Bond Banco BPM SpA 7.125% ( XS0597182665 ) in EUR

Issuer Banco BPM SpA
Market price 100 %  ⇌ 
Country  Italy
ISIN code  XS0597182665 ( in EUR )
Interest rate 7.125% per year ( payment 1 time a year)
Maturity 28/02/2021 - Bond has expired



Prospectus brochure of the bond Banco BPM S.p.A XS0597182665 in EUR 7.125%, expired


Minimal amount 100 000 EUR
Total amount 448 860 000 EUR
Detailed description Banco BPM S.p.A. is a major Italian banking group formed through the merger of Banco Popolare and Banca Popolare di Milano, offering a wide range of financial services to individuals, businesses, and public administrations.

The Bond issued by Banco BPM SpA ( Italy ) , in EUR, with the ISIN code XS0597182665, pays a coupon of 7.125% per year.
The coupons are paid 1 time per year and the Bond maturity is 28/02/2021







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OFFERING CIRCULAR
Banca Popolare di Milano S.C.a r.l.
(incorporated with limited liability in the Republic of Italy)
10,000,000,000
Euro Medium Term Note Programme
This Offering Circular constitutes a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the
Prospectus Directive). Under this 10,000,000,000 Euro Medium Term Note Programme (the Programme), Banca Popolare
di Milano S.C.a r.l. (the Issuer or the Bank) may from time to time issue non-equity securities in the meaning of Article 22
no. 6(4) of Commission Regulation (EC) No. 809/2004 of 29 April, 2004 (the Notes) denominated in any currency agreed
between the Issuer and the relevant Dealer (as defined below).
The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not
exceed 10,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described
herein), subject to increase as described herein.
The Notes may be issued on a continuing basis to one or more of the Dealers specified under "Description of the
Programme" and any additional Dealer appointed under the Programme from time to time by the Issuer (each a Dealer and
together the Dealers), which appointment may be for a specific issue or on an ongoing basis. References in this Offering
Circular to the relevant Dealer shall, in the case of an issue of Notes being subscribed by more than one Dealer, be to all
Dealers agreeing to subscribe such Notes.
An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see
"Risk Factors".
Application has been made to the Commission de Surveillance du Secteur Financier (the CSSF) in its capacity as
competent authority under the Luxembourg Act dated 10 July, 2005 on prospectuses for securities to approve this document
as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the
Programme to be admitted to trading on the regulated market of the Luxembourg Stock Exchange and to be listed on the
Official List of the Luxembourg Stock Exchange. References in this Offering Circular to Notes being listed (and all related
references) shall mean that such notes have been admitted to trading on the regulated market of the Luxembourg Stock
Exchange (Bourse de Luxembourg) and have been listed on the Official List of the Luxembourg Stock Exchange. The
Luxembourg Stock Exchange's regulated market (the Regulated Market) is a regulated market for the purposes of the Markets
in Financial Instruments Directive (Directive 2004/39/EC). Notice of the aggregate nominal amount of Notes, interest (if any)
payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are
applicable to each Tranche (as defined under "Terms and Conditions of the Notes") of Notes will be set out in the applicable
final terms (the Final Terms) which, with respect to Notes to be listed on the Luxembourg Stock Exchange, which will be filed
with the CSSF.
The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further
stock exchange(s) or markets as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted
Notes and/or Notes not admitted to trading on any market.
The Issuer may agree with any Dealer and the Trustee (as defined herein) that Notes may be issued in a form not
contemplated by the Terms and Conditions of the Notes herein, in which event a supplement to the Offering Circular if
appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes.
ARRANGER
Citi
CO-ARRANGER
Banca Akros S.p.A.
(Gruppo Banca Popolare di Milano)
DEALERS
Banca Akros S.p.A.
Banca IMI
(Gruppo Banca Popolare di Milano)
BofA Merrill Lynch
Banca Popolare di Milano
Barclays Capital
Crédit Agricole CIB
Citi
Deutsche Bank
Dexia Capital Markets
Goldman Sachs International
J.P. Morgan
Mediobanca ­ Banca di Credito Finanziario S.p.A.
Morgan Stanley
The Royal Bank of Scotland
The date of this Offering Circular is 6 August, 2010.


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The Issuer (the Responsible Person) accepts responsibility for the information contained in this
Offering Circular. To the best of the knowledge and belief of the Issuer (having taken all reasonable
care to ensure that such is the case) the information contained in this Offering Circular is in
accordance with the facts and does not omit anything likely to affect the import of such information.
