Country Profile: Italy 1 Last Updated: Septenber 2008

ITALY ITALIA Country Background

This section provides background information on the country, including key facts, recent economic performance, and information on its government.

Key Facts Capital other major cities Rome Milano, Napoli, Torino, Palmero, Genoa, Bologna, Florence Area 301,230 km2 Languages Italian Currency EUR (Euro) Country telephone code +39 National / Bank holidays 2008 — 3 Oct; 25–26 Dec

2008 — 1, 6 Jan; 13, 25 Apr; 1 May; 2 Jun; 15 Aug; 1 Nov; 8, 25–26 Dec Business / banking hours 08:30–13:30 and 14:45–16:30 (Mon–Fri) Stock exchange Borsa Italiano Leading share index S&P/MIB Index Overall share index MIBTEL Internet top-level domain .it

Economic Performance 2002 2003 2004 2005 2006 2007

Exchange rate – EUR/USD1 1.0626 0.8860 0.8054 0.8041 0.7973 0.7296 Money market rate (Euribor 1m) (%)1 3.306 2.346 2.081 2.143 2.940 4.08 Consumer inflation (%)2 2.6 2.8 2.3 2.3 2.4 2.1 Unemployment rate (%)3 8.6 8.4 8.0 7.7 7.6 7.5 GDP volume growth (%)2 0.3 0.1 1.1 0.0 1.5 1.3 GDP (EUR bn)4 1,295.2 1,335.4 1,388.9 1,417.2 1,472.7 1,525.3 GDP (USD bn)5 1,218.9 1,507.2 1,724.4 1,762.5 1,847.1 2,090.6 Population (mil)6 56.99 57.32 57.89 58.46 58.73 58.95 GDP per capita (USD) 21,463 26,344 29,830 30,200 31,350 35,464 Current account (% of GDP)7 -0.7 -1.3 -0.9 -1.6 -1.4 -1.0

1: Period average 2: Annual percentage change 3: Harmonized definition ILO (International Labour Organization) 4: GDP at market prices. Production-based approach. 5: Per exchange rate 6: End of period, recent figures may be IMF projections 7: Trade balance of goods and services + net income + net transfers

Sources: IMF, ECB

Government » Legislature regime: presidential republic with a bicameral parliament (Parlamento).

– Senate – 315 members elected by popular vote (232 are directly elected and 83 are elected via proportional representation) for five-year terms and a small number of members for life.

– Chamber of Deputies – 630 members elected by popular vote for five-year terms. The winning coalition is allocated 54% of seats.

» Political Leader: Silvio Berlusconi, Prime Minister since 8 May 2008. Former periods as PM include April 1994 – January 1995 and June 2001 – May 2006. Head of the centre-right Forza Italia party, which he founded in 1993. In 2007, before the 2008 elections, he merged Forza Italia with Allenza Nazionale (National Alliance) and other right-wing parties creating Popolo della Libertá, PdL, (People of Freedom), which he now leads. PdL together with

Country Profile: Italy 2 Last Updated: Septenber 2008

Lega Nord and the Movement for Autonomy form Italy’s coalition government, the 62nd government to lead Italy since World War II.

» Head of State: Giorgio Napolitano, president since 15 May 2006. The president is elected every seven years. The next presidential election is due in May 2013.

» Member of the European Union: founding member of EU (European Economic Community in 1957)

Legal and Regulatory Issues

This section provides information on the country’s legal and regulatory issues, including legislation, resident and non-resident status, account ownership, cash pooling regulations, account types and charges, FX controls, central bank reporting requirements, anti-money laundering, and electronic transactions.

Legislat ion » Italian financial market legislation is heavily influenced by EU Directives. As such the market for financial

transactions is deregulated.

Resident and Non-resident Status » To have resident status, a company must either maintain its principal activity in Italy or be incorporated in Italy.

Account Ownership » Any type of account can be owned by a resident as well as a non-resident company.

Cash Pool ing Regulat ions » Under Italian regulations, banks are not permitted to offset debit and credit balances. » In addition, fiscal rules mean that notional cash pools are not commonly available in Italy. » Liquidity management schemes are subject to BOP reporting. All transactions in a cash concentration scheme

have to be listed and the end-of-day credit or debit balance recorded.

