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 2022)
Based on the most recent analyses and assessments prepared using data up to 31 December 2022, some types of complex securities - specifically, securitizations, additional tier 1 subordinated bonds (AT1, also known as contingent convertibles or CoCos) and certificates - receive the most focus from the Bank of Italy, as they did last year, for the purposes of the exercise of its intervention power1, as a result of the growth in their volumes and because of the large price changes to which they may be subject.
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 and AT1 bonds could suffer significant losses in the event of an adverse scenario. In particular, the growth in certificates in 2022 (by €11 billion, to € 52 billion) is fully attributable to retail investors, who, at the end of the year, held €37 billion worth of them. However, this is equal to only 1 per cent of households' financial wealth.
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.