Subject as provided in the applicable Final Terms, the only persons authorised to use this
Offering Circular in connection with an offer of Notes are the persons named in the applicable Final
Terms as the relevant Dealer or the Managers, as the case may be.
Copies of Final Terms will be available from the registered office of the Issuer and the specified
office set out below of each of the Paying Agents (as defined below) and will be published on the website
of the Luxembourg Stock Exchange (www.bourse.lu).
This Offering Circular is to be read in conjunction with all documents which are deemed to be
incorporated herein by reference (see "Documents Incorporated by Reference" below) and with any
supplements hereto. This Offering Circular shall be read and construed on the basis that such
documents are incorporated in and form part of this Offering Circular.
Neither the Dealers nor the Trustee have independently verified the information contained
herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no
responsibility or liability is accepted by the Dealers or the Trustee as to the accuracy or completeness
of the information contained or incorporated in this Offering Circular or any other information
provided by the Issuer in connection with the Programme. No Dealer or the Trustee accepts any
liability in relation to the information contained or incorporated by reference in this Offering Circular
or any other information provided by the Issuer in connection with the Programme.
No person is or has been authorised by the Issuer or the Trustee to give any information or to
make any representation not contained in or not consistent with this Offering Circular or any other
information supplied in connection with the Programme or the Notes and, if given or made, such
information or representation must not be relied upon as having been authorised by the Issuer, any of
the Dealers or the Trustee.
Neither this Offering Circular nor any other information supplied in connection with the
Programme or any Notes (a) is intended to provide the basis of any credit or other evaluation or (b)
should be considered as a recommendation by the Issuer, any of the Dealers or the Trustee that any
recipient of this Offering Circular or any other information supplied in connection with the
Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any
Notes should make its own independent investigation of the financial condition and affairs, and its own
appraisal of the creditworthiness, of the Issuer. Neither this Offering Circular nor any other
information supplied in connection with the Programme or the issue of any Notes constitutes an offer
or invitation by or on behalf of the Issuer, any of the Dealers or the Trustee to any person to subscribe
for or to purchase any Notes.
Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall
in any circumstances imply that the information contained herein concerning the Issuer is correct at
any time subsequent to the date hereof or that any other information supplied in connection with the
Programme is correct as of any time subsequent to the date indicated in the document containing the
same. The Dealers and the Trustee expressly do not undertake to review the financial condition or
affairs of the Issuer or the Issuer and its consolidated subsidiaries during the life of the Programme
or to advise any investor in the Notes of any information coming to their attention. Investors should
review, inter alia, the most recently published documents incorporated by reference into this Offering
Circular when deciding whether or not to purchase any Notes.
The Notes have not been and will not be registered under the United States Securities Act of
1933, as amended, (the Securities Act) and are subject to U.S. tax law requirements. Subject to certain
exceptions, Notes may not be offered, sold or delivered within the United States or to, or for the
account or benefit of, U.S. persons (see "Subscription and Sale").
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This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy
any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in
such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be
restricted by law in certain jurisdictions. The Issuer, the Dealers and the Trustee do not represent that
this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in
compliance with any applicable registration or other requirements in any such jurisdiction, or
pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such
distribution or offering. In particular, no action has been taken by the Issuer, the Dealers or the
Trustee which would permit a public offering of any Notes outside the European Economic Area or
distribution of this Offering Circular in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular
nor any advertisement or other offering material may be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with any applicable laws and regulations.
Persons into whose possession this Offering Circular or any Notes may come must inform themselves
about, and observe, any such restrictions on the distribution of this Offering Circular and the offering
and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and
the offer or sale of Notes in the United States, the European Economic Area (including the United
Kingdom, the Republic of Italy, The Netherlands and Germany) and Japan see "Subscription and
Sale".
This Offering Circular has been prepared on the basis that any offer of Notes in any Member
State of the European Economic Area which has implemented the Prospectus Directive (each, a
Relevant Member State) will be made pursuant to an exemption under the Prospectus Directive, as
implemented in that Relevant Member State, from the requirement to publish a prospectus for offers
of Notes. Accordingly any person making or intending to make an offer in that Relevant Member
State of Notes which are the subject of an offering contemplated in this Offering Circular as completed
by final terms in relation to the offer of those Notes may only do so in circumstances in which no
obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the
Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in
each case, in relation to such offer. Neither the Issuer nor any Dealer have authorised, nor do they
authorise, the making of any offer of Notes in circumstances in which an obligation arises for the
Issuer or any Dealer to publish or supplement a prospectus for such offer.
