BANKING AND INSURANCE: AN ITALIAN LAWYER'S PERSPECTIVE
1. Introductory remarks. - 2. Economic and legislative trends in Italian financial markets: evolution of the bank-insurance relationship. - 3. Shareholdings of banks in insurances and of insurances in banks. - 4. Joint holdings by banks and insurances. - 5. Cooperation by contract between banks and insurances: distribution, credit, insurance, variable policies. - 6. Competition between banks and insurances for access to the pool of savings and to the market of lending (and of guarantees). - 7. The next conflict area: pension funds. - 8. A view on the future. -
1. In the Fifties, Italian financial markets where shielded from foreign competition. They were also tightly supervised by State regulation to make sure that each category of financial intermediaries operated strictly within its own proper domain and refrained from encroaching in areas reserved to other intermediaries.
At this stage, paraphrasing Julius Caesar's opening remarks to De bello Gallico, it might have well been said: "Omnis finantia dividitur in partes tres", all finance is subdivided into three parts, the parts being banking, insurance and investment. The partitions seemed pretty obvious at the time.
The domain of (commercial) banking consisted in borrowing sums deposited by holders of surplus funds and lending them in turn to individuals and entities (typically: businesses) which run financial deficits.
While banks had the exclusive right to obtain deposits for the purpose of making loans (Art. 1 of the Royal Decree of May, 12 1936, n. 375, transformed into the Act of March, 7, 1938, n. 141), it was believed (1) that their exclusivity did not extend to other forms of savings. In particular, transfer of surplus funds from the public to economic units which required them could also take the alternative form of direct investment: in this case, the fund provider could acquire a financial asset, issued by the fund user (stock, bonds or other securities, artt. 2346, 2410 and 2472 of the Civil Code, enacted in 1942). The banking channel could thus be bypassed. As a consequence, while the financial asset might give greater benefits than bank interest on deposits (in the form of a higher yield or capital appreciation), at the same time the risk of default of the end user of the funds was no longer borne by a financial intermediary (the bank in the previous case) but directly by the investor. In this perspective, investment might have been viewed as the alternative to deposits most appropriate for risk prone surplus funds holders.
While Italian legislation regarded both deposits and direct investment as forms of savings, the one within and the other without the exclusive domain of banking, insurance was considered quintessentially different from either of them. While plainly another case of exhange of present wealth for future wealth, payments of a premiums were regarded not as funds made available to a financial intermediary but as the price for a service and, more specifically, for the service of neutralizing risks having a probabilistic character (art. 1882 of the Civil Code). As the amount paid out by the insured is not (and may never be) absolutely equal to the amount paid in by the insurer, insurance has traditionally been viewed as a means to take care of the risk of a future need (life insurance) or of a future loss (property and casualty insurance) at an average cost (2). In furtherance of this view, insurance fell outside of the banking preserve and was considered the exclusive domain of insurance businesses (3).
It is perhaps unsurprising that, at the time, the partitions embodied in the legal system of one of the western market economies (albeit emerging from two decades of authoritarian rule), corresponded quite neatly to the arrangements of a straightforward - though somewhat old-fashioned - textbook analysis.
However, there is one point in which the Italian system deviated from textbook economics. Life insurance was deemed to encompass not only risks concerning the term of human life (demographic risks) but also a particular kind of "financial risks": it is in the Italian legal tradition that long term warranty of a minimum capital or a minimum yield requires the setting up of mathematical reserves and is subject to the authorisations prescribed for insurance business (4).
2. Since then, a lot of water has passed under the bridges. I will mention here only a few of the developments which have in the meantime taken place.
A) Modernisation and internalisation of financial markets has put pressure on banks to evolve; and the evolution has been the one prescribed by EEC legislation (5). Banking is no longer only the business of transforming short term deposits into medium term loans; now it certainly encompasses activities as diverse as segregated fund management (handling of investment accounts of individual clients being now permitted by art. 16 of the Act of Jan. 2, 1991, n. 1) and even issuing short term interest bearing instruments (art. 1, lett. f of the Amalgamated Banking Code), which in the past were believed to be ouside the reach of banks (6). In fact, reference to commercial banking would be out of place today: the basic rule being that any kind of bank may as a principle engage in the full spectrum of admissible transactions, the model after which credit institutions are presently being fashioned is the so called "universal bank", prevailing in Germany.
