Retail/High Street banks:
These are the "big names" in Italian retail banking. The biggest banks in this class have names that should be familiar to most who have visited Italy: Unicredito, Banca Intesa, Banca di Roma (Gruppo Capitalia), BNL and so on. Depending on which part of Italy you live in you will also see a host of smaller local banks and building societies or co-operative banks. Generally speaking these banks offer the same sort of services that you would expect from any normal bank. The trap, as with many financial matters, is in the fees and charges. Recently the ABI (Associazione Bancaria Italiana) has launched a project known as Patti Chiari, or "Clear Pacts", which has the following aim, according to its web-site www.pattichiari.it which is also in English:
"Practical action to make things easier for ordinary citizens and businessmen, with clear rules, simple, understandable information, ways to compare the services and offers of different banks and to choose the best solution for one's own needs, in a word, to improve relations between banks and customers."
When my wife and I first returned to Italy to live permanently, I studied this site quite thoroughly in order to find the best solution for our needs (a simple cheque account with low/no fees, an ATM card and a reasonable rate of interest) and discovered after several hours of comparing services that such a thing was in very short supply! If, like me, the thought of fees being continuously debited to your account drives you to distraction, then comparing the various banks' fees within the Patti Chiari website will be akin to living hell. Indeed, it is debatable the effect that Patti Chiari has had if one believes a study quoted recently by The Economist that Italian bank fees are the highest in Europe.
Another stumbling block was interest payable on the account. For me, the prospect of leaving my money with a bank that offered a rate of interest which would pay me much less than the fees I had to pay the bank was unpleasant. To give just one example, have a look at the following search that I did for the purposes of illustration:
A typical high street bank offers you 0.01% per annum on your money. That means even if you deposit â‚?,000,000, you will get â‚?00 a year in interestâ€?not exactly racy.
Most of the large banks in Italy now offer online banking services, but very few offer a substantial reduction in fees payable, although the increase in convenience is obvious. There are now a small number of pure online banks which can be a good solution if you have access to the internet and don't mind not being able to go into the bank and talk to someone. A good example of an online bank is IW Bank (www.iwbank.it) which is part of BPU (Banche Popolari Unite), a listed Italian banking group. It offers interest of 2% per annum on funds at call with free payments, free ATM card, free credit card, free cheque book and free withdrawals from all ATMs in Italy (apart from the post office ones) â€?an important advantage as most banks have penalties for withdrawals from other banks' ATMs. Other online banks include: We@bank (www.webank.it), part of the Banca Popolare di Milano and Sella.it (www.sella.it), part of Banca Sella.
Generally speaking, there is no distinction between a savings account and a cheque account, but a great option for managing excess liquidity is the Conto Arancio (www.contoarancio.it) from Dutch group ING Direct. It works in conjunction with a normal cheque account and is best considered as a place to park funds at call with the best rate of interest available in Italy. At the time of writing this, it offers 4% for the first four months of account activity and then reverts to the base rate of 2.5%. These rates are gross, and therefore taxes of 27% must be taken into account. See below for a discussion of taxes on bank accounts and various types of investment earnings.
Safety of funds deposited:
All Italian banks adhere to the FITD Fondo Interbancario di Tutela dei Depositi which offers protection on all deposits up to around â‚?03,000 (the equivalent of 200 million lire. For further details, see the link below:
There is an exception made for Co-operative Banks which have their own deposit guarantee system, with the same level of protection as detailed above:
Other financial intermediaries:
Stock-broking firms(SIM: Societa' di Intermediazione Mobiliare):
In Italy most people use their retail bank in order to manage their investments and for this reason stock-broking firms operate in much more of a niche market than in "Anglo-Saxon" markets. Generally speaking they respond to two different needs: 1) for clients who follow the markets and like to trade regularly and therefore want on-line trading or a broker who provides a more personalised service, and; 2) for clients who have had bad experiences with the investments offered by their normal bank and wish to receive impartial advice.
Not all SIMs are the same â€?the main difference being the authorisation to undertake discretionary portfolio management for its clients and the presence or not of proprietary trading authorisation.
All Italian intermediaries adhere to the Fondo Nazionale di Garanzia which offers protection on all deposits up to â‚?0,000. For further information, see the following link:
As an added guarantee for our larger clients, the firm that I am with has an agreement with Deutsche Bank that allows clients to trade with us but have all funds and stock deposited with Deutsche.
Fund Managers (SGR: Societa' di Gestione di Risparmio):
Most large financial institutions in Italy will also have an SGR attached to them which allows them to manage collective investment vehicles.
Beware il promotore finanziario:
The figure of the promotore finanziario could best be described as a financial salesman. Obviously not all of them are bad sorts (I am one myself!), but it pays to look beyond a slick presentation and ask oneself a few obvious questions: Am I receiving impartial advice? Has this person understood my financial needs (and does he or she really care)? What fees do I have to pay?
Promotori are tied, by law, to one financial institution alone and that institution is responsible jointly with the promotore for any damage done to an investor through neglecting to follow the industry regulator's (known in Italy as the CONSOB Commissione Nazionale per le Societa' e la Borsa www.consob.it) rules. This tying of an investment advisor to one financial institution can create situations which are not in an investor's best interests as that institution may only permit sales of "in house" funds.
Taxation of investment income - regime amministrato or regime dichiarativo?
What does this all mean? It seems complex, but it is one of the great advantages (from a taxation point of view) of being resident in Italy. Basically, by opting for the regime amministrato, an investor tells his intermediary to make all taxation payments on his or her behalf and is thereby absolved from having to declare them in their tax return. The work of calculating the payments to be made is done by the intermediary and you are anonymous for the tax department. The rates of tax payable are as follows:
- Interest on funds held at call and on non-government bonds with maturities of under 18 months at time of emission: 27%
- Dividends: 12.5% of net payment
- Capital gains:12.5% of net gain
- Coupon payments on Government stock and all other bonds with maturities of under 18 months at time of emission:12.5%
The regime dichiarativo means that you must declare all income in your annual tax return. Before opting for this it would be wise to discuss it with a good commercialista (tax & financial consultant).
What you need to open a bank account:
You will need to have the following to open an account in Italy. The rules vary according to whether you are a resident or not:
- Valid identification (passport or carta d'identita')
- Codice fiscale
- Valid identification as above
- A document which certifies the account holder's non-residence in Italy (the bank should provide you with a form to fill out)
About the Writer:
Andrew Lawford is a New Zealander who has lived in Italy on and off for nearly four years. He lives near Genoa, the largest city in the coastal region of Liguria and works for a SIM which is a member of the Italian Stock Exchange and offers brokerage services on the worlds main financial markets. He can be contacted at: firstname.lastname@example.org or by telephone on (+39) 3484 767576.