How to understand the Investment Compactbanks, internationalisation,

SMEs and much more

March 2015

20 January 2015

The Council of Ministers approved the Government Bill n. 3/2015 “Urgent measures for the banking system and investments” – the so-called Investment Compact.

A long-awaited Decree: several drafts and advance news leaked by the press, then the “surprise” approval (it was not on the agenda of the Council of Ministers).

Renzi comments:

“This is an important day…”yet more proof that this Government has the

“courage to change and innovate”

Investment Compact: approval of the Decree

Cooperative banks: a unique Italian model

An access to the credit system focusing on developing the territory, local economies and Made in Italy. A privileged relationship with Small Medium Enterprises (SMEs) granted credit without the involvement of big banks. But the European Banking Union is imminent… Italy has to adjust and rationalise the banking system.

Renzi“We have too many bankers and grant too little credit”

PadoanWe needed to “shock” the credit system “but nevertheless maintain a system of governance that’s been extremely

advantageous” for Italy.

Why use a Government Bill? “To show it’s an urgent issue”.

24 March 2015

The Senate of the Republic approved the Bill definitively.

Critics from the oppositionCarlo Martelli (M5S):

“We are going to destroy a money lending sector: the cooperative banks”

Government’s defence

Pierpaolo Baretta: “It was not only necessary,

but very urgent (…) it is such a strategic sector for our Country”

The new measures apply only to cooperative banks with assets exceeding 8 billion euro.

“The others, if they so wish, can remain as they are” and continue to serve local communities.

The law affects ten cooperative banks: Banco Popolare, Ubi, Bper, Bpm, Popolare di Vicenza, Veneto Banca, Popolare di Sondrio, Creval, Popolare dell’Etruria and Popolare di Bari.

The reform aims to make cooperative banks similar

to commercial banks with a financial structure.

Cooperative bank reform: “An important piece of the puzzle”

“We won’t touch cooperative banks”

Renzi on Twitter reassured MP Gabriella Giammanco (FI) who had drawn attention to this danger.

The reform of cooperative credit had initially been envisaged but was later deducted.

No! We can’t involve cooperative banks

Conversion into a joint-stock company within 18 months of the implementing rules of the Bank of Italy.

Opportunity to emit participative financial instruments (administrative + economic rights), and thereby acquire the right to hold up to a third of the votes in shareholder’s meeting and the possibility to name up to a third of the members of the Board of Directors and Supervisory Board.

Abolition of the one share/one vote governance rule.

The Government hopes this will attract investments.

Cooperative banks: what’s new?

The client no longer has to pay portability expenses or to transfer his/her account from one bank to another.

The transfer must be completed within 12 days; the bank is obliged to compensate the client for any delay or other disservices.

Renzi comments: “It’s a small gesture,

but it points in the right direction”

The Bill includes new measures to facilitate the opening, within European Countries, of a current account or of cross border payments.

I can change banks whenever I want! (even abroad)

Cassa Depositi e Prestiti (CDP) will promote the internation-alisation of the Italian economy by offering direct credit to exporter businesses, directely or through SACE or other subsidiary (with approval of the Bank of Italy).

Minister Guidi envisages that this reform will input 12 billion euro into the credit circuit for businesses, strengthen exports, and compete on a level playing field with foreign competitors who already have national exim banks.

Will this regulation be compatible with European law?

Cassa Depositi e Prestiti, SACE and direct credit to businesses

They have to be on the market for less than 7 years. They are not listed on the stock exchange but have audited accounts and fulfil at least two of the following requirements:

minimum 3% difference between cost and total value of production in Research, Development and Innovation;at least 1/5 of their employees have to be highly specialised;own a patent or a software registered with SIAE.

They will be listed in an ad hoc register at the Chambers of Commerce and will be able to access the same facilities as the innovative start-ups, including the possibility to fundraise using equity crowdfunding.

According to data provided by the Ministry for Economic Development, Italy has roughly 7,000 innovative SMEs.

A new category: innovative SMEs

What about SMEs older then 7 years?

SMEs could benefit from incentives as long as they a Development Plan of products, services or new processes in their sector, evaluated and approved by an independent organism or a public subject (not yet identified!).

Already specified in the Stability Law, from January 2015 Ires, Irap and direct and indirect revenue from intellectual property (patents, brands, processes, formulas) are no longer included in the calculation.

The approach is an innovative measure in itself: partial exemption from taxation of revenue rather than business incentives.

A dual rationale: limit delocalisation of Italian businesses in countries with low taxation;stimulate foreign businesses to invest in Italy.

Patent Box: the new patent box will be extended to include intangible assets

A joint stock company will be created to restructure companies going through a bad patch but showing signs of being able to become profitable again.Minister Guidi clarified: “This is not intended to save insolvent companies (..) but help the turnaround of companies that have the potential to quickly

return to a good economic-financial balance in the future”The capital of the new joint stock company will be underwritten within 3 years by both private and institutional investors; they can benefit from a State guarantee, but in exchange must pay back a quota of their profits into the system. Those who invest without a guarantee will have more votes in the general shareholder’s meeting. Within 7 years the Joint Stock Company created to save businesses will have to transfer its assets and reports referring to the investment. Critics have said: it’s a regulation to save the Ilva company.

A joint-stock company to save companies in crisis

SME’s businesses special control? The State guarantees

The State guarantees up to 550 millions of euro (it used to be 500 millions in the previous version) for debts for businesses under special control, both for ordinary management and for reactivation of industrial plant.

Guarantee fund for SMEs

It will be possible to guarantee indirectly financial procedures already decided by investors at the date of the guarantee request. A priority in obtaining the guarantee will be granted to businesses supplying goods or services to companies with “at least an industrial plant of national strategic interest under special control (ILVA)”.

It could’t be more explicit!

The so called “Decreto del Fare” and the Stability Law 2015 have allotted up to to the Cassa Depositi e Prestiti (CDP)

5 billion euro

The sum is to be distributed to the banks who have signed the MiSE-ABI-CDP conventions regarding financial packages for SMEs to invest in machinery, industrial plants and capital goods.

State contributions can now be acknowledged as regards financial packages granted by banks using their own funds, without having to exploit the plafond of the Cassa Depositi e Prestiti (CDP).

A new boost for the Sabatini bis

L’IIT could initiate or participate in innovative start-up, in accord with MIUR and MISE, investing up to 10% of their resources.

The Government, in its initial proposal, defined IIT as the Agency responsible for managing the intellectual property of all the public research institutes and universities.

A risky regulation?Maybe

The IIT is very concerned. Minister Giannini added that “the regulation about patents is incompatible with the independence of universities and public research institutes”.

A new role for the Italian Institute of Technology (IIT)