Understanding Italy's New Banking Framework: CRD VI & CRR III

The Decree transposes into Italy Directive (EU) 2024/1619 (CRD VI) and aligns the domestic framework with Regulation (EU) 2024/1624 (i.e., CRR III), amending the Italian Consolidated Banking Act (ICBA) and the Italian Consolidated Financial Act (ICFA). The Decree reshapes the framework applicable to third-country branches/subsidiaries, group consolidated supervision, and the execution of certain corporate transactions, including but not limited to mergers and demergers involving banks (and/or (M)FHCs, as defined below) incorporated in Italy. We set out below a brief description of the main amendments introduced by the Decree and the rollout of the transitional regimes. This publication will be followed by a series of insights relating to each of the main amendments outlined below. Main amendments of the Decree Third-country branches (TCB) The main (and, from an in-scope entities’ perspective, the most burdensome) change brought by the Decree is the introduction of the so-called “branch establishment requirement”, which, upon expiration of the transitory regime, would apply to non-European undertakings engaging in certain “core banking” activities and services with Italy-based clients. Notably, the new Article 14-bis of the ICBA provides that non-EU undertakings that intend to perform the following core banking services: (i) taking deposits and other repayable funds; (ii) lending; and (iii) granting guarantees and commitments (jointly, the Core BK Services) are required to establish a local branch (or, in certain situations, a subsidiary) within the Italian territory, unless an exemption applies. Although the domestic regime envisaged by the Decree substantially aligns with that set forth in Articles 21c and 47 and the following of the CRD VI, the Italian legislator has nonetheless exercised certain national discretions, partly deviating from the harmonized European framework. In particular, it is worth preliminarily mentioning that: (i) reliance on the intra-group and intra-bank exemptions is nonetheless subject to a prior communication requirement to the Bank of Italy. Although this is not a strict prior approval procedure, the Italian regulator has the authority to prevent the notifying entity from commencing or continuing the performance of Core BK Services if certain requirements are not met (note, these requirements will have to be identified by the Bank of Italy in its secondary-level regulations, yet to be published). (ii) the Decree seems to have not formally transposed the MiFID exemption, since Article 14-bis of the ICBA only includes a cross-reference to the ICFA (which sets out the existing regime for the provision of MiFID services in Italy by non-EU firms, among others). It is therefore not totally clear how this exemption will effectively apply to any non-EU undertakings intending to render Core BK Services that qualify as an activity ancillary to MiFID investment services. Based on the literal wording of the Decree, it seems that an authorization under the ICFA to provide investment services and activities (and relevant eligibility conditions) in Italy would nonetheless be required (subject to a case-by-case assessment). (iii) the provision on a cross-border basis of banking services and activities other than those qualifying as Core BK Services by non-EU undertakings remains subject to a requirement for the prior notification of the Bank of Italy, though formal prior authorization is no longer required. This notwithstanding, the Bank of Italy has the authority to prevent the notifying entity from commencing or continuing the provision of the relevant services if certain conditions and requirements are not met (note, these requirements will have to be identified by the Bank of Italy in its secondary-level regulations, yet to be published). (iv) the Decree finally codifies (under Article 14-bis of the ICBA) the reverse solicitation exemption but does not identify any (additional) eligibility criteria to define the permitted scope of the exemption. The Bank of Italy has been mandated to enact secondary-level regulations and acts to further implement the provisions laid down by Article 14-bis of the ICBA to determine, inter alia, the requirements non-EU undertakings should comply with to rely on the intra-bank and intra-group exemptions, and also to operate in Italy on a cross-border basis (where feasible), and the criteria for assessing the applicability of the reverse solicitation exemption. The Decree provides a “grandfather” regime benefiting pre-existing contracts (i.e., entered into before July 11, 2026) concerning Core BK Services but clarifies that non-EU undertakings may not novate or renew such contracts. Contrary to CRD VI, clients’ rights are not expressly addressed, and additional restrictions apply to open-ended pre-existing agreements, which must be terminated or transferred to other authorized intermediaries by January 10, 2028 (unless the reverse solicitation exemption applies). For existing Italian branches of non-EU undertakings, these “grandfather” rights are conditional upon the relevant Italian branch filing a “refreshed” authorization application with the Bank of Italy by January 11, 2027. As a final comment, it is also important to note that, according to the position historically taken by the Bank of Italy, the issuance and placement of debt securities in Italy by credit institutions is considered deposit-taking activity and is therefore currently subject to the requirement for prior authorization from the Bank of Italy (or passporting requirements, as the case may be). The Decree is silent on this and does not include a specific exemption the issuance of debt securities issuance may benefit from to fall outside the scope of the local branch requirement. Fit and proper requirements The Decree materially reshapes the fit and proper requirements applicable to banks (and other regulated intermediaries), as currently laid down by Article 26 of the ICBA. Notably, to ensure full alignment with the changes brought by CRD VI at a European level, the Decree: (i) introduces a reference to the “independence of mind” among the requirements for members of management bodies (ii) exercises the discretion granted by CRD VI and, in the event of the replacement of the majority of members of the management bodies, allows suitability assessments to