The Italian banking system has been undergoing a period of profound renewal that began in autumn 2011 and continued with the recent EGMs of Banca MPS and Intesa Sanpaolo on October 9.th and 29th respectively.
The co-operative banks were the most affected, in particular Banco Popolare and Banca Popolare di Milano (BPM), which followed completely different needs and methodologies. Banco Popolare passed from the traditional governance system (including the Board of Directors and the Board of Statutory Auditors, both elected by the shareholders) in order to simplify the decision-making process and to reduce the costs associated with the dual system. BPM moved in the opposite direction, adopting the dual system, because the bank needed to strengthen the level of internal controls and the independence of the governing bodies from interference from the internal structure.
amendments to the Bank MPS’Articles of Association, approved by the EGM held on October 9th, also marked a turning point for the bank’s corporate governance, at least from a “political” perspective. The new Articles of Association curtail the decision-making power of the shareholders, who are no longer able to vote on asset sales. Whilst this provision is in line with market practice, it sparked widespread protests due to the rather tense atmosphere at the Tuscan bank. The employee-shareholders strongly opposed the amendments, which significantly curtailed the scope for internal debate on such sensitive issues, which affect their own professional future. Independent shareholders should also be concerned by the outcomes of the latest EGM, but primarily because of another resolution: the authorisation to increase the share capital by up to €1 billion without pre-emptive rights. The amount of the capital increase represents approximately 30% of the bank’s current market capitalisation and is likely to alter its ownership structure by significantly diluting the rights of existing shareholders. Concerns also arise regarding a statutory provision that was not repealed: each shareholder’s votes are limited to 4% of the share capital, with the exception of the Fondazione MPS (which is set to become the former controlling shareholder). Thanks to this provision, all new shareholders resulting from the forthcoming capital increase will be entitled to only 4% of votes, despite making a much higher investment: in order to accept such a restriction, they are likely to demand a substantial discount on the share price, thereby exacerbating the already unacceptable dilution of existing shareholders’ rights.
The upcoming EGM of Intesa Sanpaolo, on 29 Octoberth, will likely be held in a more relaxing atmosphere, but it will still involve relevant changes to the bank's dual governance system. Two to four managers from the banking group will be appointed as members of the Management Board, alongside the CEO. Such a strong presence of executives may raise some concerns regarding the Board's independence. Nevertheless, an adequate level of internal controls will be ensured by the mandatory majority of external members and by the sufficiently independent composition of the Supervisory Board. The strong connection between the Management Board and the operating structure will simplify the decision-making process, aiming to improve efficiency by also eliminating the Board's executive committees.
UniCredit began a significant reorganisation of its operating structure back in 2010, defining a centralised banking structure and territorial divisions which were to be completed in 2013. However, the changes have been far slower from a corporate governance perspective. Following a €7.5 billion share capital increase in January 2012, UniCredit's ownership structure altered slightly: the banking foundations and the Central Bank of Libya saw their shareholdings diluted, while the Abu Dhabi sovereign fund became the largest shareholder, and others, such as Caltagirone and Della Valle, increased their stakes. The new ownership structure did not impact the bank's governance: the Annual General Meeting held in May renewed UniCredit's Board of Directors, with the only notable changes being a reduction in board members from 23 to 19 and the appointment of a new Chairman, Mr Giuseppe Vita, who is the former Chairman of UniCredit's partner, Allianz SE.
Despite the “large-scale manoeuvres” on the market, at Mediobanca Nothing has changed since 2008, when the last business plan was approved and the company abandoned the dual governance system (after only one year). The new Italian law banning interlocking directorships at financial companies presented a very good opportunity for renewal. Mediobanca is the most affected by the new provisions, with six directors resigning. However, the appointment of new members is still guided by the allocation of seats among controlling shareholders: Pier Silvio Berlusconi and Bruno Ermolli are linked to Fininvest, Christian Collin to Groupama, Alessandro Decio to UniCredit, Vanessa Labérenne to Bolloré Group, and Alberto Pecci, who is another member of the shareholder agreement controlling Mediobanca. The mandate of all newly appointed directors will expire at the upcoming AGM on 27 October.th, although the voting outcomes will likely hold no surprises.