The New Banking Crisis Resolution Mechanism Introduced in Italy Implementing Bail-in Measures: Issues of Constitutionality

Abstract

The article intends to provide an initial analysis of the controversial issues regarding the constitutionality of bail-in and other resolution measures provided by Directive 2014/59/EU, as implemented by the Italian legislative decree No. 180 of November 16, 2015. According to the new rules, the Bank of Italy, which is also the competent supervisory authority, may mandate creditors to participate and contribute to the bank’s refinancing in cases of financial distress or of possible collapse, through forced debt conversions or debt write-downs (the so called “bail-in”). The feasibility of this regulatory tool gives rise to numerous doubts and concerns with regards to its compliance with constitutional principles. In particular, with those principles underlying the right to property and the defense of patrimonial rights under Private Law, for the significant compression that it could entail with respect to the rights of shareholders and creditors of financial institutions in distress. Surely, the public interest in the proper operation of the banking sector and the functioning of financial markets represents the necessary assumption underlying all legislative interventions on bank recovery systems. However, the tendency is that of expanding their reach beyond control, as long as equal and uniform treatment is granted to those pertaining to the same category of investors. To the contrary, the Private Law of banking institutions and financial markets requires a continuous and mutual balancing of constitutional values and principles, without any pretense of absoluteness, in order to reconcile the need to safeguard investor rights and private property within the protection of the banking and financial sector. Refs 25.