Leading foreign banks  
       Ranked by assets as of end-2007—€
       BankAssetsMarket share (%)
       Banca Nazionale del Lavoro (BNL) (BNP Paribas,
       Dexia Crediop (Belgium,
       Banca Antonveneta (ABN AMRO, Netherlands/Banco
Santander, Spain)(b)50.71.3
       Cariparma Friuladria (Credit Agricole,
       Deutsche Bank Italia (Germany)23.70.6
       Findomestic (Cetelem) (BNP Paribas,
       Santander Consumer Bank (Santander,
       Hypo Alpe-Adria (Austria)4.50.1
       UBAE Arab Italian Bank
       Total (of all banks incorporated in Italy)3,817.3100.0
       (a) A subsidiary of Dexia Credit Local
of France, which is a subsidiary of Dexia of Belgium. (b) Sold to Banca Monte
Paschi di Siena in May 2008. (c) 50/50 joint venture between BNP Paribas of
France and Intesa Sanpaolo (via subsidiaries). (d) End-2006 results; Libyan Arab
Foreign Bank holds 49.9% of capital; other Arab interests hold another
       Source: Economist Intelligence Unit, from
information on banks' websites or in annual reports.There were 79 foreign banks operating in Italy as branches of their parent bank at end-2007, according to the Bank of Italy (Banca d’Italia—the central bank), five more than a year earlier. Among them they had 155 branches, up by 27 over the previous year.There were also 22 foreign banks with incorporated subsidiaries. These represented 11.6% of banking assets in 2007 (1.6 percentage points higher than a year previously), but the Bank of Italy said in its 2007 Annual Report that this drops back to 9.2% if Banca Antonveneta is excluded—the sale of which to Banca Monte Paschi di Siena (MPS) was completed in May 2008. Branches of foreign banks had 8.2% of all assets (7.6% in 2006). Subsidiaries of foreign banks accounted for 7.1% of lending in 2007, up from 6.1% the previous year.With the exception of Dexia and Deutsche Bank, which entered the Italian market through acquisitions, outright foreign takeovers were uncommon until 2006. Prior to that time, the Bank of Italy was hostile to foreign takeovers and encouraged Italian banks to mount counterbids when takeover attempts were made. When the previous governor of the Bank of Italy, Antonio Fazio, stepped down in 2006 over accusations that he had unfairly discriminated in favour of Italian banks in a bidding war for Antonveneta, it paved the way for ABN AMRO of the Netherlands to take over Antonveneta in November 2006, and for BNP Paribas (France) to enter Italy with the takeover of Banca Nazionale del Lavoro (BNL) in June 2007. This latter acquisition made BNL the largest foreign bank (assets of €91.2bn at end-2007). It is the seventh largest bank overall.Many foreign banks have separate operations in Italy for specialist segments, such as wholesale and/or capital markets, private wealth and consumer finance. Most do not disclose financial information about these operations. A foreign presence in universal banking has been more unusual, but that has started to change—though even these foreign banks are far from having placed all their Italian interests under a single umbrella. The last few years have been clearly characterised by the inroads made by French banks in universal banking (particularly since Antonveneta passed back into Italian hands in May 2008). The leaders are BNP Paribas via BNL (and its consumer credit bank, Findomestic) and Credit Agricole via Cariparma Friuladria. Both banks also have other interests in Italy via separate operations in areas such as non-bank consumer finance, investment banking, leasing and insurance. Credit Agricole also has a 5.6% stake in Intesa Sanpaulo (ISP).Though BNP Paribas acquired its position with a single acquisition, Credit Agricole has built up its position over time through a series of small acquisitions. Deutsche Bank (Germany) entered Italy much earlier and for a couple of decades was the only foreign universal bank of any size. It has not made any further acquisitions or expanded significantly in other ways (eg, by picking up branch networks, which have become available as a result of conditions imposed on mergers and acquisitions). In retail banking, it concentrates on high-net-worth customers. The sale to MPS of Antonveneta in May 2008 by Grupo Santander was a consequence of the restructuring of ABN AMRO after it was taken over by a consortium of the Royal Bank of Scotland (UK), Fortis (Belgium/Netherlands) and Banco Santander (Spain) in October 2007.Dexia Crediop, the number-two foreign bank by assets, specialises in public-sector finance (with assets of €51.0bn at end-2007). It is the ninth largest bank in Italy. The number three bank (after the sale of MPS in May 2008) on the basis of publicly available figures is Credit Agricole of France, through Cariparma Friuladria (assets of €29.6bn at end-2007). They are followed by Deutsche Bank (assets of €23.7bn at end-2007) and Findomestic (€11.4bn in assets at end-2007). Findomestic is a consumer-credit bank in which BNP Paribas holds a 51% stake. Two other major foreign-owned banks are Hypo Alpe-Adria, which is Austrian-owned (assets of €4.5bn at end-2007) and operates only in north-eastern Italy, and UBAE Arab Italian Bank, which is controlled by Arab banks with Italian partners (assets of €2.0bn at end-2006; latest available figures). The main shareholder in UBAE is the Libyan Arab Foreign Bank, with 49.93%. MISR International Bank of Egypt has a 17.62% stake. Other Arab banks hold 9% stakes in total. The remainder of the capital is in the hands of Italian financial institutions and companies. Consumer-credit specialist Santander Consumer Bank (formerly Finconsumo), a subsidiary of Santander of Spain, had assets at end-2007 of €6.2bn. Other foreign-owned banks do not publish financial information on their activities.Foreign banks are also linked strategically to some of the leading Italian banks. In addition to the Credit Agricole stake in ISP (see above), Credit Mutuel (France) has a 6.6% stake