This Offering Circular includes forward-looking statements. These include statements relating
to, among other things, the future financial performance of the Issuer and the Group (as defined
herein), plans and expectations regarding developments in the business, growth and profitability of the
Group and general industry and business conditions applicable to the Group. The Group has based
these forward-looking statements on its current expectations, assumptions, estimates and projections
about future events. These forward-looking statements are subject to a number of risks, uncertainties
and assumptions that may cause the actual results, performance or achievements of the Group or
those of its industry to be materially different from or worse than these forward-looking statements.
The Issuer does not assume any obligation to update such forward-looking statements and to adapt
them to future events or developments except to the extent required by law.
All references in this document to: euro and refer to the currency introduced at the start of
the third stage of European economic and monetary union pursuant to the Treaty on the Functioning
of the European Union, as amended; U.S. dollars, U.S.$ and $ refer to United States dollars being the
currency of the United States of America; Sterling refers to the currency of the United Kingdom; and
yen refers to the currency of Japan.
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CONTENTS
Page
Risk Factors ..................................................................................................................................
5
Description of the Programme ......................................................................................................
16
Documents Incorporated by Reference ........................................................................................
22
Form of the Notes ........................................................................................................................
24
Applicable Final Terms ................................................................................................................
26
Terms and Conditions of the Notes ..............................................................................................
40
Use of Proceeds ............................................................................................................................
68
Description of the Issuer ..............................................................................................................
76
Taxation ........................................................................................................................................
102
Subscription and Sale....................................................................................................................
111
General Information......................................................................................................................
114
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as
the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the
applicable Final Terms may over-allot Notes or effect transactions with a view to supporting the
market price of the Notes of the Series (as defined below) of which such Tranche forms part at a level
higher than that which might otherwise prevail. However, there is no assurance that the Stabilising
Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action.
Any stabilisation action may begin on or after the date on which adequate public disclosure of the
terms of the offer of the relevant Tranche of Notes is made and, if begun, may be ended at any time,
but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes
and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action
or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on
behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.
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RISK FACTORS
The Issuer believes that the following factors may affect its ability to fulfil its obligations under Notes
issued under the Programme. Most of these factors are contingencies which may or may not occur and the
Issuer is not in a position to express a view on the likelihood of any such contingency occurring.
In addition, factors which are material for the purpose of assessing the market risks associated with
Notes issued under the Programme are also described below.
The Issuer believes that the factors described below represent the principal risks inherent in investing
in Notes issued under the Programme, but the inability of the Issuer to pay interest, principal or other
amounts on or in connection with any Notes may occur for other reasons which may not be considered
significant risks by the Issuer based on information currently available to it or which it may not currently be
able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this
Offering Circular and reach their own views prior to making any investment decision.
Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this
Offering Circular have the same meaning in this section.
Factors that may affect the Issuer's and Group's ability to fulfil its obligations under Notes issued
under the Programme
Risks relating to the Issuer's business
As a credit institution, the Issuer is exposed to the typical risks associated with the business of a
financial intermediary such as credit risk, market risk, interest rate risk, liquidity risk and operational risk,
plus a series of other risks typical to businesses such as strategic risk, legal risk, tax and reputational
exposure.
Credit risk relates to the risk of loss arising from counterparty default (in particular, recoverability of
loans) or in the broadest sense from a failure to perform contractual obligations, including on the part of any
guarantors. The credit risk that the Issuer faces arises mainly from commercial and consumer loans and
advances. Credit risk may also be manifested as country risk where difficulties may arise in the country in
which the exposure is domiciled thus impeding or reducing the value of the asset, or where the counterparty
may be the country itself. Another form of credit risk is settlement risk, which is the possibility that the Issuer
may pay a counterparty ­ for example, a bank in a foreign exchange transaction ­ but fail to receive the
corresponding settlement in return.
In recent years, the global credit environment was adversely affected by significant instances of
default, and there can be no certainty that further such instances will not occur. Concerns about, or a default
by, one institution could lead to significant liquidity problems, losses or defaults by other institutions because
the commercial soundness of many financial institutions may be closely related as a result of credit, trading,
clearing or other relationships between institutions. This risk is sometimes referred to as "systemic risk" and
may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities
firms and exchanges with which the Group interacts on a daily basis and therefore could adversely affect the
Group.
Market risk relates to the risk arising from market transactions in financial instruments, currencies and
commodities.