B) Proliferation of financial intermediaries in the field of investment. At the beginning of the period only "società fiduciarie" were empowered to manage securities (in their name and) for the account of individual clients. Later on segregated fund management was made accessible also to SIM and banks (Act 1/1991); mutual funds (Act 77/1983) and SICAV (Act 84/1992) were granted the right to engage in pooled fund management; closed end funds were set up (Acts 344/1993 and 86/1994).
C) In the meantime, in the insurance industry, the ratio of securities and, particularly, stock investments over the total of the industry's investments has steadily increased (7); and, in the last decade, variable insurance policies, promising a yield or a capital value linked to the equities in which the premium funds are invested, have been increasingly promoted (8).
In this specific connection, it has been questioned whether variable insurance policies are to be considered securities, subject to the general regulatory framework designed for investment (9); and it has been asked whether insurance companies, rather than industries providing a service at a cost (10), should be viewed as financial intermediaries, "systematically raising funds from surplus holders and providing them to groups running financial deficits" (11).
Both groups of questions concern the relation of insurance to investment, as defined by relevant Italian legislation, so that we may leave them aside ouside of the scope of this paper (12). In the perspective chosen here it should, however, be noted that in the same lapse of time also the relationship between banking and insurance has underwent a similar change: current practice and legislative change have brought the two together in more than one area.
One area of overlap of the two kinds of institutions is the outcome of the evolution described in this paragraph. If we define segregated funds management as the service of professionally converting cash into portfolios of financial assets for the benefit of the individual client, we may easily see that this same activity is presently being carried outh both by banks (Art. 16 of the 1/1991 Act) and by variable insurance policies.
The same competition has been extended - to a point (13) - in the field of pooled fund management: legislative decree of April 21, 1993, n. 124, while establishing a general regulatory framework for pension funds, provides in its art. 6 that defined contributin plans may be manged, among others, by banks (lett. a) and by insurances (lett. b).
It may therefore be said that banks and insurances, originally neighbours in the legal order prevailing in the Fifties, have in the meantime ended up - at least in some areas - stepping over the same ground. Correspondingly, their mutual relationship may no longer viewed only in terms of cooperation but also of competition and, occasionaly, conflict. It seems therefore that time has come to try to review with a fresh eye the relationship between the two sets of institutions has shaped itself. In the next three paragraphs the varying patterns of cooperation between the two groups of firms shall be analytically considered; in the sybsequent two paragraphs attention shall be devoted to areas of competition. The final part of this paper attempts to establish whether any lesson may be drawn from this sort of analysis.
3. In a list of possible forms of cooperation between the two forms of business, I shall first consider relationships built through shareholdings. As a matter of fact, a long term community of interest between the two sorts of firms may be built by means of stock held in insurances by banks as well as of stock held by insurances in banks.
In this connection, it should be noted that until the late Eighties both kinds of shareholdings were severely restricted. Holdings by banks in insurances were believed to be outside the field proper of commercial banks (14); holdings by insurances in banks have been in turn questioned (15). In both cases, the restrictive approach flew from the legal principle whereby both banks and insurances act ultra vires when they engage, even through holdings of shares in other companies, in fields other than banking and insurance proper. Such an approach could not be further retained in its pristine form as the perception arose that the partitions between the two kinds of activities are after all not so clear cut as it had been previously imagined.
In fact, the developments sketched above, in bringing closer to each other the two business, seem to have had a clear impact on the regulatory body intended to determine admissibility of holdings.
This holds true first of all in connection with holdings by insurances in banks. The matter is now regulated by two bodies of legislation, the one concerning insurance business, the other banks. In the first perspective, under art. 4 of the Act of January 9, 1991, n. 20 (16), holdings of insurances in banks are admitted to the extent the insurance supervisory authority recognizes that the business of the latter is, in the specific case, linked to the business of the former. In the second perspective, the peculiar Italian legislation restricting holdings by non banking businesses in banks (17) has been relaxed (18) to allow holdings in banks by financial institutions including insurance businesses.
In turn, holdings in insurances, while not restricted in principle by insurance legislation (19), are expressly allowed by banking legislation (20).
