MILAN (Reuters) - Italy’s top administrative court on Friday dealt a potentially big blow to a landmark government reform that forced large cooperative banks to become joint-stock companies, saying that some aspects of the reform may be unconstitutional.
The reform, aimed at improving the banks’ governance and encouraging mergers, gave Italy’s 10 largest “popolari” banks until the end of this year to shed their cooperative status.
Eight banks have already approved their transformation into joint stock companies. Popolare di Sondrio and Popolare di Bari were planning to do so this month.
The court said in a statement it was suspending certain elements of the reform pending a ruling by the constitutional court on the legitimacy of the new rules.
The court took issue in particular with a Bank of Italy regulation that allowed the banks to limit or even scrap the cash reimbursement of shareholders who opposed the reform and exercised a withdrawal right.
This was meant to prevent the capital base of the banks in question from taking a big hit if a lot of shareholders demanded to be reimbursed.
However, the court said limiting the reimbursement of withdrawal rights might violate the constitution.
It was not immediately clear to what extent the ruling might affect the reform.
Reporting by Valentina Za and Andrea Mandala; Editing by Elaine Hardcastle