in Banca del Legnano, a subsidiary of Gruppo Bipiemme. Gruppo Bipiemme and Credit Mutuel announced in March 2008 that they would announce by June specifics about plans for working together more closely. However, no announcement had been made as of end-June 2008.Many foreign banks operate in the wholesale, investment-bank or securities markets. The list of foreign financial institutions that are recognised by the Italian Treasury (Dipartimento del Tesoro) to act as primary dealers for government debt provide a clear picture of this. Twenty of the 22 specialists nominated by the Italian Treasury as of April 1st 2008 were foreign. They were Bank of America Securities (US); Barclays Bank (UK); Bayerische Hypo und Vereinsbank (Germany; a subsidiary of UniCredit, however); BNP Paribas (France); Calyon (the investment-banking arm of Credit Agricole of France); Citigroup Global Markets (US); Credit Suisse Securities (Switzerland, via its UK subsidiary); Deutsche Bank (Germany); Dresdner Bank (Germany); Goldman Sachs International (US, via its UK subsidiary); HSBC France (UK, via its French subsidiary); ING (Netherlands); JPMorgan Securities (US, via its UK subsidiary); Lehman Brothers International (US, via its UK subsidiary); Merrill Lynch International (US, via its UK subsidiary); Morgan Stanley International (US, via its UK subsidiary); Nomura International (Japan, via its UK subsidiary); Royal Bank of Scotland (UK); Societe Generale (France); and UBS (Switzerland). Of the five highest-ranked intermediaries in terms of volume and efficiency in the secondary market, as determined by the Italian Treasury, four were foreign in 2007. They were Barclays, Societe Generale, JP Morgan Securities and BNP Paribas. The domestic exception was Banca Imi (part of ISP from January 1st 2008), which was actually the leader.Foreign banks also play a role as lead managers in bond issues and stockmarket flotations, and are major players in the securitisation of government property assets in the government bond market (Mercato Telematico dei Titoli di Stato—MTS) and the interbank market (Mercato Interbancario Depositi—e-MID). Some foreign banks are also shareholders in these markets. Foreign banks are also present in the mortgage and consumer-finance segments.Foreign banks have not always found the Italian banking environment easy. Britain's Natwest (now part of Royal Bank of Scotland) and Abbey (now part of Spain’s Grupo Santander), and Citigroup of the US, all sold earlier acquisitions some years ago. Most foreign banks have opted to enter retail and commercial banking in Italy through strategic shareholdings rather than via takeovers or establishing a business. ABN AMRO began its relationship with Antonveneta by building strategic holdings over a number of years. Santander at one time built a strategic stake in the former Sanpaolo IMI (now Intesa Sanpaolo—ISP) and tried, but failed to form a strategic alliance, and sold its stake. It also divested itself of Banca Antonveneta in May 2008 as part of its takeover of ABN AMRO in October 2007. In May 2007 Citigroup (US) sold its private-wealth banking operations, which had five branches, to Banca Euromobiliare (Credem).Setting up operations in Italy is straightforward for banks from within the European Economic Area (EEA—the EU plus Iceland, Liechtenstein and Norway). If they are authorised to operate in their home EEA country, they have an automatic right to operate in Italy without obtaining authorisation, as if they were a new bank. It is sufficient for the home-country banking supervisor to inform the Bank of Italy of the bank’s intentions. The National Financial Markets Commission (Commissione Nazionale per le Societa e la Borsa—Consob) must also be informed if the bank plans to trade in listed securities. The activities covered by these mutual-recognition arrangements are limited to those listed in EU Directive 2006/48, but this covers most types of standard banking activity and banks may still need to go through the full application procedures for sophisticated derivative products. The Bank of Italy can set any operational limits that it believes are necessary in the interest of prudential supervision.EU Directive 2004/39, the Markets in Financial Instruments Directive (MiFID), was transposed into Italian law via Legislative Decree 164 of September 17th 2007 and supplemented by secondary legislation issued jointly by the Bank of Italy and Consob on October 29th 2007. As a result, “home country” control became absolute. In other words, the host country cannot delay establishment by a firm that has home-country authorisation by asking for supplementary information. The changes wrought by MiFID came into effect on November 1st 2007. The day before, the BoI and Consob signed an agreement on closer cooperation and supervision of financial intermediaries, though each remains ultimately responsible for different categories—the Bank of Italy for credit institutions and asset-management companies, and Consob for securities firms.Non-EEA banks or newly established banks, in contrast, must meet more rigorous application requirements. The central bank can refuse permission if the country of domicile of a foreign bank does not grant reciprocal rights to Italian banks. Many US banks operate as EEA banks in Italy by working through their London-based subsidiaries. In the event of a bank start-up, either the registered office or the corporate headquarters of the bank must be in Italy.Foreign banks find it easy to compete in Italy in terms of product range, efficiency and innovation, but they have been at a disadvantage with respect to branch networks and customer relations in retail banking until the recent takeovers. Foreign banks belong to the Association of Foreign Banks in Italy (Associazione fra le Banche Estere in Italia), which had 41 members as of July 2008.SOURCE: Country Finance

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