Economy and Banking Sector of Italy

Italy is a parliamentary republic in Southern Europe and a founding member of the European Union.

After World War II, Italy rapidly transformed from an agriculture based economy into one of the world's most industrialised nations. Machinery, textiles (including closing), industrial design, furniture production, agri-alimentary are important sectors of Italian economy that contribute significantly to the country’s export. Tourism is also one of Italy's most significant economic sectors accounting for about 4% of Italy’s GDP. However, Italy has several problems which slow down the economic growth, including organized crime, corruption, and economic disbalance between southern and northern Italy.

A business model of Italian banking is focused on loans intermediation and other retail services and very limited exposure to market risk. This traditional banking approach has helped the Italian banks in supporting domestic activities.

Location Southcentral Europe
Population (2016)60 665 551 ↓ (0.00%)
EU Status member since 1952
Economy
National Currency EUR (Euro) since 1 January 1999
GDP 
    Nominal GDP (2015)1 636.4 bln EUR ↑ (+0.01%)
    Nominal GDP per Capita (2015)26 900 EUR ↑ (+0.01%)
    Real GDP Growth (2015)0.8 % ↑ (2014: -0.4 %)
Inflation Rate 
    CPI, MoM (Sep 2016)1.9 % ↑ (Aug 2016: -0.1 %)
    CPI, YoY (Sep 2016)0.1 % ↑ (Aug 2016: -0.1 %)
    CPI, Year Average (2015)0.1 % ↓ (2014: 0.2 %)
Unemployment Rate (2015)11.9 % ↓ (2014: 12.7 %)
Government Bond Yield (Sep 2016)1.27 % ↑ (Aug 2016: 1.18 %)
Credit Ratings (as of Sep 2016)
    FitchBBB+ good credit quality, outlook stable
    Moody'sBaa2 lower medium grade, outlook stable
    S&PBBB- lower medium grade
Taxation
Withholding Tax 0.0 - 20.0%
Double Taxation Agreements 103 signed agreements
Information Exchange 
    Exchange on Request 7 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 10 January 2014, Model 1
Banking Sector
Financial Market Development 3.1 (max 7.0) rank: 122nd out of 138 countries
    Banks' Soundness 4.2 (max 7.0) rank: 106th out of 138 countries
Banking Industry Country Risk 4(1 - lowest risk, 10 - highest risk)
    Economy Risk 5
    Industry Risk 4
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 EUR
Country Ceiling for Deposits 
    Local Currency (Euro)Aa2 high grade
    Foreign CurrencyAa2 high grade
Deposit Rates (Aug 2016, EUR)1.08 % ↑ (Jul 2016: 0.86 %)
Banking Sector Structure 
    Number of Banks629
    Recent Changes (2015) new banks: 18, closed banks: 32
    Consolidated Assets (2015) 2 723.19 bln EUR ↑ (+0.82%)
Major Banks
 Intesa Sanpaolo SpA  Unione di Banche Italiane SCpA (UBI Banca)
 UniCredit SpA  Mediobanca SpA
 Banca Monte dei Paschi di Siena SpA  Banca Nazionale del Lavoro SpA
 Banco Popolare SC
 List of Banks in Italy

Italian Economy

National Currency

Italy joined the Euro Area on 1 January 1999.

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GDP

According to Eurostat, nominal GDP of Italy in 2015 was 1 636.4 bln EUR.

Italy underperforms the European Union in terms of real GDP growth with the average annual differential coming to -1.1% over the past 10 years (2005 - 2015). In 2015 real GDP growth was 0.8% which was below the Euro Area average (1.6%) and below the European Union average (1.9%). Real GDP growth in 2016 - 2021 are IMF's estimates.

Real GDP Growth in Italy.
Chart 1. Real GDP Growth in Italy. Source: Eurostat, International Monetary Fund.

In 2015, nominal GDP per capita in Italy was 26 900 EUR.

Italy has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -5.6% over the past 10 years (2005 - 2015). GDP per capita at PPP in 2016 - 2021 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Italy; European Union = 100.
Chart 2. GDP Per Capita at Purchasing Power Parity in Italy; European Union = 100.
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Inflation Rate

According to Eurostat, inflation rate in Italy in 2015 expressed as annual percentages of average consumer prices was 0.1% which was above the Euro Area average (0.0%) and above the European Union average (0.0%). Inflation rates in 2016 - 2021 are IMF's estimates.

Inflation Rate in Italy.
Chart 3. Inflation Rate in Italy. Source: Eurostat, International Monetary Fund.
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Taxation in Italy

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding tax rates applied on payments of interest and dividends in Italy are shown in Table 1.

