Financial

Standards
Report

Italy
March 2010

www.eStandardsForum.org
 Financial Standards Report Italy
March 2010

Table of contents

I. Principles of Corporate Governance

II. Code of Good Practices on Transparency in Monetary Policy
III. International Standards on Auditing

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 Financial Standards Report Italy
March 2010

Principles of Corporate Governance

LEVEL OF COMPLIANCE: ENACTED

Summary legislation, underdeveloped equity markets, pyramidal groups,

and very high ownership concentration with 90 percent of
The corporate structure of traditional Italian companies is
Italian companies being family-owned. While in some areas the
somewhat unusual in comparison to the Anglo-American
Italian corporate governance framework incorporates more
model or German model. According to a 2005 International
stringent investor protection requirements in comparison to
Monetary Fund's (IMF) report, shareholders of traditional
international standards, as stated in the International Monetary
Italian companies elect a Board of Directors, as well as a
Fund's (IMF) 2006 Financial System Stability Assessment
separate Board of Statutory Auditors. Legislation was enacted
(FSSA), its benefits were not always fully realized. According
in 2004 to give Italian companies greater flexibility in their
to the 2005 Organization for Economic Co-operation and
organizational structure by allowing them to select between
Development’s (OECD) Economic Survey of Italy, there was
unitary board, a two-tier board, or the traditional Italian model.
also a need to strengthen the protection of minority
Nevertheless, the IMF report noted that virtually all listed
shareholders as stressed by the OECD’s Principles of
companies at the time continued to follow the traditional Italian
Corporate Governance.
model. A 2009 Chartered Financial Analyst (CFA) Institute
report however, cites that more changes to existing corporate
The corporate structure of traditional Italian companies is
governance models are expected due to an “evolving market
somewhat unusual in comparison to the Anglo-American
structure”, which suggests the potential for greater engagement
model or German model. According to the IMF’s 2005 report
of shareholders and a broader distribution of shareholder
on Selected Issues, shareholders of traditional Italian companies
rights. The corporate governance regime in Italy has undergone
elect a Board of Directors, as well as a separate Board of
considerable legislative reform, including the enactment of the
Statutory Auditors. The Board of Directors is responsible for
1998 Draghi Law, which was last amended in 2008. A new
assessing the suitability of business plans and organization,
Corporate Governance Code was also promulgated by the
whereas the Board of Statutory Auditors is responsible for
Italian Stock Exchange (Borsa Italiana) in March 2006, replacing
assessing governance and internal control issues. A 2009
the 1999 Preda Code. According to the 2009 CFA report,
European Corporate Governance Institute’s (ECGI) report by
compliance with the Corporate Governance Code is on a
Luca Enriques states that revisions to Italy’s general corporate
“comply or explain” basis and companies that have adopted
law in 2001-2005 allowed companies to select between
the Code are required to publish annual statements regarding
adopting an Anglo-American-style unitary board, German-style
the extent of their compliance. As stated in the same report,
two-tier board, or the status quo of the traditional Italian
a number of companies have disclosed their corporate
model. The report observed that most companies have
governance mechanisms and have even modified their systems
retained the traditional Italian model in part due to the “unclear
in order to comply with the Code. On April 9, 2009, in
and complex features in the law devising the alternative ones”
response to financial market volatility, Italy adopted Law No. 33
(p. 29). As of December 31, 2008, 7 two tier companies and 4
of 2009 in order to protect listed companies against speculative
one-tier companies were listed on the Italian Stock Exchange.
hostile takeovers.
However, a 2009 report by the Center for Financial Market
Integrity of the Chartered Financial Analyst (CFA) Institute
General Overview asserts that changes to existing corporate governance models
A 2005 study by Heidrick & Struggles highlighted that the Italian are expected due to an “evolving market structure” (p. 48),
corporate governance regime was generally characterized by which suggests the potential for greater engagement of
limited legal protection for investors, poor enforcement of shareholders and a broader distribution of shareholders’ rights.

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According to the same report, the most change so far has
been induced by majority shareholders “forcing out
underperforming old-style managements,” albeit with still little
involvement from minority shareholders. The report does go
on to note, however, that new laws have provided minority
shareholders with mechanisms to appoint board directors.
In 1999, the Committee for the Corporate Governance of
Listed Companies, also known as the Preda Committee, issued
a Code of Conduct (Preda Code) to enhance Italian
companies' competitiveness. According to a KPMG's 2001/
2002 Survey on Corporate Governance in Europe, the Preda
Code addressed the proper control of company risks, the
creation of a suitable proxy system, transparency, and the
maximization of shareholder value. Compliance with the Preda
Code was voluntary for Italian listed companies. In 2006, the
Preda Code was replaced by a new Corporate Governance
Code (CG Code). According to the 2009 CFA Institute report,
compliance with the CG Code is on a “comply or explain”
basis and companies that have adopted the Code are required
to publish annual statements regarding the extent of their
compliance. As stated in the same report, a number of
companies have disclosed their corporate governance
mechanisms and have even modified their systems in order to
comply with the CG Code. Amendments to the CG Code
made in 2008 also required companies to, as much as possible,
ensure that shareholders have access to information related to
understanding and exercising their rights. Further amendments
to the Code were adopted on March 3, 2010. According to
a press release on the Italian Stock Exchange (Borsa Italiana)
website, new principles regarding remuneration and disclosure
independence requirements were included in the revision.
In 2002, a study prepared by the international law firm Weil,
Gotshal & Manges for the European Commission, noted that
the corporate governance regime in Italy had undergone
considerable legislative reform. Legislative Decree No. 58 of
1998 (Consolidated Law on Financial Intermediation or the
“Draghi Law”) set out the institutional framework for the
regulation and supervision of the Italian securities market. The
Draghi Law, per the IMF’s 2006 Detailed Assessment of Italy's
compliance with the International Organization of Securities
Commissions’ (IOSCO) Objectives and Principles of Securities
Regulation, establishes in detail the powers of the CONSOB
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Financial Standards Report Italy
March 2010
and BoI, as well as the activities they may perform, and
identifies the persons and entities subject to their respective
supervision. Per the 2009 ECGI report, the Draghi Law
“streamlined the legal framework on securities offerings,
takeover bids, disclosure obligations and audit firms” as well as
granted additional rights to minority shareholders and lifted the
ban on proxy voting. In addition to this, the Italian government
adopted Legislative Decree No. 6 (Corporate Law Reform)
in January 2003, which governs limited liability and joint-stock
companies and cooperatives. In the wake of corporate
insolvencies, including the Parmalat scandal of 2003-04, the
Law on Savings No. 262 of 2005 (Savings Law) was enacted
in January 2006 to improve corporate governance of listed
companies, increase transparency, and enhance consumer
protection.
According to the 2009 CFA Institute report, amendments
to the Draghi Law made in 2008 contributed to increased
shareholder protection in Italy. The amendments resulted in
a requirement for the bylaws of all Italian issuers to “now
include specific processes that ensure equitable appointments
to the board of directors” (p. 49), the report notes. Company
bylaws are now required to contain directions stating that
at least one member is elected from the minority slate, and
that minority candidates must not be in any way linked with
shareholders representing the majority slate. In April 2009,
Law No. 33 of that year (Law on Economic Incentives) was
adopted by the Italian Parliament, amending several provisions
in the Italian Securities Act and Civil Code. The law was
enacted in order to discourage speculative hostile takeovers
fueled by the depressed value of many listed companies in
the current financial market turbulence. According to a 2009
Shearman & Sterling report, the law aims to allow “for more
effective defensive measures against hostile takeovers” (p. 1)
by amending provisions concerning mandatory tender offers,
disclosure on shareholdings and treasury stock. The report
however does also state that it was “too early” to predict the
impact of the provisions of the new law.
Italy has also increased the sanctioning powers of the National
Commission for Listed Companies and Stock Exchange
(CONSOB), enhanced minority shareholders' rights,
introduced more stringent rules on external auditors, and
reinforced compliance with the Corporate Governance Codes.
4

