Italian cooperative banks start to rethink ownership rules
MILAN Oct 18 (Reuters) - Italy's cooperative banks are starting to cave in to pressure from the central bank to allow large shareholders a bigger say in their affairs, thereby encouraging more investment ahead of next year's Europe-wide banking health check.
The 37 cooperative, or "popolari", lenders have been hit hard by Italy's longest recession in 60 years and analysts expect that several will need to shore up their capital when the European Central Bank (ECB) carries out its asset-quality review before taking over supervision of EU banks.
As part of its wider push to force all the country's banks to clean up their balance sheets before the ECB review, the Bank of Italy has reiterated its concern that the popolari's ownership model, whereby all shareholders receive the same voting rights regardless of the size of their holdings, discourages investment in these lenders.
After years of resistance, some of the cooperatives are starting to act.
"The sector must eventually yield to pressures from the Bank of Italy for a governance overhaul," Luigi Odorici, chief executive at Banca Popolare Emilia Romagna (BPER), told Reuters last week.
"If things were to get difficult, it would be useful if we were better placed to lure fresh capital."
BPER, whose shareholders include Norway's wealth fund, is looking at ways to allow institutional investors to appoint board members in proportion to the size of their stakes in the bank.
"We will submit a proposal to shareholders at the next meeting in April," Odorici said, adding that Italy's sixth-largest lender by assets is aiming for a "hybrid" governance model.
Smaller rival Banca Popolare di Milano is also aiming to tweak its rules after fierce opposition from employee shareholders forced it to drop plans to turn it into a full-blown joint-stock company.
The Milan-based lender, which is planning a 500 million euro capital increase by March 2014, intends to present shareholders with a less ambitious proposal by the end of this month.
This would give institutional shareholders the right to appoint six members out of 13 on its supervisory board, with the intention of limiting the power of employee shareholders and union representatives.
Last month the Bank of Italy said that the average core capital ratio for cooperative lenders is about 9.5 percent, compared with 11.4 percent for the rest of the banks, making governance changes a priority.
"Cooperative banks should reform their governance to create incentives for new shareholders to inject fresh capital and to reduce the fragmentation of their ownership structure to enhance the control on top managers," Bank of Italy Governor Ignazio Visco said in a speech this month.
"Time is running out for them to change as (European) banking union is approaching."
The cooperatives, owned by their customers and employees, were created in the second half of the 19th century and modelled on Germany's Volksbanks, with a focus on lending to local businesses and households.
They have combined assets of 480 billion euros ($656 billion), representing about a fifth of Italy's banking sector. ($1 = 0.7319 euros) (Additional reporting by Valentina Za; Editing by Silvia Aloisi and David Goodman)
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