The Bank of Italy performs the treasury function for the State. This entails executing all payment orders issued by central government departments against budget allocations and off-budget accounts and collecting all amounts due on whatever basis to the central government, both directly and – through banks, the Post Office and tax collection agencies – indirectly. Collections and payments are settled on a central government account with the Bank, called the “Treasury payments account.”
The Bank of Italy provides periodic statements of payments and receipts to the State Accounting Office and the government departments. As accounting agent, the Bank must also provide a “judicial account” of its management to the State Audit Office.
The procedures for this service are governed by a normative framework comprising the provisions of the State Accounting Law and the State Accounting Regulation, a number of other laws, ministerial decrees and conventions between the Bank and the Ministry of Economy and Finance that specify the content, organization and accounting rules for the service. There are two main conventions, one on the central government treasury service and one on the provincial treasury service. The detailed rules are laid down in the Ministry’s “Instructions on the State treasury service,” contained in a ministerial decree of 29 May 2007.
The Bank performs the treasury service also at its branches, which handle paper-based fund receipts, payments, and account statements.
In addition managing the payments and collections of central government departments and their local units, the Bank of Italy also keeps the accounts of some non-state entities, including local governments, through the “single treasury” under Law 720/1984. For the public finances the single treasury was a useful tool from the outset, rationalizing the flows and funds, and the flows of data, between the central government, public entities and the banking system. At present, under Decree Law 1/2012, the single treasury is a “pure” system, in that the own revenues of the entities covered and transfer payments from the central government budget all flow directly to 19,000 separate accounting balances with the Bank of Italy.
The Bank has performed the treasury service since 1894, the assignment being extended by a series of acts. The latest was Law 104/1991, which lengthened the convention from ten to twenty years and instituted its automatic renewal save repudiation by one of the parties at least five years before expiry. As neither party had exercised the right of repudiation by the end of 2005, the assignment of the service to the Bank of Italy was tacitly renewed through 2030.
The Bank also performs payment and collection services for state fiscal agencies (revenue agency, customs office, state property office), for the Scuola Superiore dell’Economia e delle Finanze, and for INPS, the social security administration (for the payment of temporary benefits). These activities are remunerated at full cost plus a percentage mark-up; they are independent cashier services that the Bank may perform, under Article 36 of its Statute, on behalf of and at the risk of third parties, observing the limitations set by Chapter IV of the ESCB Statute.
The Treasury payments account
The Bank keeps the “Treasury payments account for the treasury service,” which settles transactions for the account of the State. Under Community law, which prohibits central banks from financing the Treasury in any way, the payments account cannot have a negative balance. Until 30 November 2011 the balance on the account was remunerated at the average rate on the Treasury bills (BOTs) issued in the previous six months. Since then, the matter has been governed by Article 47 of the “Public Finance and Accounting Law” (Law 196/2009) and the new Treasury-Bank of Italy “Convention for the management of the Treasury’s account with the Bank of Italy for the treasury service and other equivalent accounts” signed 22 March 2011. In the new system, operational from 30 November 2011 until the entry into force of ECB Decision 2014/23 of 5 June 2014, the Treasury’s funds, previously all deposited in the payments account, are divided into three separately remunerated components:
- a payments account with the Bank which, in line with ECB directives designed to reduce the variability of Treasury-created monetary base, is stabilized daily at a target balance of €800 million and remunerated up to €1 billion at the rate on main refinancing operations;
- time deposits at the Bank, remunerated at the Eurepo rates for their respective maturities;
- overnight deposits (via competitive bilateral auctions managed by the Bank) or bilateral money market transactions for the residual amount, remunerated at market rates.
In order to attain the target balance, the daily funding requirement is now monitored intensively. The Bank and the Ministry of Economy and Finance share data and projections of inward and outward payments and financial transactions, with a view to active and efficient management of the Treasury’s liquidity balance and better debt management.
In application of ECB Governing Council Decision 2014/23 of 5 June 2014, amending Decision 2014/8 of 20 February, new measures have been taken, affecting the management of the payments account:
- a ceiling on the amount eligible for remuneration, set at the greater between €200 million and 0.04 per cent of GDP;
- application of this ceiling to the total balance on all accounts attributable to the Treasury (including the sinking fund for government securities and any time deposits constituted after 4 June 2014);
- on amounts above the ceiling, zero interest or the rate on the ECB’s deposit facility, if the latter is negative.
Starting 1 December 2014 (as provided in the ECB Decision of 20 February 2014), the remuneration of the Treasury’s balances will be capped at the Eonia rate.
Implementation of the new rules requires revision of the March 2011 convention.