Italian Senate to approve Reform of Popolari banks

Implications: The Italian Senate Finance committee is discussing a bill on the reform of the Popolari banks, such as Banca Popolare Milano (PMI.MI) and Banco Popolare (BP.MI). The reform, if approved, will lead to better rules for the institutional investors, although the principle of 'one shareholder, one vote' will not be changed. There's a strong lobbying activity from the Popolari banks in order to halt the bill.

Analysis: After a long preliminary discussion, the Senate Finance committee in Italy is discussing a bill on the reform of the Popolari banks, such as Banca Popolare Milano (PMI.MI) and Banco Popolare (BP.MI). Many senators introduced bills of reform. On June 26, 2007 the chairman of the committee, Sen. Giorgio Benvenuto, proposed a joint text. The debate on the joint text will start on September 18.

The reform, if approved, will lead to better rules for the institutional investors, although the principle of 'one shareholder, one vote' will not be changed. The bill increases the limit of shares possession for the institutional shareholders to 5%. It will become mandatory to insert in the by-laws of the Popolari banks a voting system allowing at least one director appointed by the institutional investors. The procedure to be recognized as a socio will become quicker.

Most important, in the EGM there will be a proxy voting - each shareholder may receive the voting rights from up to 10 other shareholders/soci. This provision may modify the power balance inside the EGM, currently totally in favor of the labor unions inside the Popolari banks, as the recent developments in Banca Popolare Milano clearly show.

There's a strong lobbying activity from the Popolari banks in order to halt the bill. Meanwhile the Italian government has not announced a clear, official position, although some cabinet members - such as the Deputy Minister of Economy, Roberto Pinza - are supporting the bill and making pressure over the majority coalition senators to approve it in a decent time. It's possible that the Senate will give its final approval before Christmas. Then it will be up to the House of Representatives to debate the same bill.