Account Types and Charges » Current accounts can be held in all exchangeable currencies and are offered with or without overdraft limits. » Non-resident accounts are also permitted. » These can be denominated in the local currency (EUR) and foreign currencies. » All accounts are fully convertible. » Interest-bearing current accounts and term deposits are available. » Interest rates can either be fixed using the bank’s basic rate or based on a market rate (e.g. Euribor) less a

spread. » In accordance with EU rules (Regulation 2560/2001) on cross-border payments in euro, payments/transfers with

the EU and certain EFTA countries cost the same as their domestic equivalent. – EU standard transfers can only be undertaken exclusively in euro – The maximum amount of EUR 50,000 should not be exceeded – The payment must be credited to an account maintained in a EU state (or certain EFTA countries) – The IBAN and the BIC of the recipient must be correctly indicated – Transfer fees shall be divided between the sender and the recipient (each pays the fees incurred in her/his

corresponding country). – Note: orders not fulfilling these requirements will be carried out as foreign transfers and charged

accordingly. » IBAN has been implemented.

Country Profile: Italy 3 Last Updated: Septenber 2008

FX Control » The Euro flows freely but the European Central Bank can intervene or coordinate an intervention with the other

Central Banks in the euro area in order to stabilise the exchange rate. » Italy has no exchange controls. » There are no restrictions on capital transactions, nor on spot and forward foreign exchange transactions. » Residents and non-residents are permitted to deal in foreign currency notes and coin.

Central Bank Report ing (CBR) Requirements » EU Regulation 2560/2001 eliminated systematic reporting for cross-border transfers below €12,500, otherwise

reporting regulations require all transactions between residents and non-residents to be reported on a monthly basis to the Foreign Exchange Office (Ufficio Italiano dei Cambi, UIC) of the Bank of Italy.

» In September 2005, the European Central Bank asked the European Commission to raise the threshold for balance of payments reporting (cross-border payments in euro) to EUR 50,000 as of 2008 since from 1 January 2006 the threshold for domestic charges on cross-border euro payments was raised to €50,000, whereas the threshold for CBR was not raised at the same time and maintain the current threshold of €12,500 in the meantime.

» Although banks usually report on behalf of their clients using MV (Matrice Valutaria) forms, the resident company is responsible for ensuring the accuracy and prompt delivery of all information reported.

» Parties to transactions between residents and non-residents conducted without a financial intermediary (e.g. as a result of netting transactions) must report directly to the UIC.

Anti -Money Laundering » Italy has enacted anti-money laundering legislation, including legislation implementing the three EU anti-money

laundering directives (Law No. 197 of 1991, which has since been amended extensively, most recently by the Legislative Decrees No. 56 of 2004; Decrees No. 141, 142 and 143 of 2006 and Decree No. 231 of 2007).

» According to the International Bar Association, Itlay is currently in the process of further reviewing its legislation for the purposes of implementing the Third EU Money Laundering Directive. Draft legislation has been published.

» As a Financial Action Task Force (FATF) member, it observes most of the FATF-40 standards. » Money laundering and terrorism financing are criminalized by law in Italy. Additional regulations serve a

preventative purpose. » Italy has established a financial intelligence unit (FIU), the Foreign Exchange Office (UIC) of the Bank of Italy,

which is a member of The Egmont Group. » Financial institutions in the broadest sense (with the exception of credit reference services) are required to record

and report suspicious transactions suspicious transactions plus all transactions above EUR 12,500 or several transactions aggregating to EUR 12,500 to the UIC.

» All cross-border transactions involving suspicious, non-declared or falsely declared currency and other bearer instruments must be reported.

» Account opening procedures require formal identification of the account holder. » Financial institutions are required to identify any person on whose behalf a transaction is carried out. » Financial institutions must file all account information with the central archive. These records must be kept for a

minimum of ten years.

Electronic Transact ions » Italy has implemented Directive 1999/93/EC of the European Parliament and of the Council on a Community

framework for electronic signatures. » Electronic signatures are accepted as legally binding (Italian Law N. 59, Art. 15, c. 2 enacted 15 March 1997 and

Presidential Decree No. 513: Regulations implementing Italian Law No. 59).

Country Profile: Italy 4 Last Updated: Septenber 2008

The Banking Environment

This section includes an overview of the banking market, market dominant banks and background information regarding the central bank and it's tasks.