A more central role was also given to the CONSOB by
increasing its resources and powers to act independently from
the Ministry of Economy and Finance (MEF). According to the
IMF's 2006 report, the CONSOB and the Bank of Italy (BoI)
share responsibility for securities regulation under a functional
approach to supervision, and are required to cooperate in a
coordinated manner in the areas in which they share authority.
The Borsa Italiana, Italian Stock Exchange, is also entrusted
with regulatory and market management powers over listed
companies. The Borsa Italiana merged with the London Stock
Exchange in 2007. According to the 2009 CFA report, the
Borsa Italiana “monitors both the implementation of the CG
Code” along with the “ongoing development of the regulatory
framework” (p. 48).
As noted in the International Bank for Reconstruction and
Development/The World Bank's (IBRD/WB) 2010 Doing
Business report, investor protection in Italy is slightly below
the average achieved by member states of the OECD. The
Investor Protection Index is a subcomponent of the IBRD/
WB's 2010 Doing Business Indicators, and consists of three
dimensions of investor protection: transparency of transactions
(Extent of Disclosure Index), liability for self-dealing (Extent
of Director Liability Index) and shareholders' ability to sue
officers and directors for misconduct (Ease of Shareholder
Suits Index). The indexes range from 0 and 10, with higher
values indicating greater disclosure, greater liability of directors,
greater powers of shareholders to challenge the transaction,
and better investor protection. Italy scores 7 in the disclosure
index against an OECD average of 5.9. It scores 4 in the
Director Liability Index against an OECD average of 5.0 and 6
in the Shareholder Suits Index against an OECD average of 6.6.
Principle: Principle I: Ensuring the
Basis for an Effective Corporate
Governance Framework
[Insufficient Information]
As mentioned earlier, the Preda Code was issued in 1999
by the Committee for the Corporate Governance of Listed
Companies to enhance Italian companies' competitiveness.
According to the KPMG's 2001/2002 Survey on Corporate
Governance in Europe, the Preda Code addressed the proper
control of company risks, the creation of a suitable proxy
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Financial Standards Report Italy
March 2010
system, transparency, and the maximization of shareholder
value. Compliance with the Preda Code was voluntary for
Italian listed companies. In 2006, the Preda Code was replaced
by a new Corporate Governance Code. According to the 2009
CFA report, compliance with the CG Code is on a “comply
or explain” basis and companies that have adopted the Code
are required to publish annual statements regarding the extent
of their compliance. According to the same report, a number
of companies have disclosed their corporate governance
mechanisms and have even modified their systems in order to
comply with the CG Code.
According to Weil, Gotshal & Manges (2002), the corporate
governance regime in Italy has undergone considerable
legislative reform. In January 2003, the Italian government
adopted the Corporate Law Reform, which governs limited
liability and joint-stock companies and cooperatives. In the
wake of the Parmalat scandal during 2003-04, the Savings
Law entered into force in January 2006 to improve corporate
governance of listed companies, increase transparency, and
enhance consumer protection. The Draghi Law sets out the
institutional framework for the regulation and supervision of
the Italian securities market. According to the IMF's 2006
Detailed Assessment of Implementation of the IOSCO
Principles, the CONSOB and the BoI share responsibility for
securities regulation under a functional approach to
supervision, and are required to cooperate in a coordinated
manner in the areas in which they share authority. The Draghi
Law establishes in detail the powers of both regulators and
the activities they may perform, and identifies the persons
and entities subject to their respective supervision. The Borsa
Italiana is also entrusted with regulatory and market
management powers over listed companies, and merged with
the London Stock Exchange in 2007. According to the 2009
report by the CFA Institute, the Borsa Italiana “monitors both
the implementation of the CG Code” along with the “ongoing
development of the regulatory framework” (p. 48).
The 2009 CFA Institute report notes that amendments to
the Draghi Law made in 2008 contributed to increased
shareholders’ protection in Italy. Per the same report, these
amendment resulted in a requirement for the bylaws of all
Italian issuers to “now include specific processes that ensure
equitable appointments to the board of directors” (p. 49). In
5

addition to this, the Draghi Law also requires companies to
disclose information on their compliance with their adopted
code of conduct. However, despite fairly recent developments,
available sources do not directly address Italy's compliance with
this principle.
Principle: Principle II: The Rights of
Shareholders and Key Ownership
Function
[Insufficient Information]
The Italian Civil Code contains the main provisions with regard
to the treatment and rights of shareholders. According to
the IMF's 2006 Detailed Assessment, the Civil Code and
CONSOB regulations require members of the Board of
Directors, Board of Statutory Auditors, as well as general
managers of the company "to carry out their duties with due
diligence and to be liable for losses arising from the failure to
fulfill their responsibilities" (p. 13). A provision under the Draghi
Law also permits shareholders of listed companies to bring
collective action against the members of the Board of Directors
for breach of their legal duties. The 2009 CFA Institute report
details the 2008 amendments made to this same law, which
it referred to as having contributed to increased shareholder
protection in Italy. Per the same report, these amendments
resulted in a requirement for the bylaws of all Italian issuers
to “now include specific processes that ensure equitable
appointments to the board of directors” (p. 49). Alongside this,
the report also states that shareholders representing at least 10
percent of holdings are able to request shareholder meetings
and have the power to add items onto the meeting agenda.
A 2008 amendment to the CG Code requires companies
to, as much as possible, ensure that shareholders have access
to information related to understanding and exercising their
rights. Proxy voting is allowed in Italy, but is subject to certain
restrictions. However, despite the above information, available
sources do not directly address Italy's compliance with this
principle.
Principle: Principle III: The Equitable
Treatment of Shareholders
[Insufficient Information]
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Financial Standards Report Italy
March 2010
As stated in the 2005 OECD’s Economic Survey of Italy,
there was a need to strengthen the protection of minority
shareholders as stressed by the OECD’s Principles of
Corporate Governance. According to the IMF's 2006 Detailed
Assessment of Implementation of the IOSCO Principles, the
Civil Code and the CONSOB regulations guarantee the fair
and equal treatment of shareholders, and require members
of the Board of Directors, Board of Statutory Auditors, as
well as general managers of the company "to carry out their
duties with due diligence and to be liable for losses arising
from the failure to fulfill their responsibilities" (p. 13). With
respect to listed companies, the Draghi Law requires listed
issuers to guarantee the same treatment to all holders of
identical financial instruments. A provision under the Law also
permits shareholders of listed companies to bring collective
action against the members of the Board of Directors for
breach of their legal duties. In practice, however, the legal
protection for minority shareholders was not fully realized,
according to the IMF's 2005 report on Selected Issues, as
collective action of minority shareholders for misrepresentation
against the members of the Board of Directors was unlikely.
As mentioned earlier by the 2009 CFA Institute report,
amendments to the Draghi Law made in 2008, contributed to
increased shareholder protection in Italy. Per this report, the
amendments resulted in a requirement for the bylaws of all
Italian issuers to “now include specific processes that ensure
equitable appointments to the board of directors” (p. 49).
Company bylaws are now required to contain directions stating
that at least one member is elected from the minority slate,
and that minority candidates must not be in any way linked
with shareholders representing the majority slate. However,
the 2009 Enriques paper reports a “little known” consequence
of the Draghi Law, involving fines for violations of securities
laws being significantly lowered. According to the report, the
resulting sanctions for insider trading and market manipulations
were low enough to disincentivize prosecutions due to the
“interplay between statute of limitations rules and the
pathological length of criminal trials” (p. 27).
According to the 2009 Shearman & Sterling report, the new
Italian Law on Economic Incentives outlines provisions
concerning mandatory tender offers. The law states that any
person holding over 30 percent of shares in a listed company
6

may increase their holdings by up to 5 percent without
launching a mandatory tender offer on the remaining shares in
issuance. This is an increase over the previous threshold of 3
percent, previously set out by CONSOB Regulation. The law
also increased the maximum amount of treasury stock from 10
percent of overall share capital to 20 percent, thus amending
Article 2357 of the Italian Civil Code. Due to treasury stock
not corresponding to voting rights, any repurchase of shares
would indirectly increase the voting power of existing leading
shareholders. Nonetheless, available sources do not directly
address Italy's compliance with this principle.
Principle: Principle IV: The Role of
Stakeholders in Corporate
Governance
[Insufficient Information]
The 2005 OECD’s Economic Survey of Italy underlined the
need to update the Bankruptcy Act (Royal Decree No. 267 of
1942), which failed to ensure the protection of creditors, or
to allow companies' owners to start a new business. Following
several prominent Italian insolvencies, including Parmalat, the
Parliament issued Legislative Decree No. 35 in March 2005
to introduce important amendments to the Italian insolvency
framework, which had remained largely unchanged since 1942.
On May 14, 2005, the Legislative Decree was subsequently
converted into legislation by Law No. 80 of 2005. However,
available sources do not directly address Italy's compliance with
this principle.
Principle: Principle V: Disclosure and
Transparency
[Insufficient Information]
At the time of the IMF's 2005 report, disclosure and financial
reporting requirements applicable to listed companies in Italy
were quite rigorous, particularly in comparison with other
European countries. However pecuniary and administrative
sanctions that could be imposed on issuers or management for
breaches of these requirements remained limited in practice.
Moreover, the CONSOB could not impose penalties directly,
but had to act through the MEF. Pursuant to the Savings Law,
the CONSOB was given more resources and powers to act
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Financial Standards Report Italy
March 2010
independently from the MEF. In its 2006 Detailed Assessment
of Implementation of the IOSCO Principles, the IMF noted
that the current legal and regulatory framework will be revised
to transpose and implement the EU Prospectus Directive No.
2003/71/EC. The CONSOB has reported that its disclosure
requirements are already substantially in line with the
forthcoming EU Directive.
Italian listed companies are required to prepare quarterly,
semi-annual and annual reports, and publish financial
statements on an annual basis. Furthermore, both EU
Directives and Italian legislation require individual and
consolidated financial statements of listed companies to be
audited by an external auditor. Per a regulatory and standard-
setting framework assessment published by the National Board
of Chartered Accountants and Accounting Experts in 2005,
the CONSOB has the power to recommend accounting and
auditing standards for listed entities. Conversely, the Italian
accounting standards are enacted by the Organismo Italiano di
Contabilità. As of 2005, provisions for regulating the accounting
and auditing profession in Italy were among the strongest
in Europe, as stated in the IMF's 2005 report. Furthermore,
the CONSOB's audit quality assurance system was quite
comprehensive. In this regard, the IMF report recommended
providing substantial staff resources to conduct these intensive
and on-going reviews. Beginning in 2005, pursuant to
Legislative Decree No. 38 of 2005, Italian listed companies
are required to prepare their consolidated financial statements
using International Financial Reporting Standards (IFRSs) issued
by the International Accounting Standards Board. As for
individual company accounts, CONSOB regulations mandate
the use of IFRSs and national accounting standards.
As mentioned earlier, according to the 2009 ECGI report, the
Draghi Law “significantly improved mandatory disclosure for
listed companies” (p. 18). The 2009 CFA Institute report states
that the Draghi Law requires that companies annually disclose
“comply-or-explain” statements based on their adopted code
of conduct. The report also states that not only have a number
of companies disclosed their corporate governance
mechanisms, some have even modified their systems in order
to comply with the CG Code. In April 2009, the Law on
Economic Incentives introduced provisions to the Italian
Securities Act requiring disclosure of shareholdings below 2
7

