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ROME, May 20 (Reuters) – Italy has dropped a mooted measure lifting the cap on tax incentives for bank mergers from a decree the cabinet is set to approve on Thursday, according to a draft seen by Reuters.
Instead, the decree tweaks the current norm only to give lenders slightly more time for potential deals.
The scrapping of the higher cap hit Italian banking shares, in particular Banco BPM which fell more than 4%, triggering an automatic trading suspension.
The higher ceiling, which had been proposed by the Treasury, had boosted the merger appeal of Banco BPM, Italy’s third-largest bank, fuelling investor bets about a potential takeover by rival UniCredit.
But the draft document does not include the proposal to raise the cap on the incentives to 3% of the assets of the smaller bank involved in the merger, leaving in place the current 2% limit.
A government source told Reuters the measure could be re-proposed by the Treasury and reconsidered for approval by the cabinet at a later date.
Under the latest draft, the incentives apply if merger deals are approved by lenders’ boards of directors by the end of this year. At present shareholder approval is necessary by the Dec. 31 deadline.
An earlier draft bill seen by Reuters on May 3 had raised the cap on the incentives, prolonged them by six months to June 2022 and given banks three years, instead of one, to carry out the merger.
The tax incentives, which apply to all corporate mergers, were introduced by the previous government to make a takeover of bailed-out Monte dei Paschi (MPS) palatable for UniCredit, which is considering potential M&A opportunities under new CEO Andrea Orcel.
The changes which have now been dropped would have increased by nearly 50% the tax benefits for UniCredit in an MPS deal. (Reporting by Giuseppe Fonte, Valentina Za and Andrea Mandala, editing by Gavin Jones)
