Italy’s reform of mutual banks: institutional investors at the gates


On March 24, 2015, the Italian Parliament converted into law an emergency decree aimed at dramatically changing the Italian banking scenario. The reform intends to force the country’s ten biggest banche popolari (i.e. mutual banks) with total assets exceeding EUR8 billion on a sole or consolidated basis to convert themselves into joint-stock companies (i.e. “società per azioni” or SpA) within 18 months. According to some estimates, these banks represent about 90% of the Italian mutual banks in terms of loans, branches and employees. The reform also entails changes in significant aspects of the legal framework applicable to all banche popolari.

Seven biggest mutual banks subject to the ECB’s direct supervision

Among the ten biggest mutual banks that will be affected by the reform seven are subject to the ECB’s direct supervision: Banco Popolare (BP:IM - Bloomberg), Unione di Banche Italiane (UBI:IM - Bloomberg), Banca Popolare dell’Emilia Romagna (BPE:IM - Bloomberg); Banca Popolare di Milano (BPM:IM - Bloomberg); Banca Popolare di Vicenza (unlisted); Veneto Banca (unlisted) and Banca Popolare di Sondrio (BPSO:IM - Bloomberg).


Mutual banks were set up by Luigi Luzzatti in Italy in the second half of the 19th century.

Luzzatti was said to be inspired by the ideas and initiatives of Franz Hermann Schulze, the founding father of Germany’s mutual banks (Volksbanken)

These banks, which have always been promoting the development and growth of the reference community, have adopted a business model focused on building close and long-lasting relationships with families and small- and medium-sized businesses. According to the Italian association of mutual banks Assopopolari, they represent above 25% of the Italian banking market and operate around 30% of all national branches (as of 31 December 2014).

One head-one vote principle

However positive this may sound, reality shows that institutional investors - as shareholders - did not always benefit from mutual banks as they have long been characterized by byzantine governance rules such as the “one head-one vote principle”.

According to this principle, shareholders are entitled to one vote only, regardless of the number of shares they hold. Another peculiar feature of mutual banks is the shareholders cap, which limits the number of shares each shareholder is entitled to hold. And let’s not forget the shareholders’ admission process, allowing the shareholder to exercise his voting rights after the approval of the board of directors only. Not to mention the limitations on proxy voting, which allows each shareholder to vote by proxy on behalf of max. 10 other shareholders (or a lower number as set out in the articles of associations). Last but not least, there are the limitations on the distribution of dividends, according to which the banks are obliged to put 10% of their annual net profits in a statutory reserve.

Proposals to reform the governance of mutual banks

Several proposals to reform the governance of mutual banks have been submitted to the Italian parliament, but no real developments have materialized yet. Self-regulation has been quite ineffective due to the “resistance” of organized groups of employees - and ex-employees-shareholders opposing changes at general meetings. Only last year Banca Popolare di Milano’s shareholders rejected governance changes, proposed by management and strongly promoted by the Bank of Italy, which would have reduced the say of employee and union shareholders by giving an equal voice to institutional investors.


Following the enactment of the reform, the assets of a mutual bank cannot exceed EUR8 billion on a stand-alone or consolidated basis. Within a year after exceeding this threshold, the mutual bank either has to convert into a joint stock corporation by a merger, or needs to reduce its assets below the threshold.

On June 11, the Bank of Italy issued provisions enacting the reform:

With this act, the reform of mutual banks is completed in all its aspects, and it is therefore possible to start the corporate transactions needed for implementing it (primarily changes in SpA) in the manner prescribed by law

More specifically, this means that, with the entry into force of the Bank of Italy’s provisions, the timeframe of 18 months in which mutual banks with assets in excess of EUR8 billion must convert themselves into joint-stock companies started running.

The transformation of the ten biggest mutual banks into “ordinary banks” is without a doubt a positive move towards a more competitive and much more efficient banking system, something Italy urgently needs. On the one hand, the reform will attract the interest of institutional investors which had traditionally low interest in mutual banks because of their peculiar features. On the other, the reform might help the fragmented sector to consolidate.



Your success is our success:

We are only paid when we win or settle your case.

Deminor handles all litigation costs and receives a percentage of the losses recovered.

Find out more


success rate

Get in touch with one of our experts.

We’ll give you a quick first assessment of your claim.