percent. The law also outlines sanctions concerning the failure
to undertake such disclosure measures. However, available
sources do not directly address Italy's compliance with this
principle.
Principle: Principle VI: The
Responsibilities of the Board
[Insufficient Information]
As part of Italy's unusual corporate structure, shareholders
of traditional Italian companies elect a Board of Directors, as
well as a separate Board of Statutory Auditors. The former
has the authority to assess the suitability of business plans
and organization, whereas the latter is responsible for assessing
governance and internal control issues, and monitoring the
external auditing firm. According to the IMF's 2005 report,
while an independent Board of Directors is key to protecting
shareholders' rights, there are no legally mandated
requirements for Board independence in Italy. Furthermore,
neither Italian law nor the Preda Code addressed the issue
of representation of minority shareholders on the Board of
Directors. In performing their functions, per the 2006 FSSA,
members of the Board of Statutory Auditors have wide-
ranging powers to obtain information from the Directors.
Furthermore, legislation requires the Board of Statutory
Auditors to be independent, and to include at least one
member appointed by the company's minority shareholders.
However, the effectiveness of this provision is limited in
practice, as the ability of any one of the board members to act
unilaterally is constrained
According to Heidrick & Struggles (2005), the average number
of committee meetings in 2005 in Italy was the lowest in
Europe. Furthermore, remuneration committees did not
include any independent directors. Conversely, the proportion
of independent non-executive directors increased in 2005. The
2009 CFA Institute report states that the release of the CG
Code urged boards of directors to facilitate the participation
of as many shareholders as possible in shareholder meetings.
Boards have also been entrusted with enabling shareholders
to increase their rights, as well as with maintaining consistent
communication with shareholders. Amendments to the CG
Code in 2008 also required companies to, as much as possible
ensure that shareholders have access to information related
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Financial Standards Report Italy
March 2010
to understanding and exercising their rights. Companies are
thus required to create an identifiable and accessible section of
their website containing such information. This webpage should
contain details on procedures for shareholder participation,
voting rights, as well as documentation related to items on a
meeting agenda. These sources of information however, do not
directly address Italy's compliance with this principle.
Sources of Assessment
CFA Institute Centre for Financial Market Integrity, “Shareowners Rights
across the Markets: A Manual for Investors,” 2009. Available from
Chartered Financial Analyst Institute website. Accessed on February 12,
2010. (CFA Institute 2009)
http://www.cfainstitute.org/centre/topics/pdf/italy_sor.pdf
Enriques, L., “Modernizing Italy’s Corporate Governance Institutions:
Mission Accomplished?” European Corporate Governance Institute
Working Paper Series in Law, No. 123, 2009. Available from Social Science
Research Network website. Accessed on February 12, 2010. (Enriques
2009)
http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1415604_c...
Heidrick & Struggles, "Corporate Governance in Europe: What's the
Outlook?" 2005. Available from Heidrick & Struggles website. Accessed on
February 12, 2010. (Heidrick & Struggles 2005)
http://www.heidrick.com/NR/rdonlyres/B1A816CD-0E51-4605-B...
International Monetary Fund, "Italy: Selected Issues," Country Report No.
05/41, Washington, D.C.: IMF, February 2005. Available from International
Monetary Fund website. Accessed on February 12, 2010. (IMF 2005)
http://www.imf.org/external/pubs/ft/scr/2005/cr0541.pdf
International Monetary Fund, "Italy: Financial System Stability Assessment,
including reports on the Observance of Standards and Codes on the
following topics: Banking Supervision, Payment Systems, Insurance,
Securities Regulation, Securities Settlement and Payment Systems,
Monetary and Financial Policy Transparency, and Anti-Money Laundering
and Combating the Financing of Terrorism," Country Report No. 06/112,
Washington, D.C.: IMF, March 2006. Available from International Monetary
Fund website. Accessed on February 12, 2010. (IMF 2006a)
http://www.imf.org/external/pubs/ft/scr/2006/cr06112.pdf
Organization for Economic Co-operation and Development, "2005
Economic Survey of Italy, Chapter 3: Corporate Governance and Market
Liberalization: the Scope for Improvement," Paris: OECD, May 2005.
Available from Organization for Economic Co-operation and Development
website. Accessed on February 12, 2010. (OECD 2005)
http://www.oecd.org/document/61/0,2340,en_2649_33733_3475...
http://www.oecd.org/document/19/0,3343,en_2649_33733_3474...
Relevant Organizations
Bank of Italy - Banca d'Italia (BoI)
http://www.bancaditalia.it/bancaditalia
National Commission for Listed Companies and Stock Exchange -
Commissione Nazionale per le Società e la Borsa (CONSOB)
http://www.consob.it/mainen/index.html
8