Overview » The Italian banking market has historically been a fragmented and localised market in which legal restrictions

prevented mergers taking place between different categories of banks. » 1990 saw the merger of some of Italy’s biggest banks to enable them to compete in the post-1992 single

European market. Furthermore, the legislative framework was laid for a major reform of the Italian banking market, including privatisation and abolition of operational specialisation. This represented the most revolutionary change in the Italian banking system since Benito Mussolini's bank reforms of 1936.

» In essence, there are now only two legal structures: stock companies - some of which are controlled by mutual societies - and co-operative institutions, known locally as banche popolari.

» The authorities continued to encourage actively bank consolidation into the 1990s. Some 500 banks were involved in the ensuing consolidation process which culminated in the creation of several large banking groups in 1996.

» Further mergers within the Italian banking sector have since taken place. Nevertheless, there was considerable political and economic pressure for banks to maintain the pace of consolidation and to create several ‘national champions’ that would be able to compete effectively within the wider European market.

» Nonetheless, the larger domestic banks may prefer to diversify outside the Italian home market through alliances or cross-border mergers rather than to pursue the government-backed strategy of creating national champions; the EUR 15 billion merger between Unicredit and Germany’s HypoVereinsbank (and subsidiaries) in November 2005 at the time the largest ever cross-border banking merger in Europe being a case in point.

» The focus of Italian banks on strengthening their local capacities has prevented them from building a significant presence in the international banking market. Only Banca Intesa and UniCredit have expanded significantly abroad, acquiring major stakes in a number of East European banks.

» In 2005, Banca d’Italia’s Governor Antonio Fazio came under heavy pressure to resign (which he eventually did) over his role in allegedly rigging the competition to take over Banca Antonveneta and thereby blocking a sounder foreign bid from the Netherlands’s ABN Amro.

» In February 2006, France’s BNP Paribas succeeded in its bid to acquire Italy’s Banca Nazionale del Lavoro (BNL) which Spain’s BBVA had been prevented from acquiring the year before.

» The hands-off approach of Italy’s current central bank boss, Mario Draghi, seems to be paying off as the country is starting to produce continental-scale banks. Market-friendly reform measures enacted:

– An evaluation of all the supervisory service’s rules has been put in hand with the aim of drastically cutting their number.

– The procedures for opening new branches have been simplified. – And, crucially, the central bank has abolished the requirement that banks should inform it in advance of

their intentions to acquire other banks. So banks’ managements and shareholders no longer need to go cap in hand to ask for permission to do deals.

» During Mr Draghi’s brief watch so far the Italian banking system, which until a few years ago was a collection of small, medium and bigger-than-medium institutions, has brought forth two continental-scale European leaders.

» Banca Intesa and Sanpaolo IMI merged at the end of 2006 followed shortly thereafter by UniCredit’s takeover announcement of Capitalia (whose largest shareholder incidentally was ABN Amro) creating Europe’s sixteenth and third largest banking groups, respectively.

» According to The Banker, Italian banking has changed over the past 20 years. Measured on market capitalisation, UniCredit ranked third in Europe’s bank league as of the end of 2007, behind the UK’s HSBC and Spain’s Banco Santander, and Intesa Sanpaolo ranked fourth, close behind UniCredit. Both Italian banks were ahead of arguably better known banks such as Switzerland’s UBS and France’s BNP Paribas. Strikingly, no German bank now appears among the 10 leaders.

» Further consolidation in Italy will most likely happen domestically amongst small to medium sized institutions, notwithstanding the potential of another record breaking European bank M&A deal. Furthermore, Italy's biggest banks, UniCredit and Banca Intesa, which have been expanding quickly in Europe might welcome an opportunity to acquire selective assets in the U.S. market following the banking crisis there in 2008.

Country Profile: Italy 5 Last Updated: Septenber 2008

» Although the number of banks fell from 1,156 in 1990 to 793 in year-end 2006, there has been only a small decline in the number of bank branches in Italy. As at September 2008, there were 245 commercial banks, 38 co-operative banks, 436 mutual banks and 99 branches of foreign banks in Italy.

» The Basel II framework, based on EU directives adopted in June 2006 and numerous interpretation guidelines issued by the Committee of European Banking Supervisors, entered into force in 2007. However, the framework will not be adopted simultaneously in all banks, as individual banks may choose not to introduce the new rules until the beginning of 2008.

