The Italian Government Introduces Measures To Boost The Italian Lending Market

In the last few years, Italy has embarked on a program of economic and financial reforms to ensure the country's future sustainability and growth. As part of this program, the Italian Council of Ministers enacted Law Decree No. 91 of June 24, 2014 (the "Law Decree"),1 which introduces new measures, including tax ones, aimed at facilitating the access to financing by Italian companies. The principal innovations introduced by the Law Decree concern securitization and lending transactions and the debt markets.

LENDING IN ITALY

The main changes introduced by the Law Decree are as follows: (i) allowing securitization vehicles incorporated under the Italian Securitization Law2 and Italian insurance companies (i.e., insurance companies incorporated under Italian law or authorized branches of an insurance company incorporated under the law of a non-EU Member state3) to lend in Italy4; (ii) broadening of the list of assets eligible for investments by undertakings for collective investment (organismi di investimento collettivo del risparmio); and (iii) broadening of the scope of certain favorable tax rules (see below) to (a) banks established under the laws of an EU Member State; (b) insurance companies established and licensed under the laws of an EU Member State; and (c) unleveraged undertakings for collective investment incorporated in an EU Member State or an EEA country.5

Reserve of Activity

In Italy, the lending activity carried out on a professional basis and vis-à-vis the customers is reserved to authorized banks and financial institutions.6

Italian Insurance Companies and Securitization Vehicles. The Law Decree extends to Italian insurance companies and to Italian securitization vehicles the possibility to make financing to businesses7 to the extent that (i) the borrower is identified by a bank or a financial intermediary enrolled with the Bank of Italy pursuant to article 106 of the Italian Banking Law8; and (ii) the bank or the financial intermediary indentifying the borrower retains a "significant interest" in the financing transaction. In addition:

In the case of securitization vehicles, the notes issued to fund financings to be granted by the securitization vehicle must be issued to "qualified investors" only9; and In the case of Italian insurance companies, such entities shall (i) have an adequate internal control and risk management system, and (ii) be adequately capitalized. The Bank of Italy and IVASS will issue implementing regulations providing for the operational limits and other details applicable to loans by securitization vehicles and by Italian insurance companies, respectively.10

As a further incentive, the Law Decree establishes that financings granted by insurance companies may now represent an eligible asset for the purpose of the so-called "technical reserves" (riserve tecniche) that are mandatory for insurance companies.

In addition, SACE S.p.A., which is an export finance company owned by Cassa Depositi e Prestiti S.p.A. and by the Italian Ministry of Economy, is now allowed to lend to Italian businesses.

Undertakings for Collective Investment. The Law Decree has revised the definition of "undertakings for collective investment" (organismi investimento collettivo del risparmio) contained in the Italian Unified Financial Act.11 As a result, undertakings for collective investment may grant financing out of their own assets (literally, they may invest in "receivables," including those receivables arising from financing extended out of their assets).

Tax

Scope of the Substitute Tax Regime on Medium- and Long-Term Loans Broadened. As a rule, certain qualifying lenders may elect to subject medium- and long-term loans to a 0.25...

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