ESRB European Systemic Risk Board : Notification by Banca d'Italia on three other systematically important institutions (O-SIIs)

Notification template for Article 131 CRD - Other Systemically Important Institutions (O-SII)

Please send this template to

• [e-mail] when notifying the ESRB;

• [e-mail] when notifying the ECB;

• [e-mail] when notifying the EBA.

Emailing this template to the above-mentioned addresses constitutes an official notification, no further official letter is required. In order to facilitate the work of the notified authorities, please send the notification template in a format that allows electronically copying the information.

1. Notifying national authority
1.1 Name of the notifying authority	Banca d'Italia
2. Description of the measure
2.1 Concerned institution or group of institutions	The EBA methodology has been applied to compute the scores for all the institutions operating in Italy as of 31 December 2017. Banca d'Italia has decided to maintain the 350 basis point threshold defined by EBA Guidelines. The following institutions (with scores above 350 basis points) have been identified as O-SIIs: Banking Group UniCredit Group (UCG) Gruppo Intesa Sanpaolo (ISP) Gruppo Banco BPM (BBPM)LEI Code 549300TRUWO2CD2G5692 2W8N8UU78PMDQKZENC08 815600E4E6DCD2D25E30 As of end 2017, the score of Gruppo Monte dei Paschi di Siena (MPS) is below the 350 basis point threshold; hence the bank is not identified as O-SII in 2018. The identification took place at the highest level of consolidation in Italy.
2.2 Level of the buffer applied	Banking Group UniCredit Group Gruppo Intesa Sanpaolo Gruppo Banco BPMO-SII Buffer 1.00% 0.75% 0.25%

Date of template version: 2016-03-01

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2.3 Name of the EU ultimate parent institution	Not applicable.
2.4 Names of subsidiaries	Not applicable.
3. Timing of the measure
3.1 Timing of the Decision	23 October 2018
3.2 Timing of the Publication	30 November 2018
3.3 Disclosure	Banca d'Italia will notify the ECB and then the ESRB, the EBA and the European Commission, one month before the publication of the decision. The designated institutions will be notified. The O-SII capital buffer requirements will be published on the Banca d'Italia website once all the administrative procedures have been completed.
3.4 Timing of Application	- For the O-SIIs already identified in 2016 (UCG and ISP), the buffers will be fully implemented on 1 January 2021. -For the O-SII identified in 2017 (BBPM), the buffer will be fully implemented on 1 January 2022.
3.5 Phasing in	Please refer to the following table. O-SII Buffer requirements per institution during the phase-in periodBanking Group From From From From 1 Jan 2018 1 Jan 2019 1 Jan 2020 1 Jan 2021 From 1 Jan 2022 UniCredit Group Gruppo Intesa Sanpaolo Gruppo Banco BPM 0.25% 0.19% 0.00% 0.50% 0.38% 0.06% 0.75% 0.56% 0.13% 1.00% 0.75% 0.19% 1.00% 0.75% 0.25%
3.6 Review of the measure	The measure will be reviewed at least annually.
4. Reason for O-SII identification and activation of the O-SII buffer
4.1 Scores of concerned institution or group of institutions, as per EBA guidelines on the assessment of O-SIIs (Article 131.3)	Banking Group UniCredit Group Gruppo Intesa Sanpaolo Gruppo Banco BPM Score Size Substitutability Complexity Interconnectedness 3,429 2,631 373 2,871 2,160 537 2,014 2,657 557 5,377 2,933 190 3,585 2,817 216 Please refer to the attached file for a full description of the methodology used.

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4.2 Methodology and indicators used for designation of the O-SII (Article 131.3)	The identification process followed the methodology set out in the EBA's Guidelines (EBA/GL/2014/10). Accordingly, the systemic importance of institutions was assessed using ten mandatory indicators referring to the four following criteria: size, importance (including substitutability/financial system infrastructure), complexity/cross-border activity, interconnectedness. Indicators were computed and aggregated for all institutions operating in Italy as of 31 December 2017. Whenever FINREP variables were not available, the closest variables available to Banca d'Italia were used. Banca d'Italia did not use any optional indicators among those listed by the EBA and opted to maintain the 350 basis points threshold defined by the Guidelines as a limit for systemic importance. Hence, all institutions with a score above 350 basis point were automatically identified as O-SIIs. A more detailed illustration of the score attributed to each institution is provided in the attached file.
4.3 Supervisory judgement	Not applicable.
4.4 Calibrating the O-SII buffer	The identified institutions are allocated to one of the capital buffers (0.25%, 0.75% and 1.00%) according to the classification resulting from a cluster analysis.
4.5 Effectiveness and proportionality of measure	The scope for negative spillovers from failing systemically important financial institutions has been widely acknowledged. The O-SII buffer improves the total loss-absorbing capacity of such institutions, thus minimizing the risk of contagion and strengthening the resilience of the financial sector as a whole. At the same time, it corrects the distortions in risk-taking incentives caused by implicit public guarantee (moral hazard). The proposed calibrations of the O-SII buffers are proportionate to the systemic importance of the banks involved, as summarised by their overall scores. The 4-years phase-in period allows for a gradual accumulation of capital buffers.
5. Cross-border and cross-sector impact of the measure
5.1 Assessment of cross-border effects and the likely impact on the internal market (Recommendation ESRB/2015/2)	Not applicable.

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5.2 Assessment of leakages and regulatory arbitrage within the notifying Member State	Leakages or regulatory arbitrage are not expected.
6. Combinations and interactions with other measures
6.1 Combinations between G-SII and O-SII buffers (Article 131.14)	One banking group identified as O-SII (UCG) also has G-SII status and is subject to a G-SII capital buffer (1.00% when fully implemented).
6.2 Combinations with SRB buffers (Article 131.14 + Article 133.5)	Not applicable.
6.3 O-SII requirement for a subsidiary (Article 131.8)	Not applicable.
6.4 Interaction with other measures	UniCredit Group was identified as G-SII. The identification occurred at consolidated level, in accordance with the principles developed by the Financial Stability Board and the Basel Committee on Banking Supervision, as well as the rules set out in Commission Delegated Regulation (EU) No 1222/2014. According to the G-SII score, the bank is allocated to the first bucket, corresponding to a G-SII capital buffer equal to 1.00% of total risk-weighted assets. In accordance with the transitional provisions set out in Article 162(5) of the CRD, the bank is required to hold a G-SII capital buffer equal to 0.25% of total risk-weighted assets starting from 1 January 2016 and to increase it by 0.25% each year until 1 January 2019. The countercyclical capital buffer was introduced on 1 January 2016. Banca d'Italia decided to set the countercyclical capital buffer rate at zero for 2018. The rate is reviewed quarterly.

7. Miscellaneous
7.1 Contact person(s) at notifying authority	Mr. Antonio Di Cesare Financial Stability Analysis and Coordination Division Email:[e-mail] Phone: [phone]
7.2 Any other relevant information	Not applicable.

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