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REPORT ON THE PROCEDURES FOR PORTABILITY OF HOME LOANS


PRESS RELEASE



PRESS RELEASE

HOME LOANS: ANTITRUST AUTHORITY WARNS AGREEMENT BETWEEN ABI AND NOTARIES MUST NOT LIMIT BANKS' INDEPENDENCE

Accord risks not improving competition and limiting portability to the serious detriment of consumers. Report sent to the Minister for Economic Development, to ABI and to CNN


The procedure for portability of home loans recently announced by the Association of Italian Banks (ABI) and the National Council of Notaries (CNN) must not limit the independence of banks in providing alternative solutions for portability that may be better than those agreed upon.

This is the thrust of a report by the Italian Competition Authority, approved at its meeting on 22 November 2007 and forwarded to the Minister for Economic Development, Pier Luigi Bersani, and to the two associations in question. In the Antitrust Authority's view, the initiative undertaken by ABI and CNN may not have identified the solutions that are most consistent with the development of effective competitive dynamics and are the least onerous and complex of those possible; the procedure needs to aim for simplification, speed and cost containment. To this end, the banks must have complete liberty to compete in terms of simplifying the procedure and covering the costs, so as to offer the consumer free substitution of his loan.

Specifically, the procedure agreed upon by ABI and CNN:

1) must not affect the client's complete freedom to ask his bank directly (for example, on-line or in person at his branch) as to the status of the existing home loan and to receive that information more or less instantaneously. In effect, during his research and in his first contacts with a potential new lending bank, it is essential that the customer be able to operate without the original bank's involvement in the procedure: such involvement could risk giving rise to conduct aimed at discouraging portability.

2) may not give proper weight to the difference between a substitution and the granting of a new home loan, thus inviting the application of unjustified costs. It would not be consistent with the development of a full competitive dynamic to charge customers, directly or indirectly, with fees that are not proportionate and justified. That is also true of penalties for early discharge, which do not seem to be a justified cost. Indeed, in order that substitution may effectively make customer mobility, and therefore competition, possible, both the original bank and the replacement bank must fully implement the logic of the law, whereby substitution, besides being without formalities, must also be without impediments or fees for the borrower.

3) it seems to presuppose that the substitution of a home loan will be effected through a constant three-way interaction among the parties involved (original bank, new bank and end customer). From a competitive point of view, such an option encourages an improper dynamic between the businesses resulting in the customer staying with the original bank: indeed, it is not at all clear how customer mobility can be ensured if direct participation of the original bank is allowed even in the stipulation of the contract between the customer and the new bank.

In the Authority's view, the market must demonstrate that vitality that it has lacked up to the present time, by introducing competitive pressures  aimed at encouraging a natural reduction of prices by way of both substitution and the renegotiation of home loans. In order for these two tools to bring real benefits it is essential that self-regulation and the individual banks make both options equally feasible without raising unjustified (economic or other) obstacles in the one case or the other.

The Authority reserves the right, should it see the need, to take further measures in carrying out its own institutional responsibilities.

Rome, 23 November 2007