CJEU Confirms Restrictions On Coop Banking

On 11 February 2020, Advocate General Hogan from the Court of Justice of the European Union ("CJEU"), delivered his opinion on "OC and others vs Banca d'Italia" (Case C-686/18).

The Consiglio di Stato (Council of State) had requested for a preliminary ruling in order to ascertain whether a national provision under Italian law, which mandates the conversion of a co-operative bank into a private company if it exceeds a certain asset threshold, is legal or otherwise under EU law, specifically Regulation (EU) No 575/2013 ("CRR") Delegated Regulation (EU) No 241/2014 and the Treaty on the Functioning of the European Union. While assessing Italian Decree Law No. 3/2015 under the lens of the Charter of Fundamental Rights of the European Union (the "Charter") and EU prudential and state aid rules, Hogan asserted that in his opinion the cited Italian legislation does not go against the multiple facets of European law.

The necessity for this preliminary ruling initially stemmed from three applications lodged in the Regional Administrative Court of Lazio by separate groups of anonymous entities, bearing mutual shareholding in various Italian cooperative banks, Adusbef and Federconsumatori - against Banca D'Italia, challenging, in particular, the following acts carried out by the latter:

The Italian law in question allows the Banca d'Italia to set an EUR 8 billion asset threshold for co-operative banks. If exceeded, the credit institution in question had to implement (within a year from when the threshold was exceeded) one of the three options, either:

reduce the total amount of assets below the threshold imposed; or convert itself into a company limited by shares; or liquidate itself. If the cooperative in question fails to abide with one of those avenues, this may result in the Banca d'Italia proposing to the European Central Bank the revocation of the banking licence, or the banning of the credit institution from embarking on new operations. Furthermore, the defaulting bank may also run the risk of having the Italian Minister for the Economy and Finance initiate compulsory administrative liquidation.The acts adopted by the Italian legislature also allow such a cooperative bank, once converted into a company limited by shares, to defer redemption of shares held by a withdrawing shareholder for an unlimited period and to limit the associated amount, either in full or in part.

According to the European Economic and Social Committee, Banca Popolare...