Dividends Interest
Natural person, resident 20.020.0
Natural person, non-resident 20.00.0
Table 1. Withholding tax rates in Italy.
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Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Italy signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Albania
 Algeria
 Argentina
 Armenia
 Australia
 Austria
 Azerbaijan
 Bangladesh
 Belarus
 Belgium
 Bosnia and Herzegovina
 Brazil
 Bulgaria
 Canada
 China
 Cote D'Ivoire
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Ecuador
 Egypt
 Estonia
 Ethiopia
 Finland
 France
 Georgia
 Germany
 Ghana
 Greece
 Hungary
 Iceland
 India
 Indonesia
 Ireland
 Israel
 Japan
 Jordan
 Kazakhstan
 Korea, Republic of
 Kuwait
 Kyrgyzstan
 Latvia
 Lebanon
 Lithuania
 Luxembourg
 Macedonia
 Malaysia
 Malta
 Mauritius
 Mexico
 Moldova, Republic of
 Montenegro
 Morocco
 Mozambique
 Netherlands
 New Zealand
 Norway
 Oman
 Pakistan
 Philippines
 Poland
 Portugal
 Qatar
 Romania
 Russian Federation
 San Marino (Oct 2013)
 Saudi Arabia
 Senegal
 Serbia
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sri Lanka
 Sweden
 Switzerland
 Syrian Arab Republic
 Tajikistan
 Tanzania, United Republic of
 Thailand
 Trinidad and Tobago
 Tunisia
 Turkey
 Turkmenistan
 Uganda
 Ukraine
 United Arab Emirates
 United Kingdom
 United States
 Uzbekistan
 Venezuela
 Vietnam
 Zambia

There are also several agreements between Italy and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Cuba
 Gabon
 Hong Kong (Jan 2013)
 Iran, Islamic Republic of
 Kenya
 Libya
 Mongolia
 Panama
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

There are also several agreements between Italy and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Bermuda
 Cayman Islands
 Cook Islands
 Gibraltar
 Guernsey
 Isle of Man (Sep 2013)
 Jersey

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Italy signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Italy has FATCA agreement with the U.S. in effect since 10 January 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Italy are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Italian financial accounts hold in U.S. financial institutions will be reported to Italian authorities.

Further Information:
FATCA and European countries

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Italian Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2016-2017, financial market development in Italy is scored 3.1 out of maximum 7.0 and ranked 122nd out of 138 analysed economies. Soundness of banks is scored 4.2 bringing Italy into the 106th place, trustworthiness and confidence of financial market is scored 3.2 (125th place).

Financial Market Development in Italy.
Chart 4. Financial Market Development in Italy. Source: WEF.
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Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Italy is included into group '4' with economic risk scored '5' and industry risk scored '4'.

BICRA Group 4
Economic risk 5
    Economic resilience intermediate
     Economic imbalances intermediate
    Credit risk in economy high
Industry risk 4
    Institutional framework intermediate
    Competitive dynamics intermediate
    Systemwide funding intermediate
Government support assessment supportive

Table 2. BICRA for Italy. Source: S&P's.

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Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Italy are summarised in Table 3.

Scheme Participantsall credit institutions operating in Italy, branches of non-EU banks, branches of Italian banks abroad
Scheme Exemptionsbranches of EU-banks (covered by their home countries)
Covered Accountsrepayable funds acquired by banks in the form of deposits or other forms and to bankers' drafts or other similar credit instruments shall be eligible for payment
Maximum Protected Amount100 000 EUR
Paid In CurrencyEUR

Table 3. Deposit guarantee scheme in Italy.

Further Information:
Deposit Guarantee Schemes in Europe

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Euro) deposit ceiling for Italy is set to Aa2 (high grade), foreign currency deposit ceiling is Aa2 (high grade).

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Deposit Rates

In Aug 2016, an agreed annualised deposit rate in local currency (Euro) of new contracts with agreed maturity up to 1 year between credit institutions and households was 1.08% which was above the Euro Area average (0.53%).

Deposit Rates in Italy.
Chart 5. Deposit Rates in Italy. Source: ECB.

Further Information:
Compare Bank Deposits in Italy

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Banking Sector Structure

Currently there are 629 credit institutions operating in Italy.

Recent structural changes (2013 - 2015) of the banking sector of Italy are summarised in Table 4.

201320142015
Number of Opened Banks5818
Number of Closed Banks192932

Table 4. Recent structural changes in the banking sector of Italy.

All the credit institutions operating in Italy can be classified into several categories. Table 5 summarises the number of banks in each category.

CategoryNumber of Banks
Banks192
Branches of foreign banks88
Central banks1
Cooperative banks324
Savings banks24

Table 5. Number of banks by category in Italy.

The list of the most recently opened banks in Italy is provided in Table 6.

NameStart Date
 COMPASS BANCA SPA (new)November 2015
 NUOVA BANCA DELLE MARCHE SPA (new)November 2015
 UBS LIMITED (new)November 2015
 NUOVA BANCA DELL'ETRURIA E DEL LAZIO SPA (new)November 2015
 NUOVA CASSA DI RISPARMIO DI CHIETI SPA (new)November 2015
 NUOVA CASSA DI RISPARMIO DI FERRARA SPA (new)November 2015
 BANCA PSA ITALIA S.P.A. (new)October 2015
 CREDIT SUISSE INTERNATIONAL (new)October 2015
 EXANE DERIVATIVES (new)September 2015
 BANCA DI CREDITO COOPERATIVO BERGAMASCA E OROBICA SOCIETA' COOPERATIVA (new)June 2015

Table 6. The most recently opened banks in Italy.

There are 88 branches of foreign banks from 17 different countries in Italy. Table 7 shows 10 countries having the biggest number of branches in Italy.

Country of OriginNumber of Branches
 France20
 United Kingdom16
 Germany14
 Luxembourg10
 Netherlands5
 Spain4
 Austria4
 United States3
 Ireland3
 Japan2

Table 7. Number of branches of foreign banks in Italy grouped by country of origin.

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