International Accounting Standards Board (IASB)
http://www.iasb.org/Home.htm
Organismo Italiano di Contabilità (OIC) (in Italian)
http://80.207.146.178/Pages/Public/default.aspx
Italian Stock Exchange - Borsa Italiana (BI)
http://www.borsaitalia.it/homepage/homepage.en.htm
Ministry of Economy and Finance - Ministero dell'Economia e delle Finanze
(MEF) (in Italian)
http://www.tesoro.it/
National Council of Chartered Accountants and Accounting Experts -
Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili
(CNDCEC) (in Italian)
http://www.cndcec.it/PORTAL/home/jsp/home.jsp
Relevant Legislation/Regulation
Central Bank Supervisory Provisions concerning Banks' Organization and
Corporate Governance, 2008 - Disposizioni di Vigilanza in Materia di
Organizzazione e Governo Societario delle Banche, 2008
http://www.ecgi.org/codes/documents/banca_italiana_guidel...
http://www.ecgi.org/codes/documents/banca_italiana_guidel...
Corporate Governance Code, 2006 - Codice di Autodisciplina, 2006
http://www.ecgi.org/codes/documents/codiceautodisciplina_...
http://www.ecgi.org/codes/documents/codiceautodisciplina.pdf
Committee for the Corporate Governance of Listed Companies, Code of
Conduct (Preda Code), 1999 - Comitato per la Corporate Governance
delle Società Quotate, Codice di Autodisciplina, 1999
http://www.ecgi.org/codes/documents/code_of_conduct.pdf
http://www.ecgi.org/codes/documents/codice_di_autodiscipl...
Law on Savings No. 262, 2005 - Legge recante Disposizioni per la Tutela
del Risparmio e la Disciplina dei Mercati Finanziari No. 262, 2005 (in
Italian)
http://www.camera.it/parlam/leggi/05262l.htm
Law on Market Abuse No. 62, 2005 - Legge recante Disposizioni per
l'Adempimento di Obblighi Derivanti dall'Appartenenza dell'Italia alle
Comunita' Europee No. 62, 2005 (in Italian)
http://www.camera.it/parlam/leggi/05062l.htm
Legislative Decree Consolidated Law on Financial Intermediation No. 58,
1998 (Draghi Law) - Decreto Legislativo No. 58, 1998 (amendments
through 2009)
http://www.consob.it/documenti/english/laws/fr_decree58_1...
http://www.consob.it/documenti/Regolamentazione/normativa...
Legislative Decree Corporate Law Reform No. 6, 2003 - Decreto
Legislativo recante Riforma Organica della Disciplina delle Societa' di
Capitali e Società Cooperative No. 6, 2003 (in Italian only)
http://www.altalex.com/index.php?idnot=5608
Legislative Decree regarding the Options Provided by Article 5 of
Regulation 1606/2002 of the European Parliament to Permit or Require
the Adoption of the International Financial Reporting Standards No. 38,
2005 - Decreto Legislativo recante Esercizio delle Opzioni Previste
dall'Articolo 5 del Regolamento (CE) N. 1606/2002 in Materia di Principi
Contabili Internazionali No. 38, 2005 (in Italian)
http://www.camera.it/parlam/leggi/deleghe/05038dl.htm
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Financial Standards Report Italy
March 2010
Legislative Decree on the Action plan for the Economic, Social and
Territorial Development No. 35, 2005 - Decreto Legislativo recante
Disposizioni Urgenti nell'Ambito del Piano di Azione per lo Sviluppo
Economico, Sociale e Territoriale No. 35, 2005 (in Italian)
http://www.parlamento.it/parlam/leggi/decreti/05035d.htm
Law on Economic Incentives No. 33, 2009 – Legge recante Misure Urgenti
a Sostegno dei Settori Industali in Crisis No. 33, 2009 (in Italian only)
http://www.parlamento.it/parlam/leggi/09033l.htm
Royal Decree on the Discipline of Bankruptcy, Preventive Creditors’
Settlement Procedures, Controlled Administration and Compulsory
Administration Procedures No. 267, 1942 - Regio Decreto per Disciplina
del Fallimento, del Concordato Preventivo, dell'Amministrazione
Controllata e della Liquidazione Coatta Amministrativa No. 267, 1942 (in
Italian)
http://www.regione.piemonte.it/edilizia/fallimenti/dwd/re...
Law with modifications of the decree-law No. 35 of 14 March 2005 on the
Action plan for the Economic, Social and Territorial Development No. 80,
2005 - Legge per Conversione in Legge, con Modificazioni, del Decreto
Legge N. 35/2005, recante Disposizioni Urgenti nell'Ambito del Piano di
Azione per lo Sviluppo Economico, Sociale e Territoriale No. 80, 2005 (in
Italian only)
http://www.camera.it/parlam/leggi/05080l.htm
Civil Code, 1942 - Codice Civile, 1942 (as of 2009) (in Italian)
http://www.altalex.com/index.php?idnot=34794
CONSOB Regulations
http://www.consob.it/mainen/legal_framework/laws_regulati...
EU Market Abuse Directive No. 2003/6/EC, 2003
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:...
EU Transparency Directive No. 2004/109/EC, 2004
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:...
Supplementary Sources
Borsa Italiana website. Accessed on March 23, 2010.
http://www.borsaitaliana.it/borsaitaliana/ufficio-stampa/comunicati-stampa/
2010/corpgovernancefebb2010.en.htm
International Bank for Reconstruction and Development/The World Bank
"Doing Business 2010: Italy," 2009. Available from Doing Business website.
Accessed on February 12, 2010. (IBRD&WB 2009)
http://www.doingbusiness.org/ExploreEconomies/?economyid=96
International Monetary Fund, "Italy: Financial Sector Assessment Program -
Detailed Assessment of Implementation of the IOSCO Objectives and
Principles of Securities Regulation," Country Report No. 06/83,
Washington, D.C.: IMF, March, 2006. Available from International Monetary
Fund website. Accessed on February 12, 2010. (IMF 2006b)
http://www.imf.org/external/pubs/ft/scr/2006/cr0683.pdf
KPMG, "Corporate Governance in Europe - KPMG Survey 2001/02,"
London: KPMG, 2002. Available from KPMG website. Accessed on
February 12, 2010. (KPMG 2002)
http://www.kpmg.com/aci/docs/corpgov.pdf
National Board of Chartered Accountants and Accounting Experts,
"Assessment of the Regulatory and Standard- Setting Framework," Self-
assessment prepared as part of the International Federation of
Accountants' Member Body Compliance Program, April 2005. Available
9

from International Federation of Accountants website. Accessed on
February 12, 2010. (CNDCEC 2005)
http://www.ifac.org/ComplianceAssessment/published_survey...
Shearman & Sterling LLP, “ European Corporate: Client Publication,” May
2009. Available from Shearman & Sterling website. Accessed on February
12, 2010 (S&S 2009)
http://www.shearman.com/files/Publication/0917b566-a28a-4...
U.S. Department of Commerce, "Doing Business in Italy: A Country
Commercial Guide," March 2009. Available from U.S. & Foreign
Commercial Service and U.S. Department of State website. Accessed on
www.estandardsforum.org
Financial Standards Report Italy
March 2010
February 12, 2010. (U.S. DoC 2009)
http://www.buyusa.gov/italy/en/587.pdf
Weil, Gotshal & Manges LLP, "Annex IV: Discussion Of Individual
Corporate Governance Codes Relevant To The European Union And Its
Member States," Consultation with the EASD and ECGN, January 2002.
Available from European Union website. Accessed on February 12, 2010.
(Weil et al. 2002)
http://ec.europa.eu/internal_market/company/docs/corpgov/...
10

Code of Good Practices on Transparency in Monetary Policy
LEVEL OF COMPLIANCE: FULL COMPLIANCE
Summary
Italy adopted the euro at its launch in January 1999, and
thus, its monetary policy is no longer governed by the Italian
central bank. Rather, the Governing Council of the European
Central Bank (ECB) determines Italian monetary policy, and
the Eurosystem (consisting of the ECB and the central banks of
the member states that have adopted the euro) is responsible
for its implementation. According to the International
Monetary Fund (IMF), the Eurosystem and the ECB maintain
high transparency standards and a commitment to openness.
The ECB observes the IMF's codes and standards for monetary
policy transparency and pursues an active policy of
communication with the public. In 2009, the IMF voiced its
support for the ECB’s accommodative monetary policy in
response to the global financial crisis and recession in the
European Union (EU). The Fund urged continued monetary
easing in order to prevent a still-possible deflationary spiral, and
called for quicker action from the EU in order to repair the
financial system.
General Overview
Since the launch of the European Monetary Union (EMU) on
January 1, 1999, monetary policy is no longer determined by
the Italian central bank. Rather, it is crafted by the governing
council of the European Central Bank (ECB), and implemented
by the Eurosystem, consisting of the ECB and the National
Central Banks of the member states that have adopted the
euro. According to a 2001 International Monetary Fund’s (IMF)
Report on the Observance of Standards and Codes (ROSC)
for monetary policy in the euro area, the Eurosystem complies
with nearly all monetary policy transparency standards and
has demonstrated a strong commitment to communicating
with the public. The ECB offers a wide range of publications
regarding its policies, practices, and procedures, and most are
available on its website. The ECB also welcomes visits by the
press and the public. The IMF's 2001 ROSC for the euro area
noted that the Eurosystem implements the ECB's monetary
policy decisions. The functioning of the Eurosystem is
www.estandardsforum.org
Financial Standards Report Italy
March 2010
complicated by "its complex architecture, the varied monetary
and legal heritages of participating National Central Banks and
uncertainties about the structural characteristics of the euro
area" (p. 7). The fact that the central bank of each member
nation has developed its own transparency practices has given
rise to difficulties in establishing comparability of policy and data
across the euro area.
The 2001 ROSC noted that "the Eurosystem observed all
46 principles contained in the Code (except for two, which
were regarded as not applicable), and only eight of these were
considered to be only 'broadly' or 'partly' observed" (p. 12).
In an ECB's 2005 Annual Report, the bank announced that
it would not publish the minutes of its Governing Council
discussions, "in order to maintain the confidentiality of its
meetings" (p. 143). Instead, it reaffirmed its opinion that other
channels of communication permitted greater timeliness, such
as the press conferences that it held after such meetings. These,
the ECB argued, provided "in real time, a comprehensive
account of the reasons underpinning the Governing Council's
decisions, and thus essentially serve the same purpose as
minutes" (p. 143), without the delay that would result from the
publication of formally adopted minutes.
The ECB's 2005 annual report also stressed that the
combination of press conferences, the Monthly Bulletin, and
the monthly communication on Governing Council decisions
taken in addition to interest rate decisions, make the ECB
"one of the most transparent central banks in the world" (p.
144). In the same report, the ECB president noted that the
disclosure of specific voting behavior could result in undue
pressure being brought to bear on individual council members,
with the result that they might lose sight of the broader euro-
area perspective that should govern their deliberations. An
ECB’s 2008 Annual Report notes that this issue was once again
considered by the European Parliament in its 2008 analysis of
the work performed by the ECB. The report also stated that
“the European Parliament acknowledged the full independence
of the ECB and recognized that publishing the minutes of
11