The available data show that:
- property and casualty insurance firms have remarkably lesser holdings in banks than life insurances (7% and 27% of their respctive holdings in shares, data as of the end of 1991) (21);
- holdings by banks in insurances seem to be much more important than holdings by insurances in banks (22) and increasing at a swift pace (23).
Recent experience has confirmed that links between insurances and banks may bring about remarkable benefits as well as create clear dangers, if the supervisory machinery is not appropriately tuned to the occurrence (24). It is however commonly believed that "financial conglomerates" are a phenomenon as yet totally unfamiliar with the present structure of Italian markets (25). While this opinion is probably accurate at the present stage, a close eye should nevertheless be kept on the ways in which privatisation of public insurances is being carried out (26), also to make sure that the present supervisory machinery and its exchange control mechanisms are adequate to the developments in the area.
4. Shareholding give a chance of cooperation to the two groups of firms considered not only when they take the form of a holding by one kind of firm in the stock of the other. An alternative form of cooperative effort has been made possible by the developments in the overall structure of financial markets described above (27), which enable an insurance and a bank to jointly hold the capital of a financial intermediary freshly created by new legislation.
The chance has been promptly seized in the field of mutual funds. One of the first funds to be set up under the 77/83 Act was Generalcomit, significantly spawned by the biggest insurance and by one of the biggest commercial banks. Recent data seem however to suggest that in this field banks tend to have the upper hand and end up owning the lion's share in the market (28). Nevertheless, it is to be expected that insurances are to keep a significant role in mutual funds. Variable insurance policies may be linked - not only to funds formed within the matematical reserves of the firm - to units issued by mutual funds (29) which is a good enough reason for insurances to consider most carefully the option of holding shares in companies managing mutual funds.
It has also been suggested that a bank and an insurance may combine their efforts in setting up the standard financial intermediary provided by Italian legislation, labeled SIM (30). I am not aware of experiments to this effect; and maybe it is too early to try an evaluation of this kind of liaison.
5. Shareholding is by definition a way of cooperating. A shareholder cooperates with the structure it has invested in by bringing in capital and, possibly, by variously contributing to the latter's managerial decisions.
But cooperation between insurances and banks may obviously also take other forms. The one category may offer services for the other; or they may offer, jointly or severally, services intended for the same class of clients. In turn, the performance of these reciprocal or complementary activities of banks and insurances may be affected in various ways when one of the service providers holds shares in the other.
That banks need insurance coverage, from fidelity bonds concerning the behaviour of their employees to property insurance coverage for their premises, and that most of the monetary transactions of insurances pass through bank channels is quite obvious. However, as no significant change seems to have taken place in these regards, this kind of interaction needs not to be further explored.
A special attention should, therefore, be devoted to complementary activities of banks and insurances.
5.1. Distribution of insurance products through bank premises could be the most promising example of joint service by the two classes of business to the public at large. Here the product is to be "supplied" by an insurance and "sold" by a bank.
The advantages of such a division of work would seem pretty clear. The number of bank premises has expanded exponentially in the last few years, after a long period of tight control by the supervisory authority, as a consequence of EEC liberalisation; and at the same time it seems that the emergence of telebanking is going to make a great deal of bank premises obsolete, as US trends show, if their activities are to be confined to traditional bank services. Offering insurance products over the bank counter seems an obvious move to use distributional facilities which risk to remain underemployed. The same conclusion may be reached if we observe the situation from the insurers' angle: it is well known that one of the reasons why the level of prices of insurance products in Italy is remarkably higher in Italy than in the average of the EEC (31) in spite of an acceptable concentration ratio of the industry (32) is to be found in the obsolete character of insurance distribution, based on networks of territorial "agents" to the expense of more innovative intermediaries like brokers (33). Resort to bank channels for the distribution of the more standardized insurance products al well as of those products, as touristic assistance policies (35) and endowment mortgages (36), for which the specialized knowledge of insurance intermediaries plays a minor role, would therefore appear the easy way out of many of the problems of both industries. Those, in turn, seem to be well aware of the potential, as many one-way or two-ways shareholdings set up in recent years seem to have been engineered precisely for the purpose of establishing this kind of cooperation (37).
The figures witnessing a trend in this direction are fragmentary and therefore far from satisfactory (38), but they support the view that arrangements intended to channel the sale of policies through bank networks do have a future.
