Regulation EU/2014/600 (MiFIR), which entered into force on 3 January 2018, gave national supervisors, and in some cases ESMA and the EBA, the power to prohibit or limit:
- the marketing, distribution or sale of financial instruments and structured deposits (i.e. deposits whose return is linked to indicators such as indices, financial instruments, commodities or exchange rates; variable rate deposits whose yield is directly linked to an interest rate are excluded);
- certain related financial activities and practices (e.g. how the placement is made, distribution strategies, incentive mechanisms relating to the distribution of financial products).
For the list and definitions of the individual financial instruments analysed by the Bank of Italy within the scope of its intervention power, see the Glossary.
Article 7-bis of the Consolidated Law on Finance (TUF) assigns this 'intervention power' to:
- the Bank of Italy, in order to safeguard the stability of the domestic financial system;
- CONSOB to protect investors and the smooth functioning and integrity of financial markets and commodities markets.
It is important to point out that, before exercising this power, authorities are required to verify that it is not possible to address the risks identified through other supervisory measures and that the measure is proportionate and non-discriminatory. The intervention power may be exercised by national authorities through temporary or permanent measures in respect of banks, investment firms and market operators; entities other than those specifically indicated by European legislation, such as asset management companies and financial intermediaries on the dedicated register provided for in Article 106 of the Italian Consolidated Law on Banking (TUB), do not fall within the scope of the intervention power.
As already known, the Bank of Italy already carries out controls on the transparency of the contractual conditions and the fairness of intermediaries in customer relations. However, these relate exclusively to banking and financial products and services (such as current accounts, deposits, financing, payment services), while, as mentioned, the Bank of Italy's intervention power concerning financial instruments is exclusively intended to preserve the stability of the national financial system.
In order to exercise any intervention powers, the Bank of Italy regularly carries out analyses of the risks to financial stability that may arise from financial instruments circulating in Italy based on a specific legal, analytical and methodological framework, which is constantly updated and refined.
The Bank of Italy provides the public with a summary of the results of the most recent analyses and assessments, usually once a year.
Summary of the results of the most recent analyses and assessments (data as at 31 December 2023)
Based on the most recent analyses, prepared using data up to 31 December 2023, securitized products and certificates continue to be the Bank of Italy's main focus in relation to any exercise of its intervention power due to their complexity, the growth in their volumes and the large price changes to which some of these securities may be subject.1
Although the risks to financial stability that may arise from these categories of securities seem to be small for now, it should be noted that holders of certificates could be exposed to significant losses in the event of adverse scenarios, the likelihood of which is difficult to assess. The robust growth in certificates in circulation in 2023 (up by €20 billion, to €75 billion) is mostly attributable to the least risky categories - those with full or partial capital protection (up by €15 billion, to €45 billion) - and yield enhancement certificates (€3 billion higher, to €24 billion), which may offer higher yields than the market but without capital protection. Households held most of the certificates (€53 billion at the end of 2023, from €37 million at end-2022), equal to 5 per cent of the total value of the securities they held.
The full results of the analyses and assessments of risks to financial stability are available at this link.
[1] For the list and definitions of all the individual financial instruments analysed as part of the intervention power, see: Glossary of the types of financial instruments analysed by the Bank of Italy within the scope of its intervention power.