Governing Council meetings could lead to political pressure on
Governing Council members” (p. 185).
In its official statement on the 2005 Article IV Consultation
with the euro area countries, the IMF noted that the
Eurosystem has helped to foster macroeconomic stability and
reform. According to the Consultation, "peer-driven,
multilateral surveillance has encouraged the adoption of better
policies. And thanks in part to the ECB's hard-won credibility,
wage pressures are subdued and long-run interest rates are
at historical lows in all euro-area member countries,
notwithstanding large shocks to prices." Meanwhile, an IMF’s
2009 Article IV Consultation for the euro area was published
in July of the same year, well into the global financial crisis
and subsequent recession in the EU. The report stated that
there were “tentative signs of improvement” (p. 3), but that the
economic outlook remained uncertain. Per the same report,
the Fund shared the ECB’s concern that deflation continued
to be a major risk in the EU, and thus called for continued
low interest rates and urged that “all unconventional measures
. . . remain under consideration” (p. 3) as long as prolonged
deflation remained a possibility. At the same time, the ECB
was considering a responsible exit strategy, and stated that,
if necessary, it could issue its own paper and provide short-
term deposit facilities to reduce liquidity. Of further concern
to the IMF was the slow pace of bank recapitalization and
other measures to shore up the financial system. The Fund
called for the EU to be more “proactive” in its approach to
stabilization, and urged speedier action on the coordination of
policy responses. Beyond immediate measures, the Article IV
report stated that central banks across the EU would need to
play a crucial role in the European Systemic Risk Board in order
to provide early warnings to prevent future crises.
Principle: Clarity of roles,
responsibilities and objectives of
central banks.
[Full Compliance]
Since the launch of the EMU on January 1, 1999, Italy’s
monetary policy has come under the direction of the
Eurosystem and the ECB. The IMF's 2001 ROSC for the euro
area stated that "in terms of the clarity of roles, responsibilities,
and objectives of the Eurosystem, there is a high degree of
www.estandardsforum.org
Financial Standards Report Italy
March 2010
observance of the Code" (p. 8). The goals and responsibilities
of the ECB and national central banks in the euro area are
clearly set forth in the Maastricht Treaty and the Statute of the
European System of Central Banks (ESCB) of 1992. The ROSC
noted, however, that there remains a lack of clarity as to foreign
exchange policy and how it is allocated between the Council
of Ministers and the Eurosystem. The 2001 ROSC specifically
observed that "operationally, the varied disclosure practices
by National Central Banks on the terms and conditions for
government deposits and participation in government
securities markets could be improved by the National Central
Banks adopting a common approach to greater disclosure" (p.
8).
The 2001 ROSC also cited the ECB position on this issue,
which maintains that the Maastricht Treaty and the 1992
Statute provide sufficient clarity in this regard, because their
"provisions ensure that regular exchanges of information and
views take place between the Council of Ministers and the
ECB on the exchange rate of the euro" (p. 12). The ESCB
and ECB are established by Articles 105 through 108 of the
Maastricht Treaty. Article 105, paragraph 1 establishes the
primary responsibility of the ESCB as the maintenance of price
stability and the support of the European Community's (EC)
general economic policies. Paragraph 2 of the same article
enumerates ESCB responsibilities as follows: it shall define and
implement the monetary policy of the euro area; conduct
foreign exchange operations; hold and manage the official
foreign reserves of the Member States; and promote the
smooth operation of payment systems. Paragraph 5 of the
same article requires that the ESCB contribute to the smooth
conduct of prudential supervision of credit institutions and the
stability of the financial system.
The Maastricht Treaty, in conjunction with the provisions of the
1992 Statute, confers upon the ECB (with the National Central
Banks) the task of making and implementing monetary policy
decisions. Article 109 of the Maastricht Treaty establishes the
rules by which the ECB's Governing Council (as well as the
council's Executive Board) is to be constituted, and enumerates
its responsibilities in the formulation of monetary policy of
the euro area. Article 109a, Paragraph 1 stipulates that the
Governing Council of the ECB shall comprise the Executive
12

Board and the Governors of the National Central Banks of the
member states.
In 2003, an IMF Article IV Consultation with the Euro-Area
countries reported that earlier weaknesses in the ECB's
monetary framework had been addressed. Previously existing
problems in communication had been alleviated, and greater
clarity was achieved in the terms according to which price
stability would be maintained, reducing the threat of area-wide
deflation.
The 2001 ROSC lauded the Eurosystem's "high degree of
legal and operational independence" (p. 6). The Maastricht
Treaty prohibits the ECB and the National Central Banks and
members of their decision-making bodies from taking
instructions from any external body, and prohibits attempts on
the part of member states or other bodies to influence the
decisions or activities of the ECB or National Central Banks.
The ESCB/ECB Statute of 1992 provides for secure tenure for
National Central Bank governors and sets the minimum term
of office at five years. Executive Board members serve 8-year,
non-renewable terms. The statute stipulates that governors
and members of the Executive Board may be removed from
office only in the event of incapacity or gross misconduct. The
Maastricht Treaty designates the European Court of Justice
(ECJ) as the competent authority to adjudicate questions
arising from the removal from office of a governor or board
member.
Principle: Open process for
formulating and reporting monetary
policy decisions.
[Full Compliance]
In 2001, the IMF's ROSC for the euro area noted that both
the Eurosystem and the ECB demonstrate high compliance
with the Code. According to this report, "the ECB provides
extensive information on the framework and procedures
underlying the implementation of monetary policy" (p. 8). The
ECB publishes its guidelines for Eurosystem monetary policy
instruments and procedures in the Official Journal of the
European Communities. It also publishes a Monthly Bulletin and
regularly issues press releases, transcripts of press conferences,
and other public statements in an effort to communicate both
www.estandardsforum.org
Financial Standards Report Italy
March 2010
its policy stance and the considerations underlying that policy.
In addition, the ECB publishes a broad range of information
on the framework and procedures employed in monetary
policy making and implementation. The 2001 ROSC noted
that the ECB's program of data dissemination is extensive,
and that its publications are of high quality. Italian monetary
policy is governed by the ECB, for which the Maastricht Treaty
sets forth precise reporting requirements. According to the
treaty, quarterly reports, weekly financial statements, and an
annual report must be published. The ECB meets and exceeds
these requirements, publishing a monthly report in place of
the quarterly publication mandated by the treaty. As noted
in an ECB's 2008 Annual Report, "the European Parliament
– as the body which derives its legitimacy directly from the
citizens of the EU – has continued to play a key role in
holding the ECB to account" (p. 184). Article 113 of the
Treaty requires the president to present the ECB's Annual
Report to the plenary session of the European Parliament.
In addition, the ECB's 2008 Annual Report noted that the
president "[reports] regularly on the ECB's monetary policy
and its other tasks during his quarterly appearances before the
European Parliament’s Committee on Economic and Monetary
Affairs" (p. 184).
Other examples of the ECB's commitment to transparency can
be drawn from the 2008 Annual Report, which documented
the visit by the Committee on Economic and Monetary Affairs
to the ECB for a discussion of issues relevant to monetary
policy, and discussions held between the Committee and
European Parliament members about EU policies regarding
securities clearing and settlement. The 2008 Annual Report
also detailed the ECB's practice of responding to Parliamentary
requests for information in the ECB’s areas of expertise.
Principle: Public availability of
information on monetary policy.
[Full Compliance]
As mention earlier, since the launch of the EMU in 1999, Italy
has been a member of the euro area and its monetary policy
has been governed by the Eurosystem through the ECB. The
IMF's 2001 ROSC for the euro area noted that the Eurosystem
"maintains a high degree of observance of the Code in the
area of public availability of information on monetary policy"
13

