Italy Enforces New Consumer Protection Measures for Banks
Rome, June 2021
The Italian banking sector has undergone significant changes to implement Article 106 of the Payment Services Directive (PSD2), requiring banks to make available on their websites and in print a brochure published by the European Commission. This brochure outlines consumer rights in payment systems within the European Union.
Consumer Protection Rules
- The Bank of Italy is responsible for enforcing these consumer protection rules.
- The Italian Antitrust Authority safeguards consumers against unfair commercial practices by banks.
- Consumers can also file complaints with the ABF, although its decisions do not have direct binding effect on banks.
The Italian Antitrust Authority has been paying increased attention to incorrect advertising of banking products and services. In recent years, it has sanctioned several practices, including:
- Commercial communications that are incomplete but ambiguous and capable of generating incorrect beliefs in consumers
- Commercial communications aimed at involving consumers in activities they would not have undertaken otherwise
- Practices aimed at exploiting the psychological weakness of people who need to resort to bank lending
Future Changes
Regulatory Evolution
In the coming years, Italy is expected to see significant legal and regulatory changes, particularly regarding the regulation and supervision of fintech players. The rapid technological evolution in the banking sector has been unpredictable, and it is likely that there will be even greater development in the future.
To ensure an adequate balance between opportunities and risks of innovation, supervisory authorities will need to implement regulatory interventions that address the continuous changes related to fintech. Italy is already implementing EU legislation on lending crowdfunding service providers (Regulation (EU) No. 1503/2020).
Additionally, the banking industry will deepen its commitment to environmental, social, and governance (ESG) goals in the years ahead, as part of “sustainable finance.” This concept aims to integrate ESG criteria into financial services and support sustainable economic growth.
Supervision
Single Supervisory Mechanism (SSM)
The SSM operates a system of common bank supervision in the European Union, involving national supervisors and the European Central Bank (ECB). The ECB has final supervisory powers, while national supervisors have a supporting role. Banks deemed “significant” are supervised directly by the ECB.
Smaller banks continue to be monitored directly by the Bank of Italy, although the ECB can take over direct supervision of any bank. As for less significant banks, the Bank of Italy employs three types of bank conduct supervision:
- Regulatory supervision
- Information supervision
- Inspection supervision
Banks must provide periodic reports and other data and documents required by the supervisory authorities.
Enforcement
Supervision and Sanctions
The supervision exercised by the Bank of Italy over banking activity is quite pervasive and includes the duty to provide periodic information, as well as inspection powers. In cases of infringement of laws or secondary-level regulations, the Bank of Italy has a wide range of intervention and sanctioning powers.
Supervisory authorities mainly enforce laws and regulations through written warnings, notices of infringement, and administrative pecuniary fines on persons and banks involved. Additionally, in cases of credit institutions at risk of insolvency, the Bank of Italy may issue extraordinary provisions.