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ITALIAN BANKING ASSOCIATION

BTP DAY
28 November and 12 December

QUESTIONS AND ANSWERS

GENERAL QUESTIONS

What is the “BTP day”?

The BTP Day is an initiative that aims to facilitate, temporarily citizens to invest in Italian government bonds. The Executive Committee of the Italian Banking Association (ABI) decided to support the project launched by the “Corriere della Sera” newspaper. ABI has accepted the proposal to give a clear signal of its commitment to contribute to the resolution of the difficult time being experienced by the Country in the refinancing of its public debt.
The Banking Association raised the idea of doubling the BTP day, by taking two days instead of one: the 28th of November 2011 for the purchase of securities already issued on the market and the 12th of December 2011 for newly issued securities, particularly with regards to “Buoni Ordinari del Tesoro” (BOT).

Which customers may benefit from this initiative?

Families, businesses and companies, all customers can benefit from this initiative. Only institutional investors are excluded.

What does a customer need to do to join?

There are no special requirements for customers. They will have to contact their banks as for any other transaction. The bank adhering to the initiative will not apply commissions to the transactions covered by the initiative.

Do all banks participate? If not, how is it possible to know which banks do participate?

Participation by the banks is on a voluntary basis. Banks that decide to ahdere will appropriately publicise it to their customers. A list of participating banks will also be available on the ABI web pages.

When can customers benefit from this initiative?

The initiative is relevant to two dates: the 28th November, specifically for investing in government bonds that are already issued on the market, and the 12th of December for the auction of new bonds issuances by the Ministry of Economy and Finance.

Will banks waive their right to fees and commissions on their customers’ purchase of government securities?

Yes, they will. Indeed, this is a concrete initiative, thanks to which participating banks will enable their customers to invest in government bonds, waiving their right to receive their relevant usual fees.

Then, what other expenses might be charged to customers?

For those who already hold a securities account at their own bank, no additional costs are provided for. However, customers that have not previously executed any operation in securities will need to open a securities account with their own bank. The fees and charges, including the relevant taxation, related to securities account are not covered by the initiative and will be borne by the customer.

What is the overall cost associated with the purchase and detention of BOT or BTP?

It is necessary to distinguish costs related to the purchase of government bonds from those associated with their holding. This is true not only for government bonds but also for many other types of investment.

The first case includes subscription or trading fees that the investor pays to the bank or to another intermediary for the execution of the transaction. These fees will be waived by the banks adhering to the BTP Day initiative.

The second case includes any on-going charges related to the holding of the securities purchased. In particular, for most securities, including government bonds, it is mandatory to open a securities account (also called “securities portfolio”) where the securities are hold and deposited. To this end it is necessary to sign a contract with the bank, for the custody and administration of the securities, on the basis of which the bank holds the securities and administers them on a customer’s behalf (e.g. it automatically collects the interest coupons from the Ministry of Economy and Finance and credits the account of the customer). The securities custody and administration service is usually paid by means of an annual fee charged to the customers. The securities account is also subject to stamp duty for regular notices sent by the bank to its customers and its actual amount, recently increased, varies depending on the nominal value of the securities held by the customer.

Finally, bonds’ interest coupons credited to residents are also subject to a 12.5% fixed-rate lieu-tax, charged by financial intermediaries.

BTP, BOT are government bonds. What does this actually mean?

Government bonds are financial instruments by the means of which a Country finances its debt. Therefore, those who subscribe such securities become financial backers or “sponsors” of the State. The government bonds provide for the repayment of the principal at maturity and the payment of interest payments through periodic coupons or a single payment at maturity. Those who hold the bonds until maturity, therefore, will not incur in any loss of the notional amount invested. In the event of a disinvestment before maturity - for instance through the sale of the securities on the market - losses could be incurred in should the selling price be lower than the subscription or purchase price.
Further detailed information on the characteristics of Italian government bonds and on the relevant auction process can be found on the website of the Ministry of Economy and Finance (www.dt.tesoro.it), under the section “Public Debt - Government bonds”.

The European Central Bank has bought our bonds in bulk. Can citizens contribute to the recovery of the country by buying government bonds?

The investment in government bonds by citizens can be an important contribution to show the confidence that Italians have in their Country. The European Central Bank's active intervention has beneficial effects on bond yields and, therefore, on the spread on the yields of other European countries. Investing in Italian government securities (both on the secondary market and at auction), in this times, is an important signal that Italians have confidence in their economy. This can further help to improve the overall confidence that the markets have in the Country and make it less and less necessary for the European Central Bank to intervene on Italian government bonds.

