Introduction

Italian government’s drive to reshape domestic financial sector draws legal and regulatory scrutiny

Prosecutors in Milan as well as European Commission competition regulators are investigating the Italian government's sale of a 15% stake in the bailed-out Banca Monte dei Paschi di Siena at the end of last year. There is suspicion that Rome's strategy to reshape the country's banking sector by creating a third major domestic financial group, alongside Intesa Sanpaolo and UniCredit, may have been illegitimately advanced by excluding UniCredit and foreign institutional investors from the sale. Management of the sale was handed to Bank Akros, a little-known investment banking subsidiary of Banco BPM; shares were allocated to BPM, asset manager Anima, which it is seeking to buy, and the billionaire Del Vecchio and Caltagirone families, already shareholders in Mediobanca, which Monte dei Paschi is itself seeking to acquire, and – like Mediobanca itself – in the country's largest insurer Generali, where they are looking to change the management. UniCredit threatened this strategy by bidding to acquire Banco BPM itself and seeking to sell its stake in Generali while acquiring its private banking business; the government has responded by placing onerous restrictions on any acquisition of BPM. While many analysts believe Italy's fragmented financial sector would benefit from restructuring and consolidation, they say the policy of Giorgia Meloni's coalition risks perpetuating state interference and crony capitalism while undermining corporate governance.

Key Governance Developments

EU reviews Italy’s Monte dei Paschi stake sale amid allegations that UniCredit and foreign investors were excluded

The European Commission has joined Milan prosecutors in investigating Italy's sale last November of a 15% stake in Banca Monte dei Paschi di Siena, the country's oldest bank, after claims that major investors such as UniCredit, Norway's sovereign wealth fund and BlackRock were excluded from participating. The €920m transaction, overseen by niche investment bank Banca Akros rather than high-profile institutions such as JPMorgan, Jefferies and Mediobanca that had managed previous sales, resulted in shares being allocated to four domestic buyers with close ties to government banking interests. In the sale run by Banca Akros, shares went to its parent company Banco BPM, which the Italian government hoped would merge with Monte dei Paschi, asset manager Anima, which BPM had just offered to buy, and to the billionaire Del Vecchio and Caltagirone families, who hold stakes in several large Italian financial groups and are backing a hostile bid by Monte dei Paschi for Mediobanca. Although all four investors paid a 5% premium to Monte dei Paschi's then share price, the Commission's review could result in a formal state aid investigation while prosecutors are examining whether taxpayers secured fair value. Both the finance ministry and Banca Akros say the process was transparent and conducted according to standard procedures.

Best source: Reuters (in French)

See also: Milano Finanza (in Italian)

EU Council approves significant cuts to companies’ due diligence and sustainability reporting burdens

The EU Council has agreed a negotiating position that would authorise significant reductions in due diligence and sustainability reporting requirements. It would accept changes to the Corporate Sustainability Reporting Directive that would exempt up to 80% of firms in the EU from disclosure requirements and limit the scope of the Corporate Sustainability Due Diligence Directive to companies with more than 5,000 employees or €1.5bn in annual turnover. The negotiating position of the EU member states goes far beyond the proposals of the European Commission in its original draft Omnibus legislation.

Best source: ESG News

Private investors seek clearer policies on ocean management before committing funding

Private investors are reluctant to allocate funding to ocean management projects while governance rules remain unclear and data is patchy. The bulk of the $10bn pledged in June at the third United Nations Ocean Conference in Nice came from public bodies, including $2.5bn from the Development Bank of Latin America and the Caribbean and €3bn from other development banks to tackle plastic pollution. The UN calculates that $175bn is needed annually to restore and maintain ocean health and ecosystems, but total investment between 2015 and 2019 amounted to just $10bn. Although progress has been made on overfishing, just 50 of more than 130 signatories have ratified the High Seas Treaty agreed by UN member states in 2023.

Best source: Reuters (subscription required)

World’s banks making slow progress on gender parity despite regulatory pressure

Gender equality in banking remains limited, with women occupying just 16% of senior posts worldwide and 24% of executive board positions at Europe's largest banks, according to analysis of recent studies. Regulatory initiatives across Europe and the Asia-Pacific region have yielded only incremental gains and disparities in pay and representation in high-status business positions persist. Studies indicate that improving gender balance could provide institutions with substantial financial and strategic advantages.

Best source: International Banker

European Commission to scrap proposed Green Claims Directive greenwashing legislation

The European Commission is to abandon proposals to introduce a Green Claims Directive that would protect consumers from unsubstantiated claims about the environmental characteristics of products and services. The proposals were unveiled in March 2023 and would have set minimum requirements for companies to substantiate, communicate and verify their sustainability claims with independent scientific evidence. The legislation would have also covered private environmental labels, permitting only those that apply across the EU and that are independently verified. The conservative European People's Party group in the European Parliament recently called on the Commission to withdraw the proposals, saying they were too burdensome and complex, particularly at a time when the EU is aiming to simplify sustainability and other transparency rules.

Best source: ESG Today

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