Marke t Dominant Banks » Market dominant banks in Italy include Intesa Sanpaolo, UniCredito (including Capitalia), Banca Monte dei Paschi

di Siena (MPS), BNL (Banca Nazionale del Lavoro), and Unicredit Banca d’Impresa. » Intesa Sanpaolo has an Italian network of about 6000 branches, the largest in Italy, and a market share of 18%

while UniCredito together with Capitalia will have about 5000 branches in Italy and a market share of 16%. » Monte dei Paschi di Siena (MPS) acquired Antonveneta from Spain’s Banco Santander in 2006 bringing the

combined entity’s branch total to 3000. » The major domestic cash management banks are Banca Intesa, UniCredit and SanPaolo IMI. In addition, all the

major international cash management banks have a presence in Italy.

The Central Bank » Baca d’Italia was founded in 1893 from the fusion of the four major banks in Italy. » Before 1928 it was directed by a General Manager, and since by a Governor who is elected from the internal

commission of managers, with a decree from Italy’s President. The Governor’s mandate is 7 years. » The 1936 Banking Law strengthened the protection of savings, ensured the separation of banking and

commerce, expanded the powers of banking supervision and declared the Bank of Italy a public-law institution. » As a member of the European System of Central Banks (ESCB), responsibility for implementing the single

monetary policy, whose primary objective is price stability, is shared between the European Central Bank, the Banca d’Italia and other ESCB central banks.

» Other functions include: – banking and financial supervision – promotion and protection of competition in the credit sector – note issuance and payment and settlement services – oversight of the payment system – financial market supervision

Financial Authorities

This section includes information on key financial authorities and the country’s banking association.

Department of the Treasury » The competences of the Dipartimento del Tesoro by the DPR dated 20.2.1998, nr.38 and 28.4.1998, nr.154 and

by the Decrees of the Ministry of the Treasury, Budget and Economic Planning dated 8.6.1998 and 19.12.2000 concern the following in particular:

– Analysis of national and international economic, monetary and financial problems; – European Union and international economic and financial matters; – Drawing up of economic and financial planning directions, in relation to the convergence and stability

constraints resulting from Italy belonging to the European Union; – Coverage of the financial requirements, indebtedness, management of national and foreign public debt

and financial transactions, as well as analysis of the relative trends and flows; – Regulations of the financial and banking system and supervision over banking foundations; – Currency-related fulfilments and by contrast recycling and usury phenomena;

Country Profile: Italy 6 Last Updated: Septenber 2008

– Financial management of State equities, exercise of shareholders' rights, transfer and placing of State equities on the financial market and relative inquiries;

– Consultation for pre-resolution activities of CIPE (Interdepartmental Committee for Economic Planning) and relative fulfilment for aspects for which the Department is competent;

I ta l ian Fore ign Exchange Off ice (UFI) » The Ufficio Italiano dei Cambi (UIC) was incorporated by law in 1945 and further reorganized in 1998. » Upon its institution, the UIC was entrusted with the "monopoly of foreign exchange", i.e. the exclusive right in

Italy, by force of law, to buy, hold and sell foreign currencies. » It now stands as a public institution, owned by the Bank of Italy, committed to collect and compile statistical data

on Italy's Balance of Payments, to manage national foreign currency reserves and to prevent and counter the laundering of proceeds of criminal activity.

I ta l ian Commission for Securi t ies Marke t (CONSOB) » CONSOB is the public authority responsible for regulating the Italian securities market. » Its activity is aimed at the protection of the investing public. In this connection, the CONSOB is the competent

authority for ensuring – transparency 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

» It conducts investigations with respect to potential infringements of insider dealing and market manipulation law.

I ta l ian Bankers ’ Associat ion (ABI) » L'Associazione Bancaria Italiana (ABI) is a voluntary non-profit organization whose purpose is to represent,

defend and promote the interests of its member banks and financial intermediaries. » It works, in this framework, for the development of the awareness in society and within the banking and financial

system of the social and behavioural values that follow from entrepreneurial principles and from the formation of open and competitive markets.

» Specifically, ABI undertakes initiatives for the orderly, stable and efficient growth of the banking and financial system, in a competitive outlook consistent with Italian and European Union law.

» In pursuit of these purposes: – It fosters the exchange of information among its members and other economic and financial entities. – It works for national, European, and international regulatory reform in the areas affecting the banking and

financial system. – It establishes uniform lines of conduct on labour relations and employment policies within the banking

system and in trade union relations, including signing collective bargaining agreements. – It performs informational activities, technical assistance and consultation for its members. – It develops codes of conduct and works for their adoption by members, also collaborating in relevant

initiatives undertaken by other national and international bodies. – It collaborates at national and international level with government agencies and departments and public

institutions, economic and social organizations, institutions and associations for the solution of questions involving the credit and financial industry and problems of more general interest.

