Article 1, Paragraph 68 of Law 311 of December 30 2004 (the
2005 financial law) regulates for the first time recourse by
local authorities to lines of credit.
Pursuant to Article 1842 of the Italian Civil Code, the
opening of a line of credit is a contract where a bank is
obliged to make available an agreed amount to the counterparty,
for a stated period of time or for an indefinite time, with the
right of the counterparty to use it or not, in whole or in
The limits set out for the indebtedness of local authorities
are extended to entering into lines of credit, that is:
- their use is permitted only to finance investments;
- the annual amount of interest, including those due under
other outstanding loans, notes and guarantees, should not
exceed 12% of the revenues related to the first three items
of the financial report of the second-last year preceding
that of the transaction;
- the provisional annual budget of the year should be
approved together with the financial report of the
second-last year preceding the transaction.
The council (consiglio) of the local authority must
grant approval enter into a line of credit.
Any disbursement under a line of credit should be made
against delivery by the local authority of the delegation of
payment on its treasurer bank.
Drawdowns under the line of credit may not be deferred for
more than three years from the date it is entered into, with
the possibility for the local authority to contractually
regulate the economic terms in the event of partial use of the
Interest should be due exclusively on amounts properly
disbursed, while the reimbursement of amounts due should be
made in instalments including principal and interest, and the
minimum maturity should be five years.
The rate of interest applicable should not exceed the
maximum rate applicable to lines of credit, to be determined by
decree of the Ministry of Economy and Finance in agreement with
the Ministry of the Interior.
Lines of credit are also subject, like any other type of
indebtedness, to the monitoring required under Article 41 of
Law 448 of December 28 2001 and, in particular, to the report
on the financial characteristics of the transaction to the
Ministry of Economy and Finance.