Interest rate risk refers to the possibility of the Issuer incurring losses as a result of a poor performance
in market interest rates.
Liquidity risk relates to the Issuer's ability or lack thereof to meet cash disbursements in a timely and
economic manner. It is quantified as the additional cost arising from asset sales and/or negotiation of new
liabilities incurred by the intermediary when required to meet unexpected commitments by way of recourse
to the market.
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Operational risk relates to the risk of loss arising from shortcomings or failures in internal processes,
people or systems and from external events.
Risks concerning liquidity
The Issuer's businesses are subject to risks concerning liquidity which are inherent in its banking
operations, and could affect the Issuer's ability to meet its financial obligations as they fall due or to fulfil its
commitments to lend. In order to ensure that the Issuer continues to meet its funding obligations and to
maintain or grow its business generally, it relies on customer savings and transmission balances, as well as
ongoing access to the wholesale lending markets. The ability of the Issuer to access wholesale and retail
funding sources on favourable economic terms is dependent on a variety of factors, including a number of
factors outside of its control, such as liquidity constraints, general market conditions and confidence in the
Italian banking system.
The global financial system has yet to overcome the difficulties which first manifested themselves in
August 2007, and were intensified by the bankruptcy filing of Lehman Brothers in September 2008.
Financial market conditions have remained challenging and, in certain respects, have deteriorated. In
addition, the continued concern about sovereign credit risks in the Euro-zone has progressively intensified
over the last six months, becoming more acute in early May 2010, and in July 2010 the sovereign debt of
Portugal and Ireland was downgraded by Moody's. The large sovereign debts and/or fiscal deficits in
European countries have raised concerns regarding the financial condition of Euro-zone financial institutions
and their exposure to such countries, in particular following the recently agreed International Monetary Fund
and European Union support package for Greece. These concerns may impact the ability of Euro-zone banks
to access the funding they need, or may increase the costs of such funding, which may cause such banks to
suffer liquidity stress. If the current concerns over sovereign and bank solvency continue, there is a danger
that inter-bank funding may become generally unavailable or available only at elevated interest rates, which
might impact the Group's access to, and cost of, funding. Should the Group be unable to continue to source
a sustainable funding profile, the Group's ability to fund its financial obligations at a competitive cost, or at
all, could be adversely impacted.
Risks connected with the creditworthiness of customers
The Issuer's business depends to a substantial degree on the creditworthiness of its customers.
Notwithstanding its detailed controls including customer credit checks, it bears normal lending risks and thus
may not, for reasons beyond its control (such as, for example, fraudulent behaviour by customers), have
access to all relevant information regarding any particular customer, their financial position, or their ability
to pay amounts owed or repay amounts borrowed. The failure of customers to accurately report their
financial and credit position or to comply with the terms of their agreements or other contractual provisions
could have an adverse effect on the Issuer's business and financial results.
During a recession, a greater number of the Issuer's customers may default on their loans or other
obligations. The risk arising from the impact of the economy and business climate on the credit quality of
the Issuer's borrowers and counterparties can affect the overall credit quality and the recoverability of loans
and amounts due from counterparties.
Risks associated with general economic, financial and other business conditions
The results of the Group are affected by general economic, financial and other business conditions.
During recessionary periods, there may be less demand for loan products and a greater number of the
Group's customers may default on their loans or other obligations. Interest rate rises may also have an impact
on the demand for mortgages and other loan products. Fluctuations in interest rates in the markets in which
the Group operates influence its performance.
As discussed under "Risks concerning liquidity", these risks are exacerbated by concerns over the
levels of the public debt of, and the weakness of the economies in, certain Euro-zone countries. There can
be no assurance that the initiatives aimed at stabilising the markets will be sufficient to avert "contagion",
i.e. the risk that the Greek sovereign debt crisis will spread to other indebted countries. If there were to be a
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downgrade in the sovereign debt of the countries in which the Group operates, such downgrade, or the
perception that such a downgrade may occur, would be likely to have a material effect in depressing
economic activity and restricting the availability, and increasing the cost, of funding for individuals and
companies, which might have a material adverse effect on the Group's operating results, financial condition
and prospects.
Risk management and impact of events which are difficult to anticipate
The Issuer's earnings and business are affected by general economic conditions, the performance of
financial markets, interest rate levels, currency exchange rates, changes in laws and regulation, changes in
the polices of central banks, particularly the Bank of Italy and the European Central Bank, and competitive
factors, at a regional and national level. Each of these factors can change the level of demand for the Issuer's
products and services, the credit quality of borrowers and counterparties, the interest rate margin of the Issuer
between lending and borrowing costs and the value of the Issuer's investment and trading portfolios.