– It promotes, in cooperation with the members and in accordance with the principles of free competition, initiatives to rationalize services.

» ABI also represents the Italian credit and financial system in all international fora, e.g. via the European Banking Federation and the European Mortgage Federation.

Country Profile: Italy 7 Last Updated: Septenber 2008

Clearing Systems

This section provides an overview of the different clearing systems in operation and includes information about each system such as transaction types, operating hours and clearing cycle details.

Overview » There are two main clearing systems in Itlay – TARGET2 and BI-COMP. » TARGET2 is the pan-European high value RTGS system. » Following the reform of the Italian payment system implemented in 1998, retail payments are now handled by the

BI-COMP system, which is composed of two subsystems: – Rete Dettaglio, the retail subsystem for paperless transactions – Recapiti Locali, the local clearing subsystem for paper-based transactions

» BI-COMP uses the RNI (Rete Nazionale Interbancaria) national interbank network managed by SIA, while BI-REL uses SWIFT.

High Value Clear ing TARGET2 » The current pan-European RTGS system, TARGET, migrated to a single shared platform (SSP) called TARGET2

making the 16 decentralised RTGS systems of individual Eurosystem countries and the ECB’s payment mechanism (EPM) obsolete.

» The changeover took place in three migration waves, starting 19 November 2007 and ending 19 May 2008 (15 September 2008 is reserved for contingency needs).

» Italy migrated in the third country window on 19 May 2008 along with Denmark, Estonia, the European Central Bank, Greece and Poland.

» The Swedish Central Bank and the Bank of England will not migrate to TARGET2. » Participation: options include direct and indirect participation, “addressable BICs” and “multi-addressee access” to

the system, also known as “technical BIC access”. Direct participation criteria for TARGET2 is the same as for the current TARGET system. Only supervised credit institutions established within the EEA can become indirect participants.

» Transaction types: focus on large-value payments related to inter-bank operations » Price indication: between €0.125 and €0.80 depending on type of participation. » Operating hours: the operational day in TARGET2 will be longer than that of the current TARGET system.

TARGET2 will start the new business day on the evening of the previous day. The night-time window will be available from 19:30 to 6:45 the next day, with a technical maintenance period of three hours between 22:00–01:00. Daytime hours for customer payments 07:00–17:00 CET with the day ending at 18:00 + 30 minutes for the use of standing facilities on the last day of a minimum reserve period.

» Transaction details: – Direct participation: For the exchange of payments information, TARGET2 will use the SWIFTNet FIN

service, while the SWIFTNet services “InterAct”, “Browse” and “FileAct” will be used for information and control services

Low Value Clear ing BI -COMP » Rete Dettaglio, the retail subsystem, is an electronic low-value clearing system managed by SIA (Società

Interbancaria per l’Automazione), the Italian banking and payments system technology and services provider. » Recapiti Locali, the local clearing subsystem, is a paper-based clearing system managed by the Banca d’Italia. » Participants: 137 direct at year-end 2005. BI-COMP participation is restricted to banks, the Banca d’Italia, the

Treasury and the Poste Italiane (the Italian Post Office). » Transaction types: domestic interbank retail payments.

– Rete Dettaglio is used to clear domestic retail electronic payment instruments entered using common standards. It clears low-value electronic transactions such as credit transfers below EUR 500,000 (EUR 12,500 for non-resident transactions), direct debits, ATM and POS transactions, in addition to low-value truncated cheques below EUR 12,500 and banker’s drafts below EUR 3,000.

Country Profile: Italy 8 Last Updated: Septenber 2008

– Recapiti Locali is exclusively concerned with the clearing of paper transactions, i.e. cheques exceeding EUR 12,500 and banker’s drafts exceeding EUR 3,000. However, in practice these thresholds may vary as a function of specific agreements between individual participants and the system operator.

» Operating hours: there are no official opening hours and the actual cut-off times vary from bank to bank. » Price indication: See the high value BI-REL payment system above. » Clearing cycle details Rete Dettaglio:

– This sub-system includes a set of specific procedures for different types of payment. – These procedures are operated by four service bureaux, which connect the major banks through the RNI. – The bank-owned software companies manage the payment applications on behalf of the banks, as the

majority of banks access the clearings indirectly. – The net balance for each procedure is calculated by each service provider and then the information is

forwarded to BI-COMP. – The standard clearing cycle for credit transfers is two days.

