THE%20ROLE%20AND%20TASKS%20OF%20THE%20DIFFERENT%20AGENCIES%20INVOLVED%20IN%20REGULATION%20AND%20SUPERVISION%20OF%20SOEs.%20THE%20ITALIAN%20EXPERIENCE

1
THE ROLE AND TASKS OF THE DIFFERENT AGENCIES
INVOLVED IN REGULATION AND SUPERVISION OF
SOEs.THE ITALIAN EXPERIENCE

• Presentation by Roberto Ulissi, Director General,
  Ministry of Economy and Finance, Head of
  Directorate Bank and Financial System. Legal
  Affairs

2
The SOEs in Italy

• Large privatization program in Italy, started in
  1993
• Present situation still many SOEs
• 26 directly owned some are 100 controlled
• large groups many indirect shareholdings
• diversified sectors
• listed and non-listed

3
ENTITIES INVOLVED IN REGULATION AND SUPERVISION
OF SOEs

• Ministry of Economy and Finance
• Other Ministries
• National Commission for Corporations and Stock
  Exchange (CONSOB, the Securities and Financial
  Market Regulator)
• Other Independent Authorities
• Stock Exchange Operator
• Court of Auditors
• Parliament

4
Ministry of Economy and Finance

• Two separate roles
• Owner
• Shareholder
• Two levels of responsibility
• Minister guidelines and political decisions
• Officers proposals, implementation of political
  decisions, administrative and contractual activity

5
The Ministry of Economy as owner

• MEF is only the formal owner it is not free to
  sell shares
• Some limited exceptions to MEF ownership exist
• Decision to sell and how (political decision)
• In general Prime Minister on a proposal by the
  Minister of Economy and the Minister of
  Productive Activities
• Only for minor shareholdings the Minister of
  Economy alone
• Exception for national broadcasting company
  (RAI) CIPE resolution (Interministerial
  Committee for Economic Planning) comprehensive
  resolution
• Implementation of sale the Ministry of Economy
  alone (officer level)
• Permanent assistance of an Advisory and
  Transparency Committee, appointed by Government

6
The Ministry of Economy as shareholder

• Exercise of rights (political level)
• in major companies Minister of Economy with
  other Ministers (competent for the specific
  sector) and according to guidelines of Prime
  Minister
• in some cases, Minister of Economy alone
• in some limited cases, competence of other
  Ministers alone
• Content of rights the same as common
  shareholders, with limited exceptions
• non application of ceilings on shareholding
  established in by-laws
• golden share
• No involvement in the management of the company
  (company law prescription)
• Only monitoring of management (particularly of
  non-listed companies) monitoring of industrial
  objectives and to prevent critical situations
  (officer level)

7
The role of other Ministries

• General role, not specific for SOEs
• regulation of industrial sectors licences
• licence and control of public services management
• Specific role as to SOEs
• participation in selling decisions
• participation in the exercise of shareholders
  rights for appointments of directors, actual
  involvement of whole Government and coalition
  party leaders
• CIPE guidelines for specific tariffs (e.g.
  railways)
• guidelines to specific companies in sensitive
  sectors

8
Securities and Financial Market Regulator (CONSOB)

• Exclusive competence in supervision and
  regulation of securities market and listed
  companies
• Limited exceptions for SOEs in the law
• non application of provisions on investment
  solicitation, if securities issued or guaranteed
  by the State. No occurance as to SOEs shares and
  not permitted by EU law. Only for public debt
  sec.
• facilitations in reporting indirect shareholding
  
• market abuse exemption for public debt
  transactions (permitted by EU directive)
• No exemption for SOEs granted by CONSOB
• MEF must comply with all regulations and
  obligations and it is subject to common
  supervision and sanctions also payment of fees
  to CONSOB

9
Other Independent Authorities

• Regulatory and supervisory authorities for
  specific sectors general competence for all
  enterprises
• electricity and gas telecommunications
• banking and insurance (Bank of Italy and ISVAP)
  some competences shared with CONSOB
• Antitrust authority (national and EU) compliance
  with competition rules (e.g. as to sales,
  assignment of exclusive licences, public
  procurement) State-aid control actions against
  monopolies or dominant positions

10
Stock Exchange Operator

• Listing and delisting
• Regulation of transactions
• Disclosure of prices
• No specific rules for SOEs

