Opinion of the European Central Bank of 20 October 2023 on the establishment of a macroprudential committee (CON/2023/32)

OPINION OF THE EUROPEAN CENTRAL BANK of 20 October 2023 on the establishment of a macroprudential committee (CON/2023/32) Introduction and legal basis

On 22 September 2023 the European Central Bank (ECB) received a request from the Italian Ministry of Economy and Finance for an opinion on a draft legislative decree implementing Recommendation ESRB/2011/3 on the macroprudential mandate of national authorities and implementing Articles 23-ter (7) and 28(2) of Regulation (EU) 2016/1011, as amended by Regulation (EU) 2021/168 (hereinafter the ‘draft decree’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC , as the draft decree relates to the Banca d’Italia and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft decree

1.1 The draft decree establishes a Macroprudential Policy Committee (hereinafter the ‘Committee’). The Committee is without legal personality and is established as an independent authority designated under Recommendation ESRB/2011/3 of the European Systemic Risk Board . In pursuing its objectives, the Committee acts independently. 1.2 The Committee is to be comprised of the Governor of the Banca d’Italia, who chairs the Committee, the President of the Commissione Nazionale per le Società e la Borsa (CONSOB, National Companies and Stock Exchange Commission), the President of the Istituto per la vigilanza sulle assicurazioni (IVASS, Institute for Insurance Supervision) and the President of the Commissione di vigilanza sui fondi pensione (COVIP, Commission for the Supervision of Pension Funds), representing the respective authorities. The Director-General of the Treasury participates in the

Committee’s meetings, without the right to vote. The Committee Chair, also on a proposal from the other participants, may invite third parties to attend meetings for advisory purposes, with regard to specific items on the agenda. 1.3 The Banca d’Italia acts as the secretariat of the Committee. 1.4 The Committee meets at least twice a year. The Chair convenes the Committee, sets its agenda and proposes its activities and tasks. The decisions and minutes of the Committee are to be made public unless the Committee considers that this entails risks to financial stability. 1.5 Recommendations, and opinions and reports issued on the Committee’s own initiative are approved with the consent or abstention of the authority to which the recommendation is addressed, or of the authority which has specific competence in the area which is the main subject of the report or opinion. 1.6 The Committee may inter alia identify, analyse, classify, monitor and assess risks to the stability of the financial system as a whole; share with the authorities the data and information necessary for the exercise of their tasks; define indicators for monitoring systemic risk and for using macroprudential tools; define and pursue intermediate strategies and objectives in relation to events threatening financial stability, as well as the prevention of systemic risks, thereby promoting a sustainable contribution from the financial sector to economic growth; issue warnings in relation to systemic risk which are to be made public; address recommendations to the Banca d’Italia, CONSOB, IVASS and COVIP, each of which is required to explain when and why these recommendations have not been implemented; issue reports to the Parliament, Government, other authorities, public bodies and State bodies whose purpose is to adopt measures, including legislation, and express opinions, where requested or on its own initiative, on draft legislative acts relevant to its objectives; develop methodologies and procedures to identify systemically important financial institutions, without prejudice to the relevant powers of the individual authorities participating in the Committee under their respective sectoral regulations. 1.7 The Committee has the power to request all necessary data and information from private and public entities carrying out, individually or together, economic activities relevant to financial stability. 1.8 The draft decree stipulates that entities supervised by the Banca d’Italia, CONSOB, IVASS and COVIP that fail to comply with the obligation to provide information, and in accordance with the respective sector-based legislation, will be subject to financial administrative penalties . For nonsupervised entities that fail to comply with the obligation to provide the information required , the

Banca d’Italia will apply a financial administrative penalty ranging from EUR 5,000 to EUR 5 million . 1.9 The Committee cooperates with the European Systemic Risk Board (ESRB) and the ECB in exercising its macroprudential tasks and with macroprudential authorities from other EU Member States, including through the exchange of information, to facilitate their respective tasks. 1.10 Data and information acquired by the Committee are to be covered by the obligation of professional secrecy. Professional secrecy, however, does not prevent the sharing of data and information among the Committee and its participants. 1.11 The Committee must submit to the Government and the Chambers an annual report on its activities by 31 March of the year following the reference year. 1.12 Article 2 of the draft decree provides that IVASS may exercise its supervisory powers for macroprudential purposes on the basis of recommendations issued by the Committee.

