Derivatives and the Italian inquisition
“The Banca d’Italia wants to ban derivatives products – it really is like they believe they are the instruments of the devil.” This view from a leading international bank in Milan is not an uncommon sentiment. Since the collapse of Parmalat in December 2003 there has been something like an inquisition by Italian market regulators into anything that looks like a complex financial transaction. Above all, the Banca d’Italia has been clamping down on retail market structured products.
Under Article 129 of the 1993 Banking Consolidation Act, the Banca d’Italia has supervisory powers over all capital transfers or flows of money totalling €50 million or more. Even before Parmalat, and Cirio, the major Italian corporate scandal of recent years, Banca d’Italia was apt to invoke its powers under Article 129 to restrict the terms product structurers could offer. For example, in 2003 it capped the coupons structured products could offer at 200% of the Libor rate
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