» Clearing cycle details Recapiti Locali: – All payments are centralised in the Rome and Milan clearing houses. – The normal clearing cycle is two days. However, an intra-day deposit cut-off time (09:00 CET for

presentation the following day) can affect the length of this cycle.

Payments, Collection Methods and Instruments

This section provides an overview of the payment methods employed in the country, including statistics and more detailed qualitative information about such methods.

Overview » Several factors foster the use of cash in Italy. The “grey economy” is still large and contributes to increasing the

willingness to use cash for payments. Furthermore, certain areas of the country are characterised by a low degree of financial sophistication. On the supply side, the banking sector has built a widespread and cheap ATM network, which increases the number of cash withdrawals from current accounts.

» However, in recent years initiatives such as PagoBancomat (debit cards used at POS terminals) and the diffusion of credit cards have represented a break with past trends. In addition e-money is gaining in popularity.

» In common with other EU countries, in value terms electronic credit transfers are the predominant payment method. In volume terms, there have been significant increases in the use of debit and credit cards and of direct debits over recent years. Overall, card based e-money has seen strong growth, although from a much lower starting point than other payments instruments.

» Banks in Italy have been implementing SEPA (Single Euro Payments Area) standards for EUR-denominated payments. The country’s banks now only issue SEPA-compliant debit cards (since 1 January 2008) and also now offer pan-European SEPA credit transfers (since 28 January 2008).

» SEPA direct debits however will not be available until 2009 at the earliest (the launch date depends on the implementation of the harmonising EU Payment Services Directive in each member state).

» It is not yet known how long the transition period will last for national payment products to be fully replaced by SEPA payments. However it is hoped the Single Euro Payments Area (SEPA), an initiative of the European Payments Council, will be fully operative by around 2013. It will consist of all EEA member states plus Switzerland. Final transition dates and a completion date are expected to be decided in mid- to late 2009.

Transaction Volumes, mil. Transaction Values, EUR bn.

2004 2005 2006 % change 2004 2005 2006 % change Debit cards 671.97 732.80 770.65 5.17% 58.03 63.54 71.32 12.24% Credit cards 433.62 463.55 465.92 0.51% 42.03 46.61 48.34 3.71% Card based e-money 9.33 20.38 33.89 66.29% 0.58 1.28 2.25 75.78% Credit transfers 1,048.80 1,048.29 1,066.04 1.69% 5,315.47 5,655.42 6,153.79 8.81% Direct debits 453.22 463.24 480.03 3.62% 274.29 289.07 298.97 3.42% Cheques 487.19 465.58 453.74 -2.54% 1,186.82 1,160.74 1,198.69 3.27%

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Other instruments 319.24 323.22 353.70 9.43% 658.88 686.32 758.91 10.58% Total 3,423.36 3,517.05 3,605.98 2.53% 7,536.10 7,902.99 8,532.27 7.96% Note: Figures are rounded. Percentage change calculated from 2005-2006

Sources: ECB Statistical Data Warehouse

Card Payments » Debit and credit cards have been increasingly used in Italy as retail payment instruments since 1996. In fact in

2004 for the first time ever, payment card volume outpaced credit transfers. » Although Italians widely prefer to pay cash for everyday expenditures, the growth of card payments continues at a

rapid pace converging with the financial habits of Northern European countries. This might be attributed to the fact that the the main focuses of financial cards operators in 2006-7 was the promotion of cards’ use for small purchases. Visa’s “Love Every Day” (Ama ogni giorno) and MasterCard’s “Priceless” (Senza Prezzo) campaigns were just two examples of the efforts made by operators to incentivise daily payments by card. In 2006, Visa made the highest investment ever in advertising in Italy.

» At year-end 2006 there were 70.87 million payment cards in circulation, of which over 35 million were debit cards and some 31 million were credit cards.

» Debit cards: – Italians prefer debit cards due to increasing merchant acceptance leading to the gradual replacement of

cheques and stand-alone ATM cards. – As Italy is one of the strongest debit markets in Europe, Visa announced it was ready to launch its V PAY

chip and PIN debit card in late 2007. Meanwhile, MasterCard is working with a couple of banks on PayPass, the new "contactless" payment feature.