2. General observations

2.1 The ECB welcomes that the draft decree establishes a national macroprudential Committee in which all the relevant authorities and institutions involved in macroprudential policy are represented, and that it defines the Committee’s objectives, mission and powers in line with the guiding principles expressed in Recommendation ESRB/2011/3 and Recommendation ESRB/2013/1 of the European Systemic Risk Board . 2.2 The ECB notes that the legal basis for the draft decree is Law No 127 of 4 August 2022 on European Delegation (hereinafter the ‘Law on European Delegation’) , empowering the Government to implement Recommendation ESRB/2011/3, on which the ECB was not consulted. 2.3 The Law on European Delegation contains principles and criteria on the Government’s exercise of the legislative power – such as on the Committee’s tasks and the leading role of the Banca d'Italia – together with more detailed rules, such as on how the Committee is to function. 2.4 On the basis of the Law on European Delegation, the draft decree completes the institutional framework to allow the oversight of systemic risk at national level, especially in respect of financial markets and pension funds, since CONSOB and COVIP do not currently have substantive macroprudential powers.

3. Role of the Banca d’Italia as macroprudential authority

3.1 Central banks should play a leading role in macroprudential oversight, given their expertise and existing responsibilities in the area of financial stability . This is particularly true in the case of the

Banca d’Italia, which has the power to use macroprudential tools as provided for in the

Consolidated Banking Law. The ECB therefore welcomes the role envisaged for the Banca d’Italia,

although some rules of the draft decree raise concerns in that respect, as detailed in the following

paragraphs.

3.2 The ECB understands that the Banca d’Italia will continue to be the concerned authority in Italy for

the purposes of notification to the ECB by the national competent or designated authorities of

requirements for capital buffers to be held by credit institutions in addition to own funds

requirements and any other measures aimed at addressing systemic or macroprudential risks,

pursuant to Council Regulation (EU) No 1024/2013 .

3.3 However, the leading role of the Banca d’Italia is likely to be undermined by the provisions of the

draft decree assigning a (de facto) veto power to each Committee member over the Committee’s

recommendations, reports and opinions (see paragraph 4). The ECB also notes that the draft

decree does not provide for the President of the Committee having a double (casting) vote, as

envisaged by the Law on European Delegation .

4. Voting arrangements

Under the draft decree, the Committee’s decisions are to be voted by the majority of the

participants at the meeting. However, any recommendation to the Banca d’Italia, CONSOB, IVASS

and COVIP and any report or opinion issued to the Parliament, Government, other authorities,

public bodies and State organisations on the advisability of adopting measures are to be approved

with the consent or abstention of the authority to which the recommendation is addressed or of the

authority which has specific competence in the area which is the main subject of the report or

member of the Committee a (de facto) veto power. This could cause a risk of paralysis in

macroprudential policy , especially in the areas supervised by CONSOB, COVIP and IVASS since

they would not be granted their own autonomous macroprudential powers . As already recommended by the ESRB, a central bank’s leading role should be ensured by the fact that the central bank accounts for the majority of representatives with voting power on the macroprudential authority’s board when decisions are taken on a majority basis, or that no veto power is conferred on other board members, as is the case when decisions are taken by consensus . In the light of the above, the ECB strongly recommends that the Italian legislator revisits the draft decree’s provisions concerning the Committee’s voting arrangements consistent with the guiding principles expressed in the ESRB’s follow-up report on Recommendation ESRB/2011/3 . Furthermore, the ECB also suggests that the Italian Government revisits the draft decree’s provisions concerning the Committee’s voting arrangements to ensure that, in the event of a tie, the President has a double (casting) vote, consistent with the provisions of the Law on European Delegation.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 20 October 2023.

[signed]

The President of the ECB

Christine LAGARDE