Unfortunately, the legislative framework is unsatisfactory. Art. 2 of the Act 792/1984 has been interpreted (39) as banning distributive channels other than "agents" and brokers. ISVAP, the supervisory body of insurance, acknowledges that the present legal setting is unsatisfactory (40) but does not seem to come up with really workable solutions as it suggests that "professional intermediaries" might be acting on bank's premises (41). This solution might turn out to be worse than the problem, to the extent it might encourage banks to retain on a stable basis brokers, which by law should be independent from any particular principal; and it certainly does not create an incentive for banks to develop a specific know how for distributing an innovative product (42). As a consequence, banks seem to be stepping in the business simply as "treasurers", handling premiums - and commissions - on the strength of negotiations which remain outside their reach even for standardized policies, where they would encounter no commercial difficulty in carring out the entire job (43).
5.2. Many decades of practice seemed to have shown that banks and insurances could fare well together in giving financial assistance to their business clients. "A firm purchasing insurance coverage against the possibility of default of its debtors non only eliminates or reduces the corresponding risk" - it has been noted (44) "but also reaps the additional benefit of more easily obtaining financing from banks. This form of insurance is therefore simultaneously a device to extend the borrowing capacity of the insured". In fact, advance financing from banks against discounting of notes or receivables certainly becomes easier, once the bank is aware that the credit given as collateral is no longer subject to the risk of default; and even more so, when the bank becomes, under the terms of the policy, the "loss payee" of the effected insurance and acquires the right to receive whatever indemnities are due for loss of credit directly from the insurer.
However, the banks seem to have preferred entering the business of making funds available to their business clients by purchasing the latters' credits rather than continuing to receive them as collateral for advances. It is not unusual that in the practice of factoring or forfaiting the bank - or one of its subsidiaries - purchases the credit for a price lower than its face value and correspondigly directly bears the risk of default by the ceded debtor. Good credits and bad credits are thereby pooled in the hands of the purchasing bank and the resulting risk is averaged out. As a consequence self-insurance by the bank replaces outside insurance. Plainly, the room for bank-insurance shrinks to the same extent as banks manage to be efficient risk poolers (45) .
5.3. It has already been noted (46) that a cooperative relationship may be formed between a bank and an insurance by setting up a joint financial intermediary and, specifically, either a SIM or - more to the point - a company for the management of mutual funds. The cooperative potential of the latter structure lays, as noted, in the fact that it leads to the provision of "units", which the insurance may in turn use to build its policies (47).
6. It is not suggested here that the activities described in the previous paragraph exaust the whole range of possible cooperative efforts between bank and insurances. However, they seem to cover a large portion of the total ground. And, if it is so, then the fact is to be faced that, of the various cooperative forms considered, one (distribution, 5.1.) is resorted to suboptimally, the other (combination of lending with credit insurance, 5.2.) is recessive, whereas the last one, while apparently growing, is to be located at an intersection of finance which does not belong either to banking or to insurance proper (See above, 2.B).
Against this background, it appears hardly surprising that the relationship between the two categories of firms has developed along competitive - rather than cooperative - lines.
In fact, the two categories of firms seem to have become increasingly competitive in a number of areas, and, specifically, (i) for the access to the pool of savings accumulated by surplus fund holders (typically families); and (ii) for access to the market of lending (typically to businesses), provided that lending is intended in the broad meaning of the expression (48). In both cases, the development has raised the question whether insurances involved in the process were engaging within their boundaries or were rather encroaching on the preserves granted by legislation to banking.
The issues raised by variable policies should be revisited in the first perspective. In fact, it may well be that, in legal terms and for regulatory purposes, the question may be whether such a policy is to be considered a "security" and the insurance company offering it should be considered a financial intermediary (49). But, in economic terms, variable policies seem to be not only an alternative to investment (50) but also - and possibily even more so - to bank deposits, specially if they carry additional features, such as the policyholder's entitlement to obtain loans from the insurer by using the policy as a collateral or, as in the case of the so called Universal policies, the provision for the opening of a current account between insurer and insured. In the last instance - which has not yet been tested because, to my knowledge, Universal policies have not appeared on the Italian market, it might well be argued that the issuing insurer infringes the banker's monopoly to "collect savings" under art. 10.1 of the Amalgamated Banking Code (51).