11
Court of Auditors

• Control of financial management of
  State-controlled companies for possible damages
  to public finance prosecution against directors
  and managers.
• Judge attending board meetings

12
Parliament

• Opinion on sale of States controlling
  shareholding in public utilities
• Opinion on industrial plan in case of sale of
  States controlling shareholding in national
  airline (Alitalia)
• Specific powers as to the national broadcasting
  company (RAI)
• participation in appointment of directors
  permanent supervision
• qualified majorities needed participation of
  opposition parties

13
Assessment of the allocation of responsibilities

• Clear distinction
• No overlapping between Ministry of Economy and
  CONSOB
• Some overlapping between Ministries overlapping
  of shareholders rights and regulatory
  competences
• De facto interference in some decisions by other
  Ministers and coalition party leaders
• Statutory political influence by Parliament in
  specific companies
• More rational distinction of responsabilities
  between financial sector supervisors is possible
  (CONSOB, Bank of Italy and ISVAP) and between
  Bank of Italy and Antitrust authority

14
ACCOUNTABILITY

• Ministry of Economy
• Officers accountable to Minister
• Minister accountable to Parliament
• Minister and officers to Court of Auditors
  personal liability for damages to public finance
  formal control, inadequate to market
  transactions it may affect decision making
• General principles of administrative action rule
  of law, due process, transparency,
  justiciability, possible liability for individual
  damages
• Accountability to the market decisions may
  affect market value and further sales

15
Consob

• To Parliament through MEF annual report and
  information on major events
• To Parliament and Government
• appointment of Commissioners
• To the Prime Minister and the Minister of Economy
• approval of internal regulations (formal control)
  
• removal of Commissioners, only in exceptional
  cases
• To the Minister of Economy
• annual report regular reporting of major events
  and duty to submit info requested
• To the Court of Auditors control of accounts and
  personal liability
• General principles of administrative action
• To the market consultations (now mandatory)
• To CESR (Council of European Securities
  Regulators)

16
Other Authorities

• To Parliament
• appointment of governing bodies
• annual report
• To the Court of Auditors
• Bank of Italy accountability to be better
  defined
• Stock Exchange Operator
• To CONSOB
• To the market

17
CONFLICTS

• Internal conflicts within MEF
• Different roles and functions of Ministry of
  Economy
• owner and shareholder multiple shareholdings
  responsibility for State budget responsibility
  for general economic policy
• possible conflicts in decision to sell, dividend
  policy, intercompany transactions, economic and
  tax policy measures
• statement in prospectuses to protect
  shareholders value in his role as shareholder
• Conflicts between Minister and officers formal
  independence

18
Conflicts between competent entities.Conflicts
between Ministries

• On sale (timing and modalities) and exercise of
  shareholders rights
• On tariffs, within CIPE
• Different approaches and different interests
  protected
• Resolution at Government level (Council of
  Ministers)
• Conflicts on board appointments often general
  political compromise

19
Conflicts between Ministry of Economy and CONSOB

• CONSOB is an independent authority it can not be
  forced to take a decision
• No fiduciary relationship
• The supervision of MEF over CONSOB does not
  affect the institutional activity
• Possible conflicts on sanctions, in the past
• Judicial review available
• Possible effect on re-appointment
• In fact, CONSOB is cooperative smooth
  relationship

20
Conflicts between MEF and other independent
authorities

• Possible conflicts in particular with the
  Authority for electricity and gas (e.g. on
  tariffs), the Authority for telecommunication
  (concerning the national broadcasting company,
  RAI) and the Antitrust authority
• Independence of the authorities
• Judicial review available
• No leverage as to re-appointment
• More formal relationship

21
Conflicts between Ministry of Economy and
Parliament

• Parliament opinion not binding MEF may override
  it, disclosing reasons
• Conflict may involve political confidence
• Conflicts on the national broadcasting company
  (RAI)
• conflicts and uncertainty on political
  orientations may affect the regular management of
  company
• possible internal conflicts preventing the
  formation of qualified parliamentary majorities
  delay

22
PROSPECTIVE REFORM

• Bill on the protection of saving. Issues being
  discussed, concerning financial sector
  authorities
• Strengthnening of CONSOB (partly achieved)
• Clearer distinction of responsibilities (by
  objectives)
• Stronger independence
• Stronger accountability to Parliament and
  transparency regular consultation of market
• Coordination