Average overall effective rate (AOER)

Since 14 May 2011 the ceiling on interest rates, charging above which is deemed usury, is calculated by raising the average overall effective rate (AOER) by one quarter and adding a margin of an additional four percentage points. The difference between the ceiling rate and the average rate cannot exceed eight percentage points (see Treasury Department Communication of 18 May 2011). This calculation method was introduced by Decree Law 70/2011, which modified Article 2(4) of Law 108/96 that had set the ceiling rate at the AOER plus 50 per cent.

The AOER is derived from the quarterly survey conducted by the Bank of Italy on behalf of the Ministry of Economy and Finance.

The AOER tables are published in the Gazzetta Ufficiale and on the Bank of Italy and the Ministry of Economy and Finance websites.

The AOER, including fees, remuneration of any sort and expenses (excluding taxes and duties) refers to the annual interest rate charged by bank and financial intermediaries on like operations.

Each year the Ministry of Economy and Finance groups operations into homogeneous categories, taking into account their nature, purpose, amount, duration, risks and guarantees, allocating data collection to the Bank of Italy.

The Bank of Italy:

• issues the Instructions for measuring the AOER, which take account of the technical characteristics of the various lending operations
• in exercising supervisory controls, checks that banks and financial intermediaries comply with the calculation criteria set out in the Instructions and respect the usury ceiling rates.