BANK OF ITALY – CRD IV – “Amendments to the Supervisory Provisions for Banks and the Supervisory Provisions for SIMs – Rules for the Capital Conservation Buffer” – Consultation Document

The "Consultation Document" was recently published on the Bank of Italy's website. It contains proposed amendments to the transitional regime for the capital conservation buffer, which banks and investment firms are required to comply with pursuant to Circular No. 285 of December 17, 2013, "Supervisory Provisions for Banks," and the Communication of March 31, 2014, regarding the application of European prudential regulations (CRR/CRD IV) to investment firms and investment firms groups. One of the objectives of this revision is to ensure equal treatment for Italian banks compared to other Eurozone intermediaries.

In this regard, Member States' decisions in implementing the Directive were heterogeneous. Some countries, including Italy, anticipated the implementation of the planned Capital Conservation Buffer (CCB) (2,5% from January 1, 2019), while others adopted the transitional provisions.

The CCB is an integral part of the overall capital requirements that banks are required to comply with, together with the minimum requirements set by the legislation (Pillar One) and the additional requirements set by the Supervisor (Pillar Two) at the end of the periodic supervisory review and evaluation process (SREP).

In particular, the proposed amendment allows for the alignment of capitalisation levels, below which automatic capital conservation measures apply.

The CCB rate, applicable to banking groups and banks not belonging to groups, currently set at 2,5%, is brought back to that provided for by the transitional provisions pursuant to art. 160(3)(4) CRD IV:

• 1,250% from January 1, 2017 to December 31, 2017;
• 1,875% from January 1, 2018 to December 31, 2018.

Effective January 1, 2019, as established by Article 129 of the aforementioned Directive, the CCB will be equal to 2,5%. The same change is also proposed with reference to the CCB regulation for SIMs and SIM groups.

The consultation closed on 28 September 2016.