Similarly, competition to deposits (and short term interest bearing instruments issued by banks) (52) may come from financial products which have the format - but possibly not the function - of life policies. Accordingly, it has been questioned whether a short term life policy (e.g. for one year), based on the payment of a single premium, guaranteeing immediate return of a capital increased by a flat sum in case of death or by an agreed interest rate in case of survival is admissible or should rather be regarded as a different kind of financial product which is beyond the scope of insurance business (53).
When we turn to the other perspective - competition in the market of lending - we may start by considering that, the - albeit partial - displacement of credit insurance by various forms of purchase of commercial credit without recourse (54) may be seen as a case of emergence of competition in an area in which a clear division between complementary services previously prevailed.
Interesting as the phenomenon may be in itself, it does not seem to pose regulatory questions. After all, if banks believe to be able to self insure when they purchase their client's credits (good and bad) for a price, insurances may not complain.
More complex issues seem to arise in another form of competition on the lending side of the market; and, more specifically, in the business of credit giving by means of issuing guarantees. Bank guarantees and bank bonds (on demand) on the one side, insurance guarantees and bonds on the other seem to be perfect substitutes for a creditor looking for the certainty and punctuality of payment or performance; both have emerged as an alternative to the actual deposit of sums of money by the debtor in the hands of creditors. In some countries this kind of business has been entered into by banks, in others by insurances, while in still other countries banks and insurances have jointly set up companies specializing in this branch of activity (55).
It is beyond the scope of this paper to trace the development that has led Italian insurers to compete on equal terms with banks in this section of the business (56). What should be pointed out here is that there appear to be a few difficulties in reconciling the catastrophic character of defaults (after all, in periods of recession a number of debtors greater than the average established over the years are bound to default all at the same time) with the conventional notion that the insurer's function is to aggregate uncorrelated risks (57); and that, even once it may be established that the particularity of reserve building in this branch has taken care of the correlatedness of the risk covered (58), insurance guarantees and bonds still raise a question of applicable rules. This question may not be solved until it is conclusively established whether insurers acting in this field are in fact mimicking bank bonds or offering a genuine insurance product, to which all or some of the corresponding rules - concerning for instances warranties and misrepresentation, in lieu of the general law of contracts concerning mistake and fraud - should apply.
7. The most controversial issue concerning the relationship between banking and insurance lies, however, in another area: the management of pension funds.
As indicated, a general regulatory framework in this regard has been established by Decree 124/1993. However, it is while this paper is being drafted that the system seems to be set in motion, as legislative action is underway which intends both to cut the benefits provided by the social security system and to grant the long awaited financial incentives necessary to get the (private) collective pension fund system going.
Under Decree 124/1993 funds are to be managed by a variety of intermediaries (art. 6). Defined contribution plans may be managed both by banks and by insurances (letts. a) and b) of art. 6). However, defined benefits plans and plans guaranteeing a minimum yeld are to be managed by insurances only (art. 6.2), as was to be expected in a system in which the notion that warranty of a minimum capital or yield is insurance business is deeply engrained (59) and art. 1, n. 2, letts. b-d) of the first non-life EEC Directive (267/1979) is read, in connection with art. 2.2. of the same Directive, as confirmative of the traditional Italian approach (60).
Against this setting, it may be understood that the announcement that pending legislation authorizes banks to manage also defined benefits plans has raised vocal opposition from the insurance community (61).
8. Any descriptive analysis has a prescriptive side to it. In the light of the developments sketched above, it cannot be doubted that any attempt to revert to a system in which the field of finance is rigidly subdivided in its original components, investment, finance and banking, makes no sense.
This does not mean that we do not have to ask ourselves whether there are boundaries between different kinds of activity which have to be preserved.
It would seem that definition of reserved spheres of activity still is a vital part of legislation on financial markets. For instance, pooled fund management is an activity reserved to certain kind of intermediaries (mutual funds and SICAV); and the rationale for this choice - investors' protection - is quite accepted. If we are to draw a line somewhere between banking and insurance, what criteria should guide us? I believe the reply lies in the pursuit of two purposes: to foster whatever competitive advantage the one category of firms may have over the other and to optimize the working of supervisory structures. In connection with the first purpose, it should be noted that, while the overall rate of savings seems to be shrinking, it would seem that this adverse trend is affecting more than proportionally surplus funds flowing into bank deposits, while a still sizeable amount of financial surplus seems prepared to be channelled into innovative financial assets, which, in traditional terms, would be ascribed to investment or insurance.
