Impact of regulatory changes

Here below are the regulatory changes introduced in 2015 impacting Banca IFIS:

  • Following the European Commission's adoption of the ITSs (Implementing Technical Standards) on Non-Performing Exposures and Forbearance Measures, on 21 January 2015 the Bank of Italy published the 7th update to Circular no. 272 of 30 July 2008 – Data reporting model (Matrice dei conti in Italian), which includes the new definitions of non-performing exposures applicable as from 1 January 2015. This update introduces two changes. The first concerns the classification of Non-Performing Exposures: starting from 1 January 2015, they will be broken down into Bad Loans, Unlikely To Pay, and Non-Performing Past Due Exposures and/or Overdrafts. The second introduces a new reporting element based on forbearance measures extended to customers/debtors based on their financial difficulties.
  • Introduction of the contribution to the Italian Bank Resolution Fund (Directive 59/201/EU Single Resolution Fund) and new funding mechanism for Italy's Interbank Deposit Protection Fund (FITD, Fondo Interbancario di Tutela dei Depositi) introduced by the Deposit Guarantee Schemes Directive (DGSD) 2014/49/EU.
  • Tax aspects: among the latest regulations on tax matters, the following impacted the determination of Banca IFIS's income tax expense the most. In particular:
    • Italian Law of 23 December 2014, no. 190, art.1, paragraphs 20-25 (so-called 2015 “Budget Law”): this law allows businesses to deduct all costs for employees on open-ended contracts from the IRAP (Italian regional tax on productive activities) tax base, which exceed the deductions already made. the provision, which applies also to banking entities, is effective for fiscal years beginning after 31 December 2014. This regulatory change slightly improved the Group's tax rate.
    • Italian Legislative Decree of 27 June 2015, no. 83, art. 16, para. 1: this provision has changed the rules for deducting bad debt and impairment losses. Effective from the annual period ending 31 December 2015, banks will be able to fully deduct credit losses in the first year they are accrued. In the first annual period the provision is effective—2015 for the entities whose fiscal year coincides with the calendar year—75% of bad debt and impairment losses can be deducted. The remaining 25%, as well as any amounts in excess relating to previous years that were not deducted, can be deducted (with diversified tax rates) over the following ten years, starting from 2016. This regulatory change does not impact the Group's tax rate, but it does affect the current tax expense.