– PagoBancomat is the major nationwide debit card network (90% of domestic debit cards in circulation). – The main features of this system are as follows: (i) the provision of a common infrastructure; and (ii) a

single trademark and a common set of rules and standards established by the ABI and the Convention for the Management of the Bancomat Trademark (CO.GE.BAN), which are responsible for organising and operating network facilities.

» Credit cards: – Since 1968, a single bank has been able to issue a card linked to the Visa circuit. – Since 1985, it has been possible for cards to be issued on a cooperative basis by CartaSi. – Nearly all banks take part in the latter scheme, which represents the major nationwide credit card network

(in both the issuer’s and the acquirer’s market) and is linked to both Visa and MasterCard. – In recent years, a number of individual banks have launched proprietary cards directly linked to

international circuits. Travel and entertainment cards are issued by American Express and Diners Club. – Italians are gradually embracing the “pay-later” credit concept as banks have provided incentives to

promote this means of payment, together with general economic restraints. » Pre-paid cards are preferred by Italians

– Italy is currently one of the leading countries in Europe for pre-paid card issuance, as Italians are used to the pre-paid concept, which was introduced in the mobile phone market many years ago. Moreover, pre-paid cards allow protection against card fraud and are accessible to a wide range of customers, as there is no need to set up a bank account.

– The function of pre-paid cards has changed since their launch on the Italian market in 2001, when these cards were initially conceived as being complementary cards, designed for on-line shopping, and mainly available in the “disposable” version. Pre-paid cards are now also used as a substitute for debit cards and credit cards.

» In addition, there were 43,691 ATMs and 1.12 million POS terminals. » Rising demand for pre-paid cards seen; Italy is among the leading countries in terms of issuance. » At year-end 2006 there were 4.46 million cards with an e-money function and over 250,000 e-money card

terminals.

Credit Transfe rs » Credit transfers are the dominant payment instrument in terms value. » Both electronic and paper-based credit transfers are used in Italy. » However, usage of paper-based credit transfers is increasingly being abandoned in favour of electronic transfers.

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» MAV (Mediante Avviso) is a paper-based giro system that allows the debtor to make payments to the creditor via any bank branch or post office of the debtor’s choosing. The creditor’s bank sends a payment form to the debtor bearing a pre-printed amount. Using this payment form, the debtor can then pay in the due amount at any bank or post office branch in Italy. Settlement is sent to the creditor’s bank account via BI-COMP’s ‘Rete Dettaglio’.

» Bollettino Bancario (Freccia) is a new paper-based system introduced to provide a bank clearing equivalent to the Bollettino Postale. It is similar to MAV, but can be printed and mailed by the creditor, rather than the creditor’s bank. Like MAV, it is for a pre-printed amount and the credit is sent to the creditor’s bank account via Rete Dettaglio.

D irect Debits » Italian banks execute collection orders, mainly on behalf of enterprises and public utilities. These orders are

originated by creditors and may be executed by debtors through different methods of payment; direct debits are carried out by means of preauthorised debits of payers’ current accounts,

» Pre-authorised direct debits: – Pre-authorised direct debits are commonly used in urban centres and mainly for regular low-value

payments such as utility bills, insurance premia and instalment payments. – RID (Rapporti Interbancari Diretti) is a fully automated pre-authorised direct debit system. – It enables debtors to pay their obligations by signing a mandate from their creditor, which allows the

creditor’s bank to draw amounts due to their client from debtors’ bank accounts at regular intervals. – Payment finality ranges from 4-8 days within the same bank and 8-12 days between banks, all depending

on the payment modality for the standard RID, and 2-5 working days for the fast RID. » Non-pre-authorised direct debits:

– RIBA (Ricevuta Bancaria Elettronica) is an electronic collection instrument that is gradually replacing paper-based collection methods.

– It is classified as a non-pre-authorised direct debit, as the creditor requires the debtor’s agreement to collect their receivables.

– RIBAs are used by firms to collect trade and other credits. – Bank receipts perform an economic function similar to bills of exchange, but do not have the same legal

protection (e.g. they cannot be disputed). – Nevertheless, owing to a lower stamp duty and ease of use, RIBAs have gradually replaced paper-based

bills of exchange. – Payment finality can range from 4 to 23 working days depending on the payment modality and whether

the payment remains within the bank or is inter-bank.

