UPDATE 1-Massive revaluation of Bank of Italy capital may be in store

Mon Sep 30, 2013 11:01am EDT

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By Giselda Vagnoni

ROME, Sept 30 (Reuters) - The capital of Italy's central bank could be revalued to as much as 7 billion euros from the current 156,000 euros, a Treasury document showed on Monday, a move domestic lenders hope may boost their own balance sheets.

Italian banks own the majority of the central bank's capital and have been pushing for their stakes to be revalued as this could allow them to book a capital gain.

The Treasury has also been looking at the possibility of bringing the value of the Bank of Italy capital in line with the current value of its assets as a way to boost fiscal revenues by taxing the capital gains.

"The size of the revaluation would likely be between 5 billion and 7 billion euros," the document, seen by Reuters, said. "Bank of Italy reserves would be moved to share capital and shareholders would then be forced to pay taxes on that."

However, the document said that proceeds for the state coffers from such a move would be "highly uncertain" as they would depend on individual banks' accounting choices.

The document said the European Central Bank had to be consulted before a law could be passed and the Bank of Italy could approve a capital increase.

"Only after that could shareholders proceed with the revaluation of their stakes. This would normally happen when approving the 2013 results," it said.

The document said banks had to be free to decide whether or not to revalue their stakes because of European Union rules that ban the monetary financing of a state.

ANACHRONISTIC

In calling for Italy's 2014 budget law to include measures on the revaluation, the head of the Italian Banking Association said this month it was "anachronistic" that the Bank of Italy capital was stuck at a value set in 1936.

A committee of experts, including former European Central Bank Vice President Lucas Papademos, is expected to provide the central bank by year-end with an assessment of its capital's value.

The Bank of Italy's capital and its reserves total 23.5 billion euros.

Italy's biggest retail bank Intesa Sanpaolo is the largest shareholder in the Bank of Italy with a 30 percent stake, which rises to around 40 percent when including also stakes held by other banks in the group.

UniCredit has 22 percent. Insurer Assicurazioni Generali around 6 percent.

"Many pieces of the puzzle are still missing and it is in our view not certain that a revaluation would lead to an uplift in solvency under (international rules)," analysts at Exane-BNP Paribas said in a recent note.

Bank of Italy Director General Salvatore Rossi said this month that the number of central bank shareholders had to rise for it to become a true public company. He said an excessively concentrated ownership structure posed "a problem of form though not of substance." (Additional reporting by Valentina Za and Stefano Bernabei Editing by Jeremy Gaunt)

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