If these objectives are accepted, it should follow that:
(i) the monopoly of distribution of insurance products, granted to agents and brokers, serves no appreciable purpose and should be abolished;
(ii) to the extent that insurances are thought to be more capable or better supervised in managing certains categories of funds (e.g.: variable policies; giving long term warranties of a minimum capital or yield), they should be enabled to do so and even, when required, granted exclusive authority to enter the corresponding engagements. In particular, if it is believed they possess unique talents for channelling one of the still growing portions of the savings pool, they should be enabled to exploit them.
Such an approach does not entail any kind of restraint on competition: if banks are interested in business reserved by legislation to insurances, nothings prevents them to set up insurance subsidiaries.
The developments underway seem to be following a totally different route. In the Italian system, insurance agents seem to have considerable political clout and to be able to preserve their monopoly, foreclosing a fruitful area of cooperation between banks and insurances. Banks compensate for this loss, as well as for the reduction of savings apt to be directed into deposits, by branching out in all kinds of directions, possibly also encroaching on insurers' sphere. Such an evolution seems far from being dictated by criteria of allocative efficiency. It seems rather to be the combined effect of the overall economic power of banks (after all the largest of Italian financial intermediaries), of the selective political power of agents and of the relative weakness of insurances vis-a-vis both banks and agents.
If this is the case, then the outlook for Italian financial markets may turn out to be rather bleak. We should never forget that the Kingdom of Naples, before the Unification of Italy in 1861, was endowed both with established insurances and important banks. The ones disappeared under the pressure of Northern competition; the others found their way - not always in the most crystalline of ways - in the changed political and economic constellation. Italy as a whole is now the South of Europe; and it would be unfortunate if, turning back on our economic history in a few decades, we should establish that it was in the Nineties that we doomed our insurances to become marginal just at the time when they might have given a significant contribution to Europan financial markets.
(1) In spite of the fairly extensive wording of the controlling provision of art. 1 of the Act 141/38. For a complete discussion of this point see M. MIOLA, Il risparmio assicurativo, Napoli, 1988, p. 74 ff.
(2) See, among others, G.L. PRIEST, The Current Insurance Crisis and Modern Tort Law, The Yale Law Journal, Vol. 96, 1987, 1521 ff., at 1539.
(3) Under the Presidential Decree of February 13, 1959, n. 449, Amalgamated Insurance Code.
(4) Art. 33 of the Amalgamated Insurance Code. For a discussion of the subject and reference to the different German and British approach in the matter see G. VOLPE PUTZOLU, Le assicurazioni. Produzione e distribuzione, Il Mulino, Bologna, 1992, 31 f., 53 and n. 12, 195 ff.
(5) Implementation of the various EEC banking directives, initially carried out by piecemeal legislation, has ultimately led to the Amalgamated Banking Code of September 29, 1993, n. 385.
(6) See for a strict stance on the issue G. FANELLI, Assicurazione sulla vita e intermediazione finanziaria, in Ass., 1986, I, 210 ff.
(7) According to data published by the Report by A. LONGO, the Chairman of ANIA, the insurance firms' confederation, issued Nov. 22, 1994, published as A. LONGO, Il mercato assicurativo in Italia, in Ass., 1994, 439, at 441, fixed interest bond and stocks made out respectively 64,9% and 14,4% of total investment of insurances. For data detailing holdings by life insurances and property/casualty insurances see Relazione del Governatore della Banca d'Italia, issued in Rome May 31, 1994, published in Assic., 1994, I, 196 ff. at 199.
(8) It is however to be noted that, according to data published in the Relazione del Governatore della Banca d'Italia, mutual funds units held by life insurances represented in 1992 and 1993 a very minor share of total bond and stock holdings by life insurances, 108 billion lira over a total of 58.507 for 1992, 346 over 73.778 for 1993. Data for 1993 are estimates.
(9) Legal duty to issue a prospecuts; supervision by the Italian securities commission, CONSOB, under the Act 77/83. See, for the affirmative, M. MIOLA, and G. ROSSI, Offerta al pubblico di titoli, controlli e strutture del mercato, in Riv. soc., 1985, 1 ff. The negative solution is suggested by G. FANELLI, Assicurazione sulla vita, at 199 ff. and G. VOLPE PUZOLU, 174 ff. An intermediate approach is now proposed by A. GAMBINO, Linee di frontiera tra operazioni di assicurazioni e bancarie e nuove forme tecniche dell'assicurazione mista sulla vita a premio unico, in Ass., 1993, I, 157 ff.