The Issuer has devoted significant resources to developing policies, procedures and assessment
methods to manage market, credit, liquidity and operating risks and intends to continue to do so in the future.
Nonetheless, the Issuer's risk management techniques and strategies may not be fully effective in mitigating
its risk exposure in all economic market environments or against all types of risk, including risks that the
Issuer fails to identify or anticipate.
Financial condition of banks and other financial institutions
The Issuer is exposed to many different industries and counterparties in the normal course of its
business, but its exposure to counterparties in the financial services industry is significant. This exposure can
arise through trading, lending, deposit-taking, clearance and settlement and many other activities and
relationships. These counterparties include brokers and dealers, commercial banks, investment banks, mutual
and hedge funds, and other institutional clients. Many of these relationships expose the Issuer to credit risk
in the event of default of a counterparty or client. In addition, the Issuer's credit risk may be exacerbated
when the collateral it holds cannot be realised or is liquidated at prices not sufficient to recover the full
amount of the loan or derivative exposure it is due. Many of the hedging and other risk management
strategies utilised by the Issuer also involve transactions with financial services counterparties. The weakness
or insolvency of these counterparties may impair the effectiveness of the Issuer's hedging and other risk
management strategies. A continuation or worsening of the difficulties which have impacted the global
financial services industry in recent years, discussed under "Risks concerning liquidity", may have a material
adverse effect on the business and financial condition of the Issuer and the Group.
Risks connected with concentration of business in Northern Italy
The Issuer's business is concentrated in Northern Italy. Although it has substantial business in other
regions in Italy, a downturn in demand in the Northern Italy market could have a material adverse effect on
its business.
Protracted market decline and reduced liquidity in the markets
In some of the Issuer's businesses, protracted adverse market movements, particularly the decline of
asset prices, can reduce market activity and market liquidity. These developments can lead to material losses
if the Issuer cannot close out deteriorating positions in a timely way. This may especially be the case for
assets that did not enjoy a very liquid market to begin with. The value of assets that are not traded on stock
exchanges or other public trading markets, such as derivatives contracts between banks, may be calculated
by the Issuer using models other than publicly quoted prices. Monitoring the deterioration of the prices of
assets like these is difficult and failure to do so effectively could lead to unanticipated losses. This in turn
could adversely affect the Issuer's operation results and financial condition.
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In addition, protracted or steep declines in the stock or bond markets in Italy and elsewhere may
adversely affect the Issuer's securities trading activities and its asset management services, as well as the
Issuer's investments in and sales of products linked to the performance of financial assets.
Value of financial instruments recorded at fair value
Under International Financial Reporting Standards, as adopted by the European Union and as
implemented under the Bank of Italy's instructions contained in Circular No. 262 of 22 December, 2005 and
related transitional regulations in Italy (IFRS), the Issuer recognises at fair value: (i) financial instruments
classified as "held-for-trading" or "designated as at fair value through profit or loss", (ii) financial assets
classified as "available for sale" and (iii) derivatives, each as further described in "Accounting Policies" in
the notes to the audited annual financial statements of the Issuer for the year ended 31 December, 2009,
which are incorporated by reference in this Base Prospectus. Generally, in order to establish the fair value of
these instruments, the Issuer relies on quoted market prices or, where the market for a financial instrument
is not sufficiently active, internal valuation models that utilise observable market data. In certain
circumstances, the data for individual financial instruments or classes of financial instruments utilised by
such valuation models may not be available or may become unavailable due to changes in market conditions,
as has been the case recently. In such circumstances, the Issuer's internal valuation models require the Issuer
to make assumptions, judgments and estimates in order to establish fair value. In common with other
financial institutions, these internal valuation models are complex, and the assumptions, judgments and
estimates the Issuer is required to make often relate to matters that are inherently uncertain, such as expected
cash flows, the ability of borrowers to service debt, house price appreciation and depreciation, and relative
levels of defaults and deficiencies. Such assumptions, judgments and estimates may need to be updated to
reflect changing trends and market conditions. The resulting change in fair values of the financial
instruments could have a material adverse effect on the Issuer's earnings and financial condition.
Competition
The Issuer is subject to competition from a large number of companies who may offer the same
financial products and services and other forms of alternative and/or novel forms of borrowing or investment.