Cheques » In recent years cheques have been increasingly replaced by alternative methods of payment such as credit

transfers by corporates or debit cards by retail customers. » While declining, cheques remain the second largest means of payment in value terms.

Electronic Banking

This section includes an overview of electronic banking in the country as well as information on EDIFACT, e-payments and e-invoicing.

Overview » From 1984 to 1994, electronic banking was dominated by non-banks like Geisco and Intesa (IBM) offering

multibank services on their networks. » Next, banks developed proprietary PC-based solutions (called 'remote banking') and started competing fiercely

for the same clients. Corporates quickly found themselves ensnared in multiple links, proprietary software and different formats, and started complaining to the Bank of Italy and ABI.

» In 2001 ABI (Italian Banking Association) finally got all the banks to agree to a common standard (Corporate Banking Interbancario, CBI) and to the use of the interbank network (RNI) for data exchange. Under the CBI

Country Profile: Italy 11 Last Updated: Septenber 2008

scheme, the customer, through a lead bank, sends instructions and receives balance information to/from all other CBI banks.

» CBI has reduced the cost of electronic banking and proved popular with corporates. Foreign corporates can also connect to CBI.

» This allows users to access end-of-day balance and transaction reports and the ability to effect some domestic and international transfers. Some banks offer intra-day reporting.

» An increasing number of banks are offering online payment services. ABI recently launched a new online platform (Nuovo CBI) with end-to-end security (CBI is point-to-point) where a digital signature may be applied within a multibank environment. This is expected to encourage banks to provide enhanced internet banking services to companies. Nuovo CBI will not become mandatory until July 2007.

EDIFACT / Host-to-Host Solut ions » EDIFACT messages are not frequently used in Italy, and is restricted to a small number of major banks. » A similar format, called "Logistic EDI", exists within CBI. » For domestic Italian payments, many companies use still use the domestic standard SETIF (Electronic Interbank

Fund Transfer Service).

E-payments » E-payments are provided by a handful of suppliers, both local and “global” players. » Local products include: Acquiring POS and Numera Gateway Payment System by Banca di Sassari Spa, Carte

prepagate di Banca CR Firenze, Cart@perta, Mobile Payments by SMS with CartaSi Credit Card, and XPAY. » In general, such solutions usually rest on two important prerequisites: (1) prepayment and (2) settlement via debit

or credit cards.

E-invoice / EBPP » No industry wide electronic bill present and payment (EBPP) solutions exist on the market, although various

provides operate in Italy.

Cash Pooling Solutions

This section covers cash pooling solutions such as notional pooling, cash concentration, multicurrency and cross border pooling.

Notional Pool ing » Under Italian regulations, banks are not permitted to offset debit and credit balances. » In addition, fiscal rules mean that notional cash pools are not commonly available in Italy.

Cash Concentrat ion » Domestic cash concentration techniques are available. » Zero balancing is the most common liquidity management technique in Italy. » These techniques are offered by both domestic and international banks. » Italian companies have on average more bank relationships than their continental European neighbours due to

the fact that the majority of Italian banks are still unable to establish multi-bank cash management arrangements.

Mult icurrency and Cross Border Pool ing » Cross-border notional pools are not commonly available in Italy. » International companies do not usually select Italy as the location for a centralised cross-border cash

concentration structure.

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» Resident companies are able to sweep balances (on a zero, target or threshold balance basis) to a non-resident account on a daily or weekly basis. This allows them to participate in a cross-border cash concentration structure, based in a different location.

Sources

The hyperlinks of various sources used throughout this country profile are provided below.

Banca d’Italia www.bancaditalia.it Ministry of the Economy and Finance www.tesoro.it Department of the Treasury www.dt.tesoro.it Italian Commission for Securities Market (CONSOB) www.consob.it Italian Foreign Exchange Office (UFI) www.uic.it National Institute of Statistics (Istat) www.istat.it Borsa Italiana (stock exchange) www.borsaitalia.it Italian Banking Association www.abi.it Associazione CBI (Corporate Banking Interbancario) www.acbi.it SIA (Società Interbancaria per l’Automazione) www.sia.it CartaSi www.cartasi.it Bancomat (Pagobancomat) www.cartabancomat.com Italian Association of Corporate Treasurers www.aiti.it Italian Institute for Foreign Trade (ICE) www.ice.gov.it Chamber of Commerce www.chamberofcommerce.it