(10) This view is being still firmly held by A. GRAZIANI-G. MINERVINI-U. BELVISO, Manuale di diritto commerciale, Morano, Napoli, 1994, 351 f.
(11) G. CASTELLANO-R. COSTI, Attività bancaria e attività assicurativa nell'intermediazione finanziaria, in (A. NIGRO-G. VOLPE PUTZOLU eds.), Profili di concorrenza e di integrazione fra attività bancaria e attività assicurativa, Giuffré, Milano, 1985, 3 ff., at 4.
(12) But, for the relevant angle in the present context, see herafter, par. 6.
(13) See paragraph 7 hereunder.
(14) See the Rules issued by the Interministerial Committee for Credit and Savings of January 28, 1981 and, for a comment, G. CASTELLANO-R. COSTI, 21.
(15) For a state-of-the art discussion see Un dossier su banche e assicurazioni: contributi di G. CASTELLANO, G. FANELLI, G. GUARINO, N. IRTI, P. SCHLESINGER, B. LIBONATI, P.G. JAEGER, in Giur. comm., 1987, I, 809 ff. and 851 ff.
(16) Specifically intended to regulate holdings by insurance companies and in insurance companies. On the implementation of this piece of legislation see the essay prepared by one of the key figures in the supervisory body of insurance, ISVAP: G. MANGHETTI, Evoluzione del sistema assicurativo e disciplina della legge n. 20/1991, in Dir. ec. ass., 1993, 649 ff.
(17) Enacted as a part of the Italian antitrust law, Act of October 10, 1990, n. 287. For a criticism of the underlying approach see G. CAMPOBASSO, Le partecipazioni al capitale delle banche, in BBTC, 1994, I, 285 ff., specially at 302 f.
(18) Not uncontroversially: a stricter approach has been favored, under Act 287/90, by A. PATRONI GRIFFI, Assicurazioni e banche: intreccio di attività e intreccio di controlli, in Ass., 1992, I, 32 ff., specially at 35-39) by the Rules issued by the Interministerial Committee for Credit and Savings of April 19, 1993 (Published in BBTC, 1993, I, 522 ff. See also art. 19.6. of the Amalgamated Banking Code. It may be questioned whether the deletion of art. 27 of the Act 287/90 by virtue of art. 161 of the Amalgamated Banking Code has left open the questions raised by A. PATRONI GRIFFI, 35 ff.
(19) Artt. 9-11 subject purchase of shares in insurance companies to certain notice and authorisation requirements, with the view of preserving the stability and the autonomy of insurance firms, but are neither intended nor used to prevent acquisitions by banks: see G. MANGHETTI, 656 ff.
(20) See the Instructions of the Bank of Italy concerning shares held by banks and bank groups of Nov. 16, 1993, n. 269, published in BBTC, 1994, I, 417 ff. The limits - set forth at 421 - and the requirement of authorisation built in the system - are intended to avoid that any particular holding exceeds certain ratios to the bank assets.
(21) See G. MANGHETTI, 651 and Attachments 1 and 2 at 664-5.
(22) See G. MANGHETTI, 660.
(23) A. LONGO, 452 indicates that holdings by banks giving them control or substantial influence over insurance firms concerned 5% of the market in 1990, 15% in 1994.
(24) See on the EEC draft proposed BCCI follow-up Directive, in OJ 1993 C229/10 and for a comment P. WOOLFSON, "Bancassurance" and Community Law: Current Status and Expected Developments, in INTISL, 1994, 404 ff.
(25) See G. MANGHETTI, 653.
(26) From press reports, it would seem that, while three (formerly public) banks, IMI, S. Paolo and Cariplo, are to purchase a total of 15% of the share capital of the large (formerly public) life insurance INA, the latter is to purchase 2% in the share capital of each of said banks (see La Repubblica, April 22, 1995, p. 23). Whether this situation will trigger the dangers envisaged by the so called BCCI draft directive, is obviously still to be seen.
(27) See hereafter paragraph 2, lett. B.
