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Financial instruments

According to the supervisory regulations on banks issued by the Bank of Italy in 1999, as amended, and the resolution of the Inter-Ministerial Committee for Credit and Savings dated July 19 2005 (the CICR Resolution), a collection of savings may be made by financial intermediaries registered under Article 106 of the Italian Banking Act only through the issue of financial instruments, and subject to certain limits.

According to these provisions, financial intermediaries are allowed to issue financial instruments (such as notes) for an amount not exceeding the value of their assets, represented by the capital, legal reserve and available reserves according to the latest approved balance sheet.

In addition, the Supervisory Regulations provide that an issue of financial instruments does not represent a collection of public savings if, inter alia, it is destined to subscription by institutional investors subject to supervisory control in compliance with the applicable laws.

The limit for the issue of financial instruments by financial intermediaries under the Supervisory Regulations makes reference to a generic "collection of savings through financial instruments" without any express limitation on the public savings made by retail investors.

The issue is relevant, since infringement of the above provisions also falls under Italian criminal laws.

The Bank of Italy, upon a specific query, has recently intervened on the issue providing its interpretation of the relevant provisions.

According to the Bank of Italy the issue by financial intermediaries of financial instruments destined exclusively to institutional investors does not fall within the limits set by the Supervisory Regulations and CICR Resolution (that is, issue of financial instruments for an amount not exceeding the assets of the issuer) since the issue is not considered a "collection of public savings", to which the restriction applies.

The Bank of Italy stated that the relevant terms and conditions of an issue of financial instruments for an amount exceeding the limit of the assets of the financial intermediary shall have to expressly provide that those financial instruments (i) are to be placed and held until maturity exclusively by institutional investors and (ii) cannot be subsequently distributed to investors other than institutional investors until their maturity.

The Bank of Italy also confirmed that the provisions of Article 2412 paragraph 2 of the Italian Civil Code do not apply to issues of notes by financial intermediaries over the limits indicated above, since those notes cannot be distributed to retail investors until maturity.

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