Doesn't allocating savings to purchase government bonds inevitably take valuable resources away from businesses - banking, financial and otherwise – which, in this complex situation, are struggling to raise capital through the traditional collection channel represented by bonds and corporate bonds?

In this moment, it is very important to collect financial resources from investors and savers and channel them to the real economy: households and businesses. This ability, however, is profoundly affected by the general situation of the country and by market confidence. An increase in rates paid by the State on their securities (which would reflect a lower confidence in the country) also affects other markets - including the interbank market where banks lend each other money - and has an impact on the banks’ funding raised by direct issuance of bonds. The result is an increase in interest rates on loans granted by banks to households and businesses.

For this reasons, it is very important for the Italian economy that there is willingness by citizens to invest in Italian government bonds, as much as to invest in bonds issued by banks and businesses.

THE INITIATIVE OF THE 28th OF NOVEMBER

On the 28th of November the initiative refers to the secondary market.
What does this mean?

It means that the fees consumers pay for the purchase of securities already issued by the Ministry of Economy and Finance, negotiated among savers, investors and intermediaries, will be waived.

What fees do not apply?

There will be waived any trading commissions and other expenses related to the purchase and sale of government bonds – which are already issued on this date – executed on the markets on the 28th of November (e.g. the MOT of “Borsa Italiana”, the Italian Stock Exchange, TLX or Hi-MTF).

What securities are covered by the initiative of the 28th of November?

All Italian government bonds already issued and therefore in circulation on the market, i.e. Treasury Bills (BOT), Buoni del Tesoro Poliennali (BTP), Zero Coupon Treasury Certificates (CTZ), Treasury credit certificates (CCTs / CCTeu) and BTP indexed to the European inflation rate (BTP€i). It also includes Italian Government Bonds issued on foreign markets.

Is this not just a way to transfer securities that banks have in their portfolio to customers?

Italian banks are among the major subscribers of Italian government bonds and contribute to the success of placements of securities and their liquidity. This role will continue to be carried out as usual. The initiative, therefore, is not designed to transfer bonds from banks to customers but help them to invest in the national debt, giving a strong signal of confidence in the Country.

Is there a way to figure out who owns the BTP I would buy?

When the purchase of government securities takes place on a market, the seller of the securities is not known because trading is anonymous. The matching of demand and supply of securities is made in accordance with the rules of the market.

Securities may also be purchased directly from the bank. In this case, the bank shall provide specific relevant information to the customer and must guarantee the execution of the purchase order at the best possible conditions, according to the law.

THE INITIATIVE OF THE 12th OF DECEMBER

On the 12th of December the initiative refers to the auction of Treasury bills (BOT). What does this mean?

On the 12th of December it is scheduled an issuance of Treasury Bills (BOT) by the Ministry of Economy and Finance. The initiative provides that the fees normally due to your bank to underwrite the securities issued will be waived.

What is the difference between this and the initiative of 28 November?

The initiative taking place on the 12th of December concerns the subscription of newly issued government bonds, while the initiative taking place on the 28th of November regards any investment in government bonds which have already been issued and are in circulation among investors.

What does a customer need to do to adhere to the initiative?

As for all auctions of government securities, customers must contact their own bank to "reserve" a certain amount of the newly issued securities that it intends to purchase. It should be noted that, where the demand for securities is greater than the quantity offered at the auction, the customer's subscription request may not be completely fulfilled.

How much time is it available to take advantage of the initiative?

Normally, reservations can be made up until the day before the auction. However, considering the particular festive period preceding the auction (i.e. the 8th of December is a public holiday in Italy), it is recommended to contact your bank well in advance of the date of 12 December. The bank will take care of the government bonds’ reservation request and make the subscription on behalf of the customer when and as appropriate.

Which are the securities covered by the December 12 initiative?

The initiative applies to newly issued Treasury Bills (BOT) – with an annual maturity and expiring on the 14th of December 2012 – which will be issued by the Ministry of Economy and Finance on the 12th of December.

What fees do not apply?

The initiative regards the fees that customers should normally pay to their bank to underwrite newly issued government bonds. These fees are explicitly provided for in the Ministerial Decree of 12 February 2004 which establishes the maximum applicable amount (for the securities to be issued on 12 December, the maximum fee is set at €0.30 per €100 of issued capital).