(p. 8). The ECB complies with nearly all of the IMF's Special
Data Dissemination Standard principles regarding coverage,
periodicity, timeliness, and access by the public for central
bank, banking sector, and foreign reserves data. Among the
ECB's freely available publications are detailed annual balance
sheets and a weekly consolidated financial statement for the
Eurosystem. The quality and accessibility of these publications
are high, and they are available in all EU languages. The ECB
also offers an active public information service, including press
releases and addresses made by the Bank's Executive Board.
Regulations and other documentation are provided on the ECB
website.
The IMF's 2009 Article IV Consultation for the euro area
determined that Eurostat and ECB statistics maintain
appropriate standards of quality, scope, and timeliness, and that
major progress has been made since the euro was introduced.
A new regulation passed in 2009 improved the legal basis
for collecting and compiling EU statistics. Nonetheless, the
report states that the financial crisis that began in late 2007
“has exposed new needs, notably, new data and information
systems to allow better macrofinancial risk monitoring and
support the work of the new European Systemic Risk Board”
(p. 42). To this end, the ECB is planning to expand statistical
compilation of non-bank financial intermediaries that pose
systemic risks, such as hedge funds, insurance companies, and
pension funds.
The 2007 ECB Annual Report stated that "the ECB's other
statutory publications – the Annual Report, the quarterly issue
of the Monthly Bulletin and the Convergence Report – are also
made available in the official EU languages" (p. 172). Through
the Bank of Italy the ECB also makes available its key
publications and issues press releases on changes in monetary
policy, macroeconomic projections, and other information of
public interest, again, in all EU languages.
Principle: Accountability and
assurances of integrity by the central
bank.
[Full Compliance]
In 2001, the IMF's ROSC for the euro area ascertained that
"the Eurosystem practices a high degree of accountability and
www.estandardsforum.org
Financial Standards Report Italy
March 2010
assurances of integrity in the conduct of its operations, and has
a high degree of observance of the Code" (p. 9) In practice,
the ECB Executive Board members, including the president of
the board, make regular reports to the European parliament
and its Committee on Economic and Monetary Affairs. The
publication of annual reports occurs on a regular schedule, with
a lag of no more than four months from the end of the prior
fiscal year. Other documentation includes a report released
by the Anti-Fraud Committee, a management efficiency report
produced by the Court of Auditors (both released annually),
and data on the ECB's internal governance, including its
employee code of conduct. The 2001 IMF’s ROSC did identify
areas in which the ECB might make improvements. These
include a review of the way in which the ECB carries out
consultations on payment issues, and a recommendation that
it actively engage the public, for example via the internet, on
proposed technical, regulatory, and policy changes.
Sources of Assessment
International Monetary Fund, "Euro Area - Report on Observance of
Standards and Codes: Assessment of Observance of the IMF Code of
Good Practices on Transparency on Monetary and Financial Policies,"
Washington, D.C.: IMF, October 2001. Available from International
Monetary Fund website. Accessed on February 24, 2010. (IMF 2001)
http://www.imf.org/external/pubs/ft/scr/2001/cr01195.pdf
Relevant Organizations
Bank of Italy – Banca D'Italia (BoI)
http://www.bancaditalia.it/
European Central Bank (ECB)
http://www.ecb.int/
Eurostat
http://epp.eurostat.ec.europa.eu/portal/page/portal/euros...
The Executive Board of the European Central Bank
http://www.ecb.int/ecb/orga/decisions/eb/html/index.en.html
National Institute of Statistics – Istituto Nazionale di Statistica (ISTAT)
http://www.istat.it/english/
Relevant Legislation/Regulation
The Maastricht Treaty - Treaty on European Union, 1992
http://www.eurotreaties.com/maastrichtext.html
Statute of the European System of Central Banks and of the European
Central Bank, 1992
http://www.ecb.int/ecb/legal/1341/1343/html/index.en.html
Bank of Italy Statute, 1936 - Statuto Della Banca D'Italia,1936 (as of 2006)
http://www.bancaditalia.it/bancaditalia/funzgov/gov/statu...
14

Supplementary Sources
European Central Bank, "Annual Report 2004," Frankfurt: ECB, February
2005. Available from ECB website. Accessed on February 24, 2010. (ECB
2005)
http://www.ecb.int/pub/pdf/annrep/ar2004en.pdf
European Central Bank, "Annual Report 2005," Frankfurt: ECB, February
2006. Available from ECB website. Accessed on February 24, 2010. (ECB
2006)
http://www.ecb.int/pub/pdf/annrep/ar2005en.pdf
European Central Bank, "Annual Report 2006," Frankfurt: ECB, March
2007. Available from ECB website. Accessed on February 24, 2010. (ECB
2007)
http://www.ecb.int/pub/pdf/annrep/ar2006en.pdf
European Central Bank, "Annual Report 2007," Frankfurt: ECB, April 2008.
Available from ECB website. Accessed on February 24, 2010. (ECB 2008)
http://www.ecb.int/pub/pdf/annrep/ar2007en.pdf
European Central Bank, "Annual Report 2008," Frankfurt: ECB, April 2009.
Available from ECB website. Accessed on February 24, 2010. (ECB 2009)
http://www.ecb.int/pub/pdf/annrep/ar2008en.pdf
International Monetary Fund, "Concluding Statement of the IMF Mission on
Euro Area Policies 2004 (In the Context of the 2004 Article IV
Consultation Discussions with the Euro Area Countries)," Washington,
D.C.: IMF, May 18, 2004. Available from International Monetary Fund
website. Accessed on February 24, 2010. (IMF 2004)
http://www.imf.org/external/np/ms/2004/051804.htm
International Monetary Fund, "Concluding Statement of the IMF Mission on
Euro-Area Policies (In the Context of the 2005 Article IV Consultation
www.estandardsforum.org
Financial Standards Report Italy
March 2010
Discussions with the Euro-Area Countries)," Washington, D.C.: IMF, May
29, 2005. Available from International Monetary Fund website. Accessed
on February 24, 2010. (IMF 2005)
http://www.imf.org/external/np/ms/2005/052905.htm
International Monetary Fund, "Euro Area Policies: Staff Report; Staff
Supplement; Public Information Notice on the Executive Board Discussion;
and Statement by the Executive Director on Euro Area Policies," Country
Report No. 06/287, Washington, D.C.: IMF, August 2006. Available from
International Monetary Fund website. Accessed on February 24, 2010.
(IMF 2006)
http://www.imf.org/external/pubs/ft/scr/2006/cr06287.pdf
International Monetary Fund, "Euro Area Policies: 2007 Article IV
consultations - Staff Report; Staff Supplement; Public Information Notice
on the Executive Board Discussion; and Statement by the Executive
Director for Member countries," Country Report No. 07/260, Washington,
D.C.: IMF, July 2007. Available from International Monetary Fund website.
Accessed on February 24, 2010. (IMF 2007)
http://www.imf.org/External/Pubs/FT/SCR/2007/cr07260.pdf
International Monetary Fund, “Euro Area Policies: 2009 Article IV
Consultation—Staff Report; Public Information Notice on the Executive
Board Discussion; and Statement by the Executive Director for Member
Countries,” Country Report No. 09/223, Washington, D.C.: IMF, July 2009.
Available from International Monetary Fund website. Accessed on
February 24, 2010. (IMF 2009)
http://www.imf.org/external/pubs/ft/scr/2009/cr09223.pdf
International Monetary Fund's Special Data Dissemination Standard
website. Accessed on February 24, 2010. (IMF SDDS website)
http://dsbb.imf.org/Applications/web/sddscountrycategoryl...
15

International Standards on Auditing
LEVEL OF COMPLIANCE: ENACTED
Summary
The National Commission for Listed Companies and the Stock
Exchange (CONSOB) requires the use of Italian Auditing
Standards in the audit of listed entities, their significant
subsidiaries and holding companies, and other public interest
entities (PIEs). These standards are set by the Consiglio
Nazionale dei Dottori Commercialisti e Degli Esperti Contabili
(CNDCEC) and have recently become mandatory for non-
PIEs as well. A 2010 International Federation of Accountants
(IFAC) report states that the Italian Auditing Standards are
“strictly” based on International Standards on Auditing (ISAs),
with minor exceptions related to national requirements and
additional procedures. The IFAC report also states that Italy
implemented the EU Directive on Statutory Audit (2006/43/
EC) in November 2009. The Directive requires all statutory
audits of annual and consolidated accounts to be carried out
in accordance with the international auditing standard adopted
by the EU. Although such standards are currently pending
adoption by the EU, it is widely anticipated that ISAs as issued
by the International Auditing and Assurance Standards Board
of the IFAC will be adopted.
General Overview
In its 2006 Financial Sector Assessment Program of Italy, the
International Monetary Fund states that Italy has been
harmonizing its national auditing standards with International
Standards on Auditing (ISAs) since 2003, after the National
Commission for Listed Companies and the Stock Exchange
(CONSOB) called for the adoption of the internationals
standards on auditing. According to a self-assessment
submitted to the International Federation of Accountants
(IFAC) by the Consiglio Nazionale dei Dottori Commercialisti e
Degli Esperti Contabili (CNDCEC) in 2009, the Italian Auditing
Standards are “closely based” (p. 25) on the ISAs. However,
a subsequent IFAC report published in February 2010, states
that ISAs have been translated into Italian and adopted on a
de facto basis, as the Italian Auditing Standards. The national
standards, per the same report, are “strictly based on ISAs, and
www.estandardsforum.org
Financial Standards Report Italy
March 2010
include only minor modifications due to national requirements
and limited additional procedures” (p. 16). The IFAC report
classified Italy as a jurisdiction whose “national standards are
the ISAs” (p. 4). The definition of this classification implies
that the modifications made to the ISAs in adapting them for
national application, should be in line with the International
Auditing and Assurance Standards Board (IAASB) of the IFAC
Modifications Policy.
Prior to 2008, national auditing standards were set by the
Consiglio Nazionale dei Ragionieri e Periti Commerciali
(CNRPC) and the Consiglio Nazionale dei Dottori
Commercialisti (CNDC). The CNRPC and CNDC on January
1, 2008, merged to form the CNDCEC, as is indicated in the
paper titled "The Italian Accountancy Profession" available on
the CNDCEC's website. The updated 2006 CNDCEC report
states that under Legislative Decree No. 58 of 1998, listed
entities, their significant subsidiaries and holding companies,
and other public interest entities (PIEs) are required to apply
the Italian Auditing Standards as set by the CONSOB in
consultation with the CNDCEC. Non-listed companies on the
other hand, per the 2009 CNDCEC report, are not subject
to similar requirements. Instead, the report states that the
CNDCEC “recommends the principles to its members” (p.
23). An IFAC report subsequently published in February 2010,
states that the Italian Auditing Standards are now mandatory in
the audits of even non-PIEs, citing it as a “significant change” (p.
17).
A CNDCEC's 2005 self-assessment notes that the Bank of Italy
(BoI) is the authority that regulates banks and similar financial
institutions. The BoI, however, does not have the power to
enact auditing standards; however, it can issue additional
financial reporting regulations that banks have to apply. Other
companies like non-financial institutions have no regulatory
authority to enforce auditing standards. Insurance companies
are supervised by the Institute for the Supervision of Private
Insurance Undertakings, which have the power to verify
compliance with the imposed rules and regulations, request
16
 Financial Standards Report Italy
March 2010

