP growth -0.8 (2012-First quarter)[

GDP per capita $36,267 (2011)(nominal; 21

st)

$30,464 (2011) (PPP; 27th )

GDP by sector agriculture: 1.8%; industries: 24.9%; services: 73.3%

Inflation (CPI) 1.4%

Labour force 25.05 million

Labour forceby occupation services (65.1%), industry (30.7%), agriculture (4.2%) (2005)

Unemployment 10.7% (July 2012)

Average gross salary 2,521 / 3,403 $, monthly (2006)

Main industries tourism, communications, machinery,steel, chemicals, pharmaceuticals,

food processing, textiles, motor vehicles, home

appliances, clothing,fashion


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Functions of Financial Market

Transfer of resources across time and space

Allocation of risk

Economics of pooling

Payment system

Managerial incentives

Regulators/financial decision making


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Transfer of resources across

time and space


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Types of Banks

Central bankBanca d'Italia

Part of the ESCB

Headquarters ROME

Established 1893

Governor Ignazio Visco

Central bank of Italy

Preceded by BankitaliaSucceeded by European

Central

Bank(1999)


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Central bankFunctions

After the charge of monetary and exchange rate policies was shifted

in 1998 to the European Central Bank, within the European

institutional framework, the bank implements the decisions,

issues euro banknotes and withdraws and destroys worn pieces.

banking and financial supervision

market supervision

oversight of the payment system and provision of settlement

services State treasury service

economic analysis and institutional consultancy.


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Banking Sector structure


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Ownership


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Banks

The top largest banks of Italy include UBIBanca, UniCredito Italiano, BPU

Group,Banco Popolare, among others.

Italy's top three banks have a combined market

capitalisation of around 56 billion euros

34 of 37 banks are downgrade by S&P


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Types of pension funds in Italy

New legislation provides for two types of pension funds

1 Occupational pension funds (2nd pillar)

Typically set up by collective bargaining at industry level some are very large funds:

COMETA (steel industry, has over 330.000 members);

FONCHIM ( chemical industry, has over 100.000 members)

2 Open-ended pension funds (2nd/3rd pillar)

set up by banks, insurance companies, asset management firms

legal structure similar to that of mutual funds (legal separation of assets, but

no independent legal status)

Mainly addressed to self-employed


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Eligibility requirement

Worker registered under public retirement system can be divided in to two

category

1. Employees

2. Self employed

Old age pension

Earning based method : Men 65 , woman 60 and both have minimum tenure of 20 years to access

fund

Contribution based : accession required 5 years of contribution in addition to 65 years for man and

60 year for woman

Seniority pension : benefit are paid at yonger age than old pension scheme .95years = 60 years + 35 tenure


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Pension funds in Italy main figures (end-2011)

Number of

funds

Members Assets

( bn )

Occupational Pension Funds 42 880,000 1.2

of which:fully operative 5 490,000 1.0

Open Pension Funds 99

of which:fully operative 70 220,000 0.5

Old Pension Funds 577 680,000 28.5

Total 718 1,800,000 30.2

Members as % of workforce( 21m ) 8.5 %

Assets as % of householdsFinancial assets( 2,600 bn )

1.2 %

Assets as % of GDP( 1,150 bn ) 2.6 %


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Stock Exchange-Borsa Italiana

based in Milan, is Italy's main stockexchange.

It was privatised in 1997 and is a part

of the London Stock Exchange Group

plc since 2007.

In 2005, the companies listed on the

Borsa were worth US$890 billion.

It is also informally known as Piazza

Affari("Business Square"), after the city

square of Milan where its headquarters

(the Palazzo Mezzanotte building) is

located.


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Structure

The Italian Stock Exchange (Borsa Italiana)indexes approximately 270 listed stocks within

five different market sectors:

MTA/MTAX and Mercato Expandi

Derivatives (IDEM)

Covered Warrants and Certificates (SeDeX)

Government Bonds and Securities (MOT)

Exchange-Traded Funds and Index Open-end

Funds (MTF)


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Mutual Funds

Italy's mutual-fund market is the second-biggest incontinental Europe, after France.

Classification :Two classifications are used in Italy: the Bank of Italy's classification (bond funds, balanced funds and equity

funds)

classification used by Assogestioni (the Italian mutual fundsassociation)

(20 different categories and distinguishes between Italian and international funds)


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Funds Fee and expenses

The Capital Gain Tax : income received from mutual

funds is tax exempt for household


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Risk Allocation


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Insurance Sector

Overview According to a recent report of ANIA (the Italian Insurance Company

Association), the overall result of the industry in the first half of 2011has improved over the first six months of 2010, but was lower thanthat recorded in the first six months of 2009.

In the second part of 2012 the prospects on the profitability of thesector might get worse due to the tension in the euro area of thefinancial markets, especially in the areas of sovereign bonds

Concerning the non-life insurance sector, ISVAP (the ItalianInsurance Authority) reported for the first nine months of 2011 anincrease of 2.8% in premium, with respect to the same 2010 period.


