Measures to support financial stability introduced by Law Decree 237 of 23 December 2016

by Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP

On 23 December 2016 law decree 237 (the "Decree") was published in the Official Gazette no. 299 and entered into force on the same day.

The Decree was adopted in light of events that have affected Banca Monte dei Paschi di Siena to enact, with urgency, certain provisions aimed at guaranteeing the economic and financial stability of Italy, ensuring public support for capital strengthening measures and the protection of savings deposits. The Decree included the following:

(i)     provisions entitled (a) "State Guarantees on newly-issued liabilities" and (b) "Emergency Liquidity Provision".
(ii)    provisions relating to "Capital Strengthening Measures";
(iii)    amendments to Law Decree 170 of 21 May 2004 on financial collateral arrangements.
This Alert is a summary of the main provisions of the Decree described above.


1.  State guarantees on newly-issued liabilities: general features

Pursuant to Article 1 of the Decree, the Ministry of Economy and Finance (the "MEF") can, until 30 June 2017, provide a State guarantees for debt securities issued by Italian banks to preserve financial stability (each a "Guarantee"). The Guarantees will be unconditional, irrevocable and payable on first demand.  

1.1 Object of the Guarantee

Guarantees may only be given for debt instruments with the following characteristics:
(i)     they are issued after 23 December 2016;
(ii)    maturity is between three months and five years (or seven years in the case of covered bonds);
(iii)   they provide for bullet repayment of principal in a single instalment at maturity;
(iv)   Euro denominated and fixed interest rate;
(v)    no subordination clauses as to repayment of principal and payment of interest; and
(vi)   not structured debt or complex products and without component of a derivative nature.
The Guarantee will cover both principal and interest payments.

1.2 Condition for the granting of the Guarantee

The Guarantee can be granted only after the positive decision of the European Commission on the regime for granting the Guarantee or, as appropriate, following an individual notification. In other words, the granting of the Guarantee is subject to the scheme complying with EU rules on State aid.
Furthermore, the granting of each Guarantee will be made on a case-by-case basis following the assessment by the competent supervisory authority (Bank of Italy or the European Central Bank, as applicable) of the following:
(i)    compliance with own funds requirements pursuant to EU regulation 575/2013;
(ii)   no capital shortfalls highlighted under stress tests.

1.3  Duration and limits

The MEF is entitled to grant the Guarantee until 30 June 2017, which may be extended by the MEF for an additional six months.
With regard to the quantitative limits, under Article 3 of the Decree the amount of Guarantees granted is limited to the amount strictly necessary to restore the medium to long-term refinancing capacity of the beneficiary banks.
In addition, for each bank, the nominal value of debt instruments with a maturity longer than three years for which the Guarantee may be granted cannot exceed one-third of the total nominal value of the securities issued.

1.4  Application procedure

The application for admission to the Guarantee shall be submitted to the Bank of Italy and the Treasury Department indicating, inter alia, the liquidity needs, including future liquidity needs, of the bank, the liabilities for which a Guarantee is sought and any liabilities for which a Guarantee has already been granted.
Within three days of receiving the request, the Bank of Italy must provide its assessment to the Treasury Department, which shall decide on the application within the following five days.

1.5  Enforcement of the Guarantee

If a bank believes it will be unable to fulfill its payment obligations related to the issuance of debt securities covered by the Guarantee, it shall apply for the activation of the Guarantee indicating, inter alia, the amounts owed by the bank under the guaranteed financial instruments as issued.
The application for activation shall be submitted at least 30 days before the maturity of the guaranteed securities.
The Treasury Department shall promptly pay the amount due by the bank, in any case no later than the day before the guaranteed bond matures, subject an assessment of the foundation of the application for activation.
Following payment by the Treasury Department pursuant to the Guarantee, the bank is required to repay to the Treasury Department the amount paid plus interest at the legal rate up to the date of repayment to the Treasury Department (there seems to be no specific deadline for repayment).

1.6   Beneficiaries of the Guarantee

Those eligible for the Guarantee are, in addition to the Italian banks which meet the requirements referred to in paragraph 1.2 above, also banks with registered offices in Italy which do not meet only one of the requirements indicated in paragraph 1.2. but that have positive net assets, provided that the relevant bank is in urgent need of liquidity support.
Finally, the Guarantee can be granted, subject to certain conditions, in favor of a bank under resolution procedures or a bridge institution under Law Decree 180/2015.

2.  Emergency liquidity provisions

In addition to Guarantees, the Decree also introduces provisions related to the emergency liquidity assistance, "ELA", i.e. loans provided by the Bank of Italy to banks facing serious liquidity crises.
In particular, Article 10 of the Decree sets forth that within six months from the entry into force of the Decree, the MEF may grant the State guarantee to supplement the security granted by the Italian banks  in order to guarantee such loans.
Such state guarantee is irrevocable. The Bank of Italy will be required to first enforce the security allocated by the bank and then the state guarantee.       

2.1 Beneficiaries

Those eligible for the state guarantee in the context of emergency liquidity provision operations are the same as those in paragraph 1.6 above.

