Can You guess the country ?

The country which known for their music such as the piano and opera (very popular) and sometimes they’re known for there amazing art such as the one above.

Financial Institutions and Market (ITALY)

Presented By :

Anuj Goyal

Shyam Nayma

Economy of ItalyRank 8th  (nominal) / 10th  (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; 21st )$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

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

Transfer of resources across time and space

Types of BanksCentral bank – Banca d'ItaliaPart of the ESCB

Headquarters ROME

Established 1893

Governor Ignazio Visco

Central bank of Italy

Preceded by Bankitalia

Succeeded by European Central Bank(1999)

Central bank – Functions

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 supervisionmarket supervision oversight of the payment system and provision of settlement

services State treasury service economic analysis and institutional consultancy.

Banking Sector structure

Ownership

BanksThe top largest banks of Italy include UBI

Banca, 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

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

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 fundContribution 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

Pension funds in Italy main figures (end-2011)

Number offunds

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 households’Financial assets( 2,600 bn € )

1.2 %

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

Stock Exchange-Borsa Italiana

based in Milan, is Italy's main stock exchange.

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.

StructureThe Italian Stock Exchange (Borsa Italiana)

indexes approximately 270 listed stocks within five different market sectors:MTA/MTAX and Mercato ExpandiDerivatives (IDEM)Covered Warrants and Certificates (SeDeX)Government Bonds and Securities (MOT)Exchange-Traded Funds and Index Open-end

Funds (MTF)

Mutual Funds Italy's mutual-fund market is the second-

biggest in continental 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 funds

association)

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

Funds’ Fee and expenses

The Capital Gain Tax : income received from mutual funds is tax exempt for household

Risk Allocation

Insurance Sector OverviewAccording to a recent report of ANIA (the Italian Insurance

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

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

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

Top Italian insurance players

Asset Allocation of Pension and Insurance

The payment system can be defined as the set of instruments, procedures and entities (both intermediaries and other), infrastructures and rules that contribute to the transfer of money from one operator to another

Payment System entity involved The banking system, The Italian Post Office andThe Bank of Italy

Italian State Treasury Service: Traditional Payment Processes

State Accounting Offices

Internal Control

State GeneralAccounting Office

Monitors theExpenditure Level

State Treasury Service

(Bank of Italy)

Post Offices

Cash Payments

State AdministrationsState AdministrationsIndividuals/

CorporationsState Audit Office

Control on administrative

regularity

Banks

Clearing and settlement

System

Reporting

Reporting

Payment flows

Information flows

Driving forces of the reform of public payments in Italy

REFORM OF PUBLIC ADMINISTRATION

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

economy

FEDERALISM Improving informationon public accounts

PROMOTION OF PAYMENT SYSTEMS EFFICIENCY

REFORM OF PUBLIC PAYMENTS

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 the Post Office in the low-value credit transfer procedure (in April 2000).

In July 2002 a new agreement for mutual acceptance of cheques.

“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.

Payment and Settlement Services for the Italian Marketplace

CLEARING AND SETTLEMENT SYSTEMS

Electronic orders of paymentElectronic collection of tax and contribution

Payments on behalf of the State and 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 cash balances

Monte TitoliMonte Titoli is a company which provides central

custody and administration of transferable securities (shares and bonds)

Since 1986 the CSD’s activities in private securities have been regulated by a specific law, making Monte Titoli the only company authorised to administer private securities.

In August 2000 Monte Titoli was authorised to manage government bonds, which until then had been managed by the Bank of Italy; the actual transfer of government securities from the Bank of Italy to Monte Titoli took place at the end of 2000. Therefore, there is now one single CSD that manages both private and government securities.

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 Interbancaria – CAI)

CORRESPONDENT SERVICES

The Euro’s performance within a context of increasingly integrated financial markets has led the Bank of Italy to strengthen its correspondent banking services by introducing technological and functional innovations concerning both payment management and securities.

At the same time, these services have come to be used by a wider range of clients, including Public Administration, the central banks of countries outside of the euro area and supranational bodies.

The Bank of Italy has decided to offer the entire range of services in a “modular” configuration, allowing clients to choose the types of services they wish to use.

SIBOSSIBOS is an annual conference on payment

systems organised by SWIFT, in which banks, financial operators and service providers from all countries participate. In 2006, this event was held in Sydney in the week from 9 to 13 October 2006. As is customary, the Bank of Italy together with 4 other national central banks and the European Central Bank participated in a shared Euro system stand.

The conference offered the possibility to illustrate to operators the Euro system’s functions and its main activities in the field of payment systems, with particular reference to the TARGET2 project (1) and to the more recent TARGET2-securitiesinitiative (2).

Managerial incentivesPARMALAT meltdown : biggest failure of Italy

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

out )Financial FraudBankruptcy : December 24 , 2003

BANK OF ITALY REGULATIONS

Bank of Italy regulation consists of circulars, regulations and supervisory measures. Of a basically technical nature these provisions lay down rules and methods for categories of banking and financial intermediaries, operating both individually and in groups.

Under Law 262/2005 on the protection of savings, the Bank of Italy must carry out advance analysis of the impact of the measures that it intends to issue, assess their effects, in terms of costs and benefits, on the interested parties, and carry out a public consultation. The reasons for regulatory measures must be given and the measures themselves revised periodically

European Banking Authority (EBA)

The EBA has officially come into being as of 1 January 2011 and 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 the EU institutions in the areas of banking, payments and e-money regulation as well as on issues related to corporate governance, auditing and financial reporting.

CONSOBtransparency 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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