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Top Italian insurance players


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Asset Allocation of Pension and Insurance


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The payment system can be defined as the set of

instruments, procedures and entities (bothintermediaries and other), infrastructures and

rules that contribute to the transfer of money from

one operator to another


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Payment System entity involved

The banking system,

The Italian Post Office and

The Bank of Italy


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Italian State Treasury Service:Traditional Payment Processes

State Accounting

OfficesInternal Control

State GeneralAccounting Office

Monitors theExpenditure Level

State

Treasury Service(Bank of Italy)

Post Offices

Cash Payments

State AdministrationsState AdministrationsIndividuals/

Corporations

State Audit OfficeControl on

administrative

regularity

Banks

Clearing and

settlementSystem

Reporting

Reporting

Payment flows

Information flows


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Driving forces of the reform of public payments in Italy

REFORM OF PUBLIC

ADMINISTRATION- Customer satisfaction- Cost efficiency of PA- Competitiveness of Italian

economy

FEDERALISMImproving informationon public accounts

PROMOTION OF PAYMENT

SYSTEMS EFFICIENCY

REFORM OF

PUBLIC PAYMENTS


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Post Office

Law 71/1994 has gradually changed the legal status of the Post

Office, which, since February 1998, has been a private company

owned by the Ministry of the Treasury.

growing rapidly so as to compete with the banking system

In March 2012 post offices numbered almost 13308.

in 1999 the Italian Post Office completed the process of

involvement in the interbank procedures for the exchange and

settlement of bank and postal cheques.

Furthermore, the Bank of Italy fostered the involvement of thePost Office in the low-value credit transfer procedure (in April

2000).

In July 2002 a new agreement for mutual acceptance of

cheques.


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BI-Rel & BI-Comp

BI-Rel,for the settlement in real time of large individual

transactions,

BI-Comp, for the clearing and settlement of retail

payments.

S S i f


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Payment and Settlement Services for

the Italian MarketplaceCLEARING AND SETTLEMENT SYSTEMS

Electronic orders of paymentElectronic collection of tax and contribution

Payments on behalf of the Stateand other administrations

PAPER BASED TRANSACTIONS

LOW-VALUE DOMESTIC PAYMENTS

SECURITIES TRANSACTIONS

NON EURO AREA CORRESPONDENT TRANSACTIONS

LARGE VALUE AND CROSS BORDER PAYMENTS

DERIVATIVES

BI - COMP

EXPRESS

Securities

BI-REL

(Settlement accounts

at the Bank of Italy)

Multilateral balances

Multilateral cashbalances


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Monte Titoli

Monte Titoli is a company which provides centralcustody and administration of transferablesecurities (shares and bonds)

Since 1986 the CSDs activities in private

securities have been regulated by a specific law,making Monte Titoli the only company authorisedto administer private securities.

In August 2000 Monte Titoli was authorised tomanage government bonds, which until then hadbeen managed by the Bank of Italy; the actualtransfer of government securities from the Bankof Italy to Monte Titoli took place at the end of2000. Therefore, there is now one single CSD

that manages both private and government


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Interbank register of bad cheques and

payment cards

Legislative Decree n 507 of 30 December 1999, implementing

Law n 205 of 25 June 1999, reformed the system of penalties

for the issuing of unauthorised or uncovered bank and postal

cheques

hese new rules have provided for the setting up at the Bank of

Italy of a computerised archive of bank and postal cheques and

payment cards (called Centrale di Allarme InterbancariaCAI)


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CORRESPONDENT SERVICES

The Euros performance within a context ofincreasingly integrated financial markets has ledthe Bank of Italyto strengthen its correspondentbanking services by introducing technological andfunctional innovations concerning both paymentmanagement and securities.

At the same time, these services have come tobe used by a wider range of clients, includingPublic Administration, the central banks of

countries outside of the euro area andsupranational bodies.

The Bank of Italy has decided to offer the entirerange of services in a modular configuration,

allowing clients to choose the types of services


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SIBOS

SIBOS is an annual conference on paymentsystems organised by SWIFT, in which banks,financial operators and service providers from allcountries participate. In 2006, this event was heldin Sydney in the week from 9 to 13 October 2006.As is customary, the Bank of Italy together with 4other national central banks and the EuropeanCentral Bank participated in a shared Eurosystem stand.

The conference offered the possibility to illustrateto operators the Euro systems functions and itsmain activities in the field of payment systems,with particular reference to the TARGET2 project

(1) and to the more recent TARGET2-ri i initiative 2 .


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Managerial incentives

PARMALAT meltdown : biggest failure of Italy (European history )

Founder(s) :Calisto Tanzi ( 22 years college drop

out ) Financial Fraud

Bankruptcy : December 24 , 2003


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BANK OF ITALY REGULATIONS

Bank of Italy regulation consists of circulars, regulations andsupervisory measures. Of a basically technical nature theseprovisions lay down rules and methods for categories of bankingand financial intermediaries, operating both individually and ingroups.

Under Law 262/2005 on the protection of savings, the Bank ofItaly must carry out advance analysis of the impact of themeasures that it intends to issue, assess their effects, in terms of

costs and benefits, on the interested parties, and carry out a publicconsultation. The reasons for regulatory measures must be givenand the measures themselves revised periodically

E B ki g A th it


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European Banking Authority(EBA)

The EBA has officially come into being as of 1 January 2011and has taken over all existing and ongoing tasks and

responsibilities from the Committee of European Banking

Supervisors (CEBS).

The EBA has some quite broad competences, including

preventing regulatory arbitrage, guaranteeing a level playing

field, strengthening international supervisory coordination,

promoting supervisory convergence and providing advice to theEU institutions in the areas of banking, payments and e-money

regulation as well as on issues related to corporate governance,

auditing and financial reporting.


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CONSOB

transparency and correct behaviour by securities market

participants;

disclosure of complete and accurate information to the

investing public by listed companies;

accuracy of the facts represented in the prospectuses related to

offerings of transferable securities to the investing public;

compliance with regulations by auditors entered in the Special

Register


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Thanks !!!

financial markets and institutions of italy

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