2.2 Enforcement of the Guarantee

If the bank to which emergency liquidity has been provided does not meet its payment obligations under its loan agreement with the Bank of Italy, the latter, depending on the outcome of the enforcement of security granted by the bank, submits the activation application for the state guarantee to the Treasury Department which, after confirming the validity of the request, shall pay the amount due by the bank promptly and, in any case, within 30 days.As regards this measure, unlike the provisions concerning the Guarantee described above, the legislator seems not to have regulated the restitution obligations of the defaulting bank towards the State, or the subrogation of the same in the credit position of the Bank of Italy.       

3.  Implementing provisions

Article 12 of the Decree sets forth that the implementation of both the provisions on the Guarantee on liabilities and the provisions on state guarantees within ELA operations is mandated to the adoption of a special decree by the MEF.


1. Subscription for or acquisition of shares by the State

Pursuant to Article 13 of the Decree, the MEF may subscribe for or acquire, by 31 December 2017, in derogation of public finance accounting rules, shares issued by Italian banks, whether or not they belong to a banking group, or Italian parent companies of banking groups (the "Issuer"). Issuers eligible to apply for this type of intervention by the State are Issuers that, based on stress tests, need to strengthen their regulatory capital.        

2.   Conditions for State interventions

In order to request the intervention of the State, the Issuer is required to first submit to the competent authority (Bank of Italy or the European Central Bank, as applicable) a capital strengthening plan indicating (a) capital needs; (b) the measures that the Issuer intends to adopt to achieve the capital strengthening and (c) the deadline for completion of the capital strengthening plan.
Only if implementation of the capital strengthening plan - the results of which should be given to the competent authorities and the MEF - proves insufficient to achieve the capital strengthening required, may the Issuer request state intervention.

3.  State intervention implementation

The intervention by the State, in the subscription for or acquisition of shares, based on the provisions of the Decree, seems to be conditional upon pre-emptive "burden sharing measures among creditors", as stated in Article 22.
In particular, Article 22 provided that -  in order to limit the use of public funds - subscription for the Issuer's shares by the MEF is made after application of the "burden sharing measures among creditors". Such measures, to be provided by decree of the MEF and subject to the positive decision of the European Commission on the compliance of the intervention with the EU regulatory framework on State aid applicable to bank recapitalisation measures in the context of the financial crisis, are:

(i)     conversion of the Additional Tier 1 instruments into newly-issued ordinary shares that can be calculated in the Issuer's primary equity Tier 1;
(ii)     if the measure referred to in point (i) above is not sufficient, conversion of instruments and loans calculated as elements of Tier 2 into newly-issued ordinary shares that can be calculated in the Issuer's primary equity Tier 1; (iii) if the measure referred to in subparagraph (ii) above is not sufficient, conversion of instruments and loans, other than those referred to in (ii) above, whose right to repayment of principal is contractually conditional upon fulfillment of the rights of all non-subordinated creditors of the Issuer, into newly-issued ordinary shares that can be calculated in the Issuer's primary equity Tier 1.    

4.   Implementing measures

The provisions relating to the subscription for or acquisition of shares by the State may be subject to implementing decrees of the MEF, to be adopted after consulting with the Bank of Italy.


The Decree has introduced the following amendments to Article 26, Law Decree 170 of 24 May 2004 regarding financial collateral arrangements and, in particular, varying provisions regarding perfection of security transfers for transactions involving the Bank of Italy:

(a)  Under Article 3, subsection 1-bis, the following wording was inserted in bold:
"In case of a pledge or assignment of claims, the guarantee that meets the requirements set out in Article 2 shall be effective between the parties of a financial guarantee contract. Except as provided for by the following subparagraph, for the purposes of the enforceability against third parties and the assigned debtor or borrower of claim that has been pledged, the notice requirements to the debtor or acceptance by the debtor set forth by the Civil Code remain unchanged";

(b) in Article 3, after subsection 1-bis, the following provisions were inserted:

  • subsection 1-ter: "If, in order to satisfy, including indirectly, liquidity requirements, the Bank of Italy carries out financing transactions or other transactions that are guaranteed by a pledge or assignment of claims, the guarantee is effective against third parties from the moment it is granted, in accordance with Articles 1, paragraph 1, letter q), and 2, paragraph 1, letter b), and in derogation of the provisions of Articles 1265, 2800 and 2914 no. 2), of the Civil Code.
    In derogation of Articles 1248 and 2805 of the Civil Code, the assigned debtor or the debtor of the pledged claim cannot set-off against the Bank of Italy any claims against the transferor or pledgor, respectively, regardless of whether such claims have arisen, have been acquired or become due before or after the granting of the security in favor of the Bank of Italy. For other purposes, regarding the enforceability of the guarantee towards the assigned debtor or the debtor of the pledged claim, the notice requirements or acceptance provisions set forth by the Civil Code remain unchanged";

  • subsection 1-quater. "If the guarantees referred to in subsection 1-ter consist of mortgages, registration provided for in Article 2843 of the Civil Code is not required. Article 67, paragraph 4, of Royal Decree 267 of 16 March 1942 applies to the transactions of the Bank of Italy referred to in subsection 1-ter".

Written by:

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.