Clarifications about the Circulars No. 285 and 288 – prudential treatment of tax credits
Through the note of clarification of the Circular No. 285 “Supervisory reporting for Banks” and to Circular No. 288 “Supervisory reporting for financial intermediaries” on 14 September 2020, Bank of Italy provides clarifications about the prudential treatment of tax credits, referring to the Standardised and IRB Approach
The Supervisory Authority was asked to clear which prudential treatment banks and financial intermediaries have to apply in case of purchase of tax credit introduced by Decree-Law 17th march 2020 and Decree-Law 19th may 2020.
These decrees have introduced in the Italian Legislation some tax incentives provided like deductions and tax credits convertible into tax credits.
Regarding the prudential treatment, the exposures from the acquisition of tax credits are similar to the “exposures to central governments or central banks”.
As part of the standard method, it’s applied a risk weight of 0% to the these exposures.
Banks and financial intermediaries have to define appropriate policies, governance processes and risk management to secure the limits of the tax credits purchase are defined as a function of the current and perspective capacity of debt position of the intermediary towards the State Treasury, avoiding the acquisition of an amount of credits inconsistent with the debts can be used for clearing.
Read or download here:
Note of clarification to Circular No. 285, 5th January, 2021
Update to note of clarification to Circular No. 288, 5th January, 2021