information and conduct inspections of the regulated entities. See ISA 200.
In addition, it can summon the auditors of the auditing firms
that have the duty of auditing the financial statement of Principle: ISA 220 Quality Control
insurance companies. for an Audit of Financial Statements
On May 17, 2006, Directive 2006/43/EC of the European (effective 2009)
Parliament and the Council came into force requiring all [Enacted]
statutory audits to be carried out on the basis of international
auditing standards as adopted by the European Commission See ISA 200.
(EC). Although such standards are currently pending adoption
by the EU, it is widely anticipated that ISAs as issued by the Principle: ISA 230 Audit
IAASB of the IFAC will be adopted. The Directive aims at Documentation (effective 2009)
high-level, though not full, harmonization of statutory audit
[Enacted]
requirements. EU member states were required to adopt and
publish the provisions necessary to comply with the Directive See ISA 200.
by June 29, 2008. The Directive indicates that in an effort
to achieve a maximum degree of harmonization, EU member
Principle: ISA 240 The Auditor’s
states should be allowed to impose additional national audit
procedures or requirements which stem from specific national
Responsibilities Relating to Fraud in
legal requirements. The 2010 IFAC report states that Italy has an Audit of Financial Statements
implemented the Directive via a legislative decree enacted in (effective 2009)
November 2009. [Enacted]

Principle: ISA 200 Overall Objectives See ISA 200.

of the Independent Auditor and the
Conduct of an Audit in Accordance Principle: ISA 250 Consideration of
with International Standards on Laws and Regulations in an Audit of
Auditing (effective 2009) Financial Statements (effective 2009)
[Enacted]
[Enacted]

See ISA 200.

An IFAC report published in February 2010 states that ISAs
have been translated into Italian and adopted on a de facto
basis as the Italian Auditing Standards. The report further states Principle: ISA 260 Communications
that these standards are “strictly based on ISAs, and include of Audit Matters with Those Charged
only minor tailoring due to national requirements and limited With Governance (effective 2009)
additional procedures” (p. 16).
[Enacted]

Principle: ISA 210 Agreeing the See ISA 200.

Terms of Audit Engagements
(effective 2009) Principle: ISA 265 Communicating
[Enacted] Deficiencies in Internal Control to

www.estandardsforum.org 17
 Financial Standards Report Italy
March 2010

those Charged with Governance and See ISA 200.

Management (effective 2009)
[Enacted]
Principle: ISA 450 Evaluation of
Misstatements Identified during the
See ISA 200. Audit (effective 2009)
[Enacted]
Principle: ISA 300 Planning an Audit
of Financial Statements (effective See ISA 200.
2009)
[Enacted]
Principle: ISA 500 Audit Evidence
(effective 2009)
See ISA 200. [Enacted]

Principle: ISA 315 Understanding the See ISA 200.

Entity and Its Environment and
Assessing the Risks of Material
Misstatement (effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 320 Materiality in
Planning and Performing an Audit
(effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 501 Audit
Evidence—Specific Considerations
for Selected Items (effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 505 External
Confirmations (effective 2009)
[Enacted]
See ISA 200.

Principle: ISA 330 The Auditor’s Principle: ISA 510 Initial Audit
Procedures in Response to Assessed Engagements—Opening Balances
Risks (effective 2009) (effective 2009)
[Enacted]
[Enacted]
See ISA 200.
See ISA 200.

Principle: ISA 402 Audit Principle: ISA 520 Analytical

Considerations Relating to an Entity Procedures (effective 2009)
Using a Service Organization [Enacted]

(effective 2009) See ISA 200.

[Enacted]

www.estandardsforum.org 18
 Financial Standards Report Italy
March 2010

Principle: ISA 530 Audit Sampling Principle: ISA 580 Written

(effective 2009) Representations (effective 2009)
[Enacted] [Enacted]

See ISA 200. See ISA 200.

Principle: ISA 540 Audit of Principle: ISA 600 Special

Accounting Estimates (effective Considerations—Audits of Group
2009) Financial Statements (Including the
[Enacted] Work of Component Auditors)
(effective 2009)
See ISA 200.
[Enacted]

Principle: ISA 545 Auditing Fair See ISA 200.

Value Measurements and Disclosures
(effective 2004, superseded by ISA Principle: ISA 610 Using the Work of
540 in December 2009) Internal Auditors (effective 2009)
[Enacted] [Enacted]

See ISA 200. See ISA 200.

Principle: ISA 550 Related Parties Principle: ISA 620 Using the Work of
(effective 2009) an Auditor’s Expert (effective 2009)
[Enacted] [Enacted]

See ISA 200. See ISA 200.

Principle: ISA 560 Subsequent Events Principle: ISA 700 Forming an

(effective 2009) Opinion and Reporting on Financial
[Enacted] Statements (effective 2009)
[Enacted]
See ISA 200.
See ISA 200.
Principle: ISA 570 Going Concern
(effective 2009) Principle: ISA 705 Modifications to
[Enacted] the Opinion in the Independent
Auditor’s Report (effective 2009)
See ISA 200.
[Enacted]

See ISA 200.

www.estandardsforum.org 19

Principle: ISA 706 Emphasis of
Matter Paragraphs and Other Matter
Paragraphs in the Independent
Auditor’s Report (effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 710 Comparative
Information—Corresponding Figures
and Comparative Financial
Statements (effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 720 The Auditor’s
Responsibilities Relating to Other
Information in Documents
Containing Audited Financial
Statements (effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 800 Special
Considerations—Audits of Financial
Statements Prepared in Accordance
with Special Purpose Frameworks
(effective 2009)
[Enacted]
See ISA 200.
www.estandardsforum.org
Financial Standards Report Italy
March 2010
Principle: ISA 805 Special
Considerations—Audits of Single
Financial Statements And Specific
Elements, Accounts Or Items Of A
Financial Statement (effective 2009)
[Enacted]
See ISA 200.
Principle: ISA 810 Special
Considerations—Engagements to
Report On Summary Financial
Statements (effective 2009)
[Enacted]
See ISA 200.
Sources of Assessment
Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili,
"Response to the IFAC Part 2, SMO Self-Assessment Questionnaire," self-
assessment prepared as a part of the International Federation of
Accountants' Member Body Compliance Program, September 2006
(updated April 2009). Available from International Federation of
Accountants website. Accessed on February 18, 2010. (CNDCEC 2006/
2009)
http://www.ifac.org/ComplianceAssessment/part_2_survey/IT...
Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili,
"The Italian Accountancy Profession," n.d. Available from Consiglio
Nazionale dei Dottori Commercialisti e Degli Esperti Contabili website.
Accessed on February 18, 2010. (CNDCEC n.d.)
http://www.cndcec.it/PORTAL/Documenti/2266_ebgqvginnn.pdf
European Commission, “Scoreboard on the Transposition of the Statutory
Audit Directive,” November 2009. Available from European Commission
website. Accessed on February 18, 2010. (EC 2009)
http://ec.europa.eu/internal_market/auditing/docs/dir/01_...
International Federation of Accountants, “IFAC Member Body Compliance
Program: Basis of ISA Adoption by Jurisdiction,” February 2010. Available
from International Federation of Accountants website. Accessed on
February 18, 2010. (IFAC 2010)
http://web.ifac.org/download/basis-of-isa-adoption.pdf
Relevant Organizations
Consiglio Nazionale dei Dottori Commercialisti (CNDC) (in Italian)
http://www.cndc.it/CNDC/home/home.jsp
Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili
(CNDCEC) (in Italian)
http://www.cndcec.it/PORTAL/home/jsp/home.jsp
20

