Mps: ECB does not view CDP as a bank in Palermo's fit-and-proper assessment - source

The ECB does not consider CDP to be a bank for the purposes of evaluating the banking experience of Mps board candidate Fabrizio Palermo for the CEO position at the Sienese lender, according to a source familiar with the European regulator's stance.

The ECB and the Bank of Italy declined to comment.

The potential failure to comply with the ECB's request for a CEO candidate with significant banking experience will be taken into account by European supervisors as part of the "fit and proper" assessment process. Under Italian law, this process takes place after the appointment, the source explained.

This process, the source added, can conclude with a decision imposing conditions on the credit institution to strengthen the professional profiles of its key figures.

After excluding current CEO Luigi Lovaglio from the board's list for a potential new mandate, the Mps board initially identified three CEO candidates and subsequently selected Acea CEO and former CDP head Fabrizio Palermo as the most suitable to manage upcoming market challenges.

Palermo led Cassa Depositi e Prestiti (CDP) from 2018 to 2021.

CDP is a public body that operates as a non-bank financial institution and has access to long-term liquidity provided by the ECB.

Tasked with managing postal savings, CDP is subject to Bank of Italy monitoring on issues such as money laundering, but it does not hold a banking license and is not subject to prudential supervision as a credit intermediary.

The ECB does not consider CDP equivalent to a bank, and this factor will be part of the "fit and proper" assessment if Palermo emerges as the winner of the Mps shareholders' vote on April 15.

In the event of doubts regarding "fitness and propriety" requirements, the ECB could issue a decision at the end of the assessment accompanied by additional provisions, such as a request for further training.

The ECB has clarified in the past that such conditions, known as ancillary provisions, are most effective when they contain "concrete and legally binding expectations (...) according to clear deadlines."

(Valentina Za, editing Andrea Mandalà)