(28) See the data published in Relazione del Governatore della Banca d'Italia, 197.
(29) See paragraph 2, lett. C above.
(30) See M. CHIARLO, L'integrazione compagnie di assicurazione-banche, in Ass., 1992, I, 246 ff. at 264.
(31) See Autorità garante della concorrenza e del mercato, Relazione annuale sull'attività svolta, April 30, 1994, p. 82.
(32) Relazione annuale, cit., 81.
(34) Relazione annuale, 81-2.
(35) M. CHIARLO, 252.
(36) M. CHIARLO, 263.
(37) For a first analysis see S. PREDA-F. LEONE, Le clausole di esclusiva nei rapporti banche-assicurazioni, in Dir. ec. ass., 1993, 377 ff.
(38) The data offered by the Banca d'Italia's Relazione del governatore, at 199, are based on a - surely significant - sample of agreements entered into by 95 banks with 38 insurances and report a growth of 5,7% in value of policies sold in 1993 over 1992. According to A. LONGO, 452, the value of life insurance premiums received through bank channels in the first semester of 1994 exceeds 25% of the aggregate. In turn, the Relazione annuale by the Anitrust authority, at 82, estimates that 7% of the overall value of policies passes through bank channels.
(39) By the Consiglio di Stato, opinion n. 1808/75 of December 10, 1985.
(40) ISVAP, Rapporto sull'attività dell'Istituto nell'anno 1993, in Ass., 290 ff. at 293.
(41) Rapporto, 292-3
(42) The limitations discussed in the text seem particularly anachronistic if contrasted with UK developments in alternative channels, which witness marketing of pension fund policies through retail stores. See B. RILEY, A hard pressed life industry is facing tough new competition, in Financial Times, April 22, 1995.
(43) It should be noted that better alternatives seem open than the one suggested by ISVAP: the bank might well act as subagent for a company set up by it and appointed agent by the insurance, as suggested by M. CHIARLO, 260. And it should be noted that the "monopolistic" reading of art. 2 of the 792/1984 Act is not accepted by the most authoritative writers: see G. VOLPE PUTZOLU, 222 f. For the peculiar practice of Italian banks to purchase casualty insurance on behalf of their account holders in absence of instructions from the latter - and the serious questions raised thereby - see G. CASTELLANO-R. COSTI, 23 f.
(44) G. CASTELLANO-R. COSTI, 24.
(45) However, recent data on bad debts by banks - see R. BOCCIARELLI, Banche, i bilanci da oscuri a Bianchi, in La repubblica, Affari & Finanza, April 24, 1995, p. 7 - seem to suggest that the expansion referred to in the text may have reached limitis which find an explanation more in the terms of political markets theory than in the ones of allocative efficiency.
(46) Above, paragraph 4.
(47) See however the data above in note 8.
(48) See hereafter, note 55? and prior text.
(49) See above, paragraph 2.
(50) As defined above, paragraph 1.
(51) The opposite opinion is held, however, by an eminent writer as G. FANELLI, 191.
(52) See paragraph 2.A above.
(53) For the second alternative A. GAMBINO, 165. It should be also kept in mind that is traditionally - and loosely - said that reinsurers are in the business of lending to direct insurers and borrowing from them: I am not sure that the question should not deserve closer scrutiny in both the perspectives examined in this paragraph.
(54) See above, 5.3.
(55) G. CASTELLANO-R. COSTI, 27.
(56) For a comment of the latest Ruling by ISVAP, of October 24, 1991, n. 162, see the document prepared by ANIA, Nuova regolamentazione amministrativa delle assicurazioni del credito e delle cauzioni, in Dir. ec. ass., 1993, 417 ff.
(57) G. L. PRIEST, 1540.
(58) For information on the so called equilibrium reserves in branches as hailstones coverage, insurance bonds and the like see G. VOLPE PUTZOLU, 34 ff.
(59) See above, paragraph 1. For a defense of the rationale of this rule see G. FANELLI, 210 ff.
(60) See, for instance, G. FANELLI, 217 and G. VOLPE PUTZOLU, Fondi pensione: responsabilità e garanzie, in Ass., 1994, 224 f. at note 1.
(61) G. SCHETTINO-V. SIVO, Pensioni, lo Stato aiuta i Fondi, in La Repubblica, April 4, 1995.