Italian Association of Auditors - Associazione Italiana Revisori Contabili
(Assirevi) (in Italian)
http://www.assirevi.it/
Italian Stock Exchange - Borsa Italiana (BI)
http://www.borsaitalia.it
Ministry of Economy and Finance - Ministero dell'Economia e delle Finanze
(MEF) (in Italian)
http://www.tesoro.it/
Ministry of Justice - Ministero della Giustizia (MoJ) (in Italian)
http://www.giustizia.it/giustizia/
National Commission for Listed Companies and the Stock Exchange -
Commissione Nazionale per le Società e la Borsa (CONSOB)
http://www.consob.it/mainen/index.html
Organismo Italiano di Contabilità (OIC) (in Italian)
http://www.fondazioneoic.it/
Supervisory Authority for Private Insurance Undertakings and Insurance
Undertakings of Public Interest - Istituto per la Vigilanza sulle Assicurazioni
Private e di Interesse Collettivo (ISVAP) (in Italian)
http://www.isvap.it/isvap/imprese_jsp/HomePage.jsp
Bank of Italy - Banca d'Italia (BoI)
http://www.bancaditalia.it/bancaditalia
Relevant Legislation/Regulation
Civil Code, 1942 - Codice Civile, 1942 (as of 2009) (in Italian)
http://www.altalex.com/index.php?idnot=34794
Legislative Decree Corporate Law Reform No. 6, 2003 - Decreto
Legislativo Riforma organica della disciplina delle societa' di capitali e
societa' cooperative No. 6, 2003 (in Italian only)
http://www.altalex.com/index.php?idnot=5608
Legislative Decree Consolidated Law on Financial Intermediation No. 58,
1998 - Decreto Legislativo recante Testo Unico delle Disposizioni in
Materia di Intermediazione Finanziaria, No. 58, 1998 (with amendments
through 2009)
http://www.consob.it/documenti/english/laws/fr_decree58_1...
http://www.consob.it/documenti/Regolamentazione/normativa...
Legislative Decree per Directive N. 84/253/CEE on Auditors No. 88, 1992
- Decreto Legislativo di Attuazione della Direttiva N. 84/253/CEE, Relativa
all’Abilitazione delle Persone Incaricate del Controllo di Legge dei
Documenti Contabili No. 88, 1992 (in Italian)
http://www.revicom.eu/leggi/D.LGS.88%20del%201992.pdf
Legislative Decree per Directive N. 86/635/CEE Relative to the Annual and
Consolidated Accounts of Banks and Financial Institutions and per Directive
N. 89/117/CEE, relative to the Obligation of the Publication of Accounting
Records of the Branches, Established in a Member States, of Credit and
Financial Institutions with Social Center Outside of Such Member States
No. 87, 1992 - Decreto Legislativo recante Attuazione della Direttiva N.
86/635/CEE, relativa ai Conti Annuali ed ai Conti Consolidati delle Banche
e degli Altri Istituti Finanziari, e della Direttiva N. 89/117/CEE, relativa Agli
www.estandardsforum.org
Financial Standards Report Italy
March 2010
Obblighi in Materia di Pubblicità dei Documenti Contabili delle Succursali,
Stabilite in uno Stato Membro, di Enti Creditizi ed Istituti Finanziari con
Sede Sociale Fuori di Tale Stato Membro, No. 87, 1992 (in Italian)
http://www.tuttocamere.it/files/dirsoc/1992_87.pdf
Legislative Decree on the Accounting Profession and Experts per article 2
of the law No. 34 of 24 February 2005 No. 139, 2005 - Decreto
Legislativo di Costituzione dell'Ordine dei dottori commercialisti e degli
esperti contabili, a norma dell'articolo 2 della legge 24 febbraio 2005, n. 34
No. 139, 2005 (in Italian)
http://www.unimore.it/esamidistato/doc/DLgs28giugno2005n1...
Decree No. 99, 1999
EU Auditing-Related Directives
http://ec.europa.eu/internal_market/auditing/directives/i...
Directive 2006/43/EC of the European Parliament and of the Council of 17
May 2006 on Statutory Audits of Annual Accounts and Consolidated
Accounts, amending Council Directives 78/ 660/EEC and 83/349/EEC and
repealing Council Directive 84/253/EEC
http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_157...
Regulation (EC) No 1606 of the European Parliament and of the Council
of 19 July 2002 on the Application of International Accounting Standards,
2002
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CEL...
Supplementary Sources
Consiglio Nazionale dei Dottori Commercialisti e Degli Esperti Contabili,
"Assessment of the Regulatory and Standard- Setting Framework," self-
assessment prepared as part of the International Federation of
Accountants' Member Body Compliance Program, April 2005. Available
from International Federation of Accountants website. Accessed on
February 18, 2010. (CNDCEC 2005)
http://www.ifac.org/ComplianceAssessment/published_survey...
Deloitte and Touche Tohmatsu IAS Plus website. Accessed on February 18,
2010. (Deloitte IAS Plus website)
http://www.iasplus.com/country/italy.htm
International Federation of Accountants website. Accessed on February 18,
2010. (IFAC website)
http://www.ifac.org/About/MemberBodies.tmpl
International Monetary Fund, "Italy: Financial Sector Assessment Program -
Detailed Assessment of Observance of the Insurance Core Principles,"
Country Report No. 06/82, Washington, D.C.: IMF, March 2006. Available
from International Monetary Fund website. Accessed on February 18,
2010. (IMF 2006a)
http://www.imf.org/external/pubs/ft/scr/2006/cr0682.pdf
International Monetary Fund, "Italy: Financial Sector Assessment Program--
Detailed Assessment of Implementation of the IOSCO Objectives and
Principles of Securities Regulation," Country Report No. 06/83,
Washington, D.C.: IMF, March 2006. Available from International Monetary
Fund website. Accessed on February 18, 2010. (IMF 2006b)
http://www.imf.org/external/pubs/ft/scr/2006/cr0683.pdf
21

Methodology Note
For a more thorough discussion of our methodology, please
visit our website. Below you find an explanation of qualifying
criteria for information used in eStandardsForum's standard
reports as well as a definition of the Levels of Compliance.
Sources
Sources used in this report are information that is objective
and freely available to the public that pertain to a country's
compliance with the requirements of any given standard. The
defining characteristics of eStandardsForum's sources are
public availability and objectivity. For example, third-party
assessments of a country will take precedence over
selfassessments. Nevertheless, in the absence of third-party
assessments, self-assessments form an important source of
information.
Levels of Compliance
The compliance categories assess information on two levels.
On the first level, it measures the public availability of
information on a country's compliance with the 12 Key
Standards. If the level of information is unsatisfactory, a rating of
"Insufficient Information" is assigned. If the level of information
is deemed sufficient, a rating ranging from "No Compliance"
to "Full Compliance" is assigned, depending on how well the
publicly available sources have evaluated the country's
regulatory framework for the respective standard. These
particular categories have been selected because they mirror
the process a country follows when implementing standards
and codes.
www.estandardsforum.org
Financial Standards Report Italy
March 2010
FULL COMPLIANCE: There is publicly available
information indicating that the country has incorporated the
principles of the relevant standard into laws or regulations, and
that these principles are currently being applied and followed
in an effective, consistent, and transparent manner.
COMPLIANCE IN PROGRESS: There is publicly available
information indicating that the country has incorporated the
principles of the relevant standard into laws or regulations and
that there has been significant progress made towards the
effective enforcement of the laws or regulations by regulators
and supervisors, albeit with minor shortcomings.
ENACTED: There is publicly available information indicating
that the country has incorporated most of the principles of
the relevant standard into laws or regulations. The Enacted
category does not address the actual enforcement of the laws
or regulations.
INTENT DECLARED: The country has made a formal,
public, and authoritative declaration that it will incorporate the
principles of the relevant standard into laws or regulations and
will adhere to the standard.
NO COMPLIANCE: There is publicly available information
indicating that the country has not incorporated the principles
of the relevant standard into laws or regulations or has taken
any steps to comply with the relevant standard.
INSUFFICIENT INFORMATION: There is not enough
information publicly available to make an assessment as to the
country's level of compliance with the relevant standard.
22