take place after newly appointed members have taken up their position (iii) grants the Bank of Italy authority to independently assess the suitability of members of management bodies and key function holders for larger institutions. The relevant materiality thresholds for this assessment shall be identified by a secondary-level decree to be adopted by the Ministry of Economy and Finance. The Decree also extends the application of the above requirements to regulated non-banking intermediaries, including Italian investment firms (e.g., SIMs) and Italian asset management companies, and, to certain extent, financial holding companies and mixed financial holding companies (the (M)FHCs). Mergers and demergers Irrespective of any materiality thresholds or the size of the relevant transactions, mergers and demergers are subject to the prior approval of the Bank of Italy in the following cases: (i) In the case of a merger, the incorporating entity is a bank or an (M)FHC with its registered office in Italy. (ii) In the case of a demerger, the demerged entity is a bank or an (M)FHC with its registered office in Italy. Article 57 of the ICBA, as amended by the Decree, sets out the evaluation criteria for granting (or denying) authorization in accordance with the requirements laid down at a European level by CRD VI. Contrary to the approach followed by the European legislator, the Decree does not directly identify circumstances in which prior approval is not required, or the regulatory term for completing the assessment or filing further information upon the regulator’s request. The regulatory procedure that banks and/or (M)FHCs should follow will be governed by the secondary-level acts and regulations that the Bank of Italy has been mandated to enact. Acquisition or sale of material holdings The Decree introduces a new prior authorization or notification requirement for acquisition and sales of “material holdings” by banks and (M)FHCs, respectively. As opposed to CRD VI, the Decree (notably, the newly introduced Article 57-bis ICBA) does not define the meaning of “material holding”, nor set the thresholds for triggering a prior approval (or notification) requirement. Among other things, the Bank of Italy is in charge of enacting a secondary-level regulation identifying the materiality thresholds for the application of the regime in question, governing the main terms and the timing of the relevant regulatory procedure in-scope entities should follow, and ensuring an adequate level of coordination with other regulatory regimes already in place (e.g., qualified holdings). The thresholds triggering a prior approval (or notification) requirement may be exceeded on an individual or consolidated basis. In the latter scenario, the Bank of Italy shall consult and decide whether to grant the prior approval in coordination and cooperation with the European competent authority exercising the consolidated supervision (if different). Similar to the approach followed for the qualified holdings regime, voting (or similar) rights attached to material holdings acquired/held in breach of the prior approval requirements cannot be exercised and the Bank of Italy may order the disposal of the relevant material holdings within a predetermined time frame. Material transfer of assets and liabilities Italian banks and (M)FHCs are required to notify the Bank of Italy, in writing, in advance of any material transfer of assets or liabilities they intend to execute. The newly introduced Article 58-bis of the ICBA does not identify the criteria for assessing whether a transfer of assets or liabilities is considered “material” or carry over the exemptions from this notification requirement laid down at a European level into Italian law. As per the approach taken in relation to mergers and demergers and material holdings, the comprehensive regime concerning the material transfer will be envisaged by the secondary-level regulation the Bank of Italy is mandated to enact in this respect. This notwithstanding, to avoid any regulatory misalignment and unlevel playing fields, the Decree amends the regulatory treatment applicable to bulk transfers of legal relationships (cessione di rapporti giuridici in blocco). Notably, the Decree: (i) repeals the prior authorization procedure previously provided by Article 58 of the ICBA in relation to certain (material) bulk transfers of legal relationships (ii) clearly envisages that in the case that a bulk transfer of legal relationships amounts to a material transfer of assets and liabilities, the relevant transaction will be subject to both regulatory regimes, as set out by Articles 58 and 58-bis of the ICBA, respectively. Group supervision and consolidation perimeter In terms of group consolidated supervision, the new Article 60-ter of the ICBA enables (M)FHCs that have been exempted from acting as a parent company to be excluded from the prudential consolidation perimeter of the group, provided that certain conditions and requirements are met. Upon the granting of the relevant authorization, the prudential requirements will be then calculated at the level of the controlled entity designated as a parent. The Decrees also clarifies that an intermediated (M)FHC can be designated as responsible for ensuring compliance with the applicable legal and regulatory requirements on a consolidated basis. The transitional regimes The Decree entered into force on January 9, 2026, and provides for the following transitional regimes: (i) The amendments introduced in relation to: (i) mergers and demergers; (ii) the acquisition and sale of material holdings; (iii) the material transfer of assets and liabilities; (iv) the regulatory treatment of (M)FHCs; and (v) the “fit and proper” requirements, would enter into force upon the adoption of the relevant secondary-level acts and regulations by the Bank of Italy. Therefore, as at the date of this publication, it is not possible to foresee when the transitory regimes for these matters would ultimately end. (ii) The amendments introduced in terms of third-country branch regimes would enter into force on January 11, 2027. As from such date, non-EU undertakings may continue to provide, on a cross-border basis, any activities that are strictly necessary for the execution/performance of contracts pertaining to Core BK Services entered into before July 11, 2026 (with no ability to novate or renew such agreements).