Such competitors include banks and other financial intermediaries. In addition, the formation of increasingly
large banking groups, and the entry of foreign financial institutions into the Italian banking market, may
allow such companies to offer products and services on terms that are more financially advantageous than
those which it is able to offer as a result of their possible economies of scale. As a result of this competition,
it may not be able to attract and retain new clients or sustain the rate of growth that it has experienced to date,
which may adversely affect its market share and results of operations.
Risks associated with the legislative, accounting and regulatory context
Changes in the Italian and European regulatory framework could adversely affect the Issuer's
Business. The Issuer is subject to extensive regulation and supervision by the Bank of Italy, CONSOB (the
public authority responsible for regulating the Italian securities market), the European Central Bank, the
European System of Central Banks and the CSSF in Luxembourg.
The banking laws to which the Issuer is subject govern the activities in which banks may engage and
are designed to maintain the safety and soundness of banks, and limit their exposure to risk. In addition, the
Issuer must comply with financial services laws that govern its marketing and selling practices. The
regulatory framework governing international financial markets is currently being amended in response to
the credit crisis, and new legislation and regulations are being introduced in Italy and the European Union
that will affect the Issuer, including proposed regulatory initiatives that could significantly alter the Issuer's
capital requirements. In order to meet additional capital requirements, the Issuer may be forced to raise
further capital. Any failure of the Issuer to meet any such additional regulatory capital requirements could
result in administrative actions or sanctions. Such changes in the regulatory framework and in how such
regulations are applied may have a material effect on the Issuer's business and operations.
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Further, on 31 January, 2007 the Italian Government adopted law decree No. 7 which was later
converted into law by Law No. 40 of 2 April, 2007 (the Bersani Decree). The Bersani Decree aims at, inter
alia, increasing competitiveness in a number of sectors, including the banking sector. In particular, in the
banking sector, the Bersani Decree aims at reducing the costs associated with prepayment of mortgage loans
with a view to allowing borrowers to refinance their mortgage loans more easily. With specific regard to
mortgage loans (mutui) (and, in particular, mortgage loans granted for the purpose of purchasing or
refurbishing real estate assets dedicated to residential use or to the carrying out of economic or professional
activities by natural persons) executed after 2 February, 2007, under article 7 of the Bersani Decree
prepayment fees are no longer permitted. Any provision to the contrary is null and void.
Operational risk
The Issuer, like all financial institutions, is exposed to many types of operational risk, including the
risk of fraud by employees and outsiders, unauthorised transactions by employees or operational errors,
including errors resulting from faulty information technology or telecommunication systems. The Issuer's
systems and processes are designed to ensure that the operational risks associated with its activities are
appropriately monitored. Any failure or weakness in these systems, however, could adversely affect its
financial performance and business activities.
Risks connected with information technology
The Issuer's business relies upon integrated information technology systems, including an offsite
back-up system. It relies on the correct functioning and reliability of such system and on its ability to protect
the Issuer's network infrastructure, information technology equipment and customer information from losses
caused by technical failure, human error, natural disaster, sabotage, power failures and other losses of
function to the system. The loss of information regarding customers or other information central to the
Issuer's business, such as credit risk control, or material interruption in the service could have a material
adverse effect on its results of operations. In addition, upgrades to the Issuer's information technology
required by law or necessitated by future business growth may require significant investments.
Factors which are material for the purpose of assessing the market risks associated with Notes issued
under the Programme
The Notes may not be a suitable investment for all investors
Each potential investor in the Notes must determine the suitability of that investment in light of its
own circumstances. In particular, each potential investor should:
(i)
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the
merits and risks of investing in the Notes and the information contained or incorporated by
reference in this Offering Circular or any applicable supplement;
(ii)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Notes and the impact the Notes will have on
its overall investment portfolio;
(iii)
have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Notes, including Notes with principal or interest payable in one or more currencies, or where
the currency for principal or interest payments is different from the potential investor's
currency;
(iv)
understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant
indices and financial markets; and
(v)
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear
the applicable risks.
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Level: 2 ­ From: 2 ­ Thursday, August 5, 2010 ­ 22:49 ­ Eprint2 ­ 4253 Section 01
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not
purchase complex financial instruments as stand-alone investments. They purchase complex financial
instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of
risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial
instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes
will perform under changing conditions, the resulting effects on the value of the Notes and the impact this
investment will have on the potential investor's overall investment portfolio.
Risks related to the structure of a particular issue of Notes
A wide range of Notes may be issued under the Programme. A number of these Notes may have
features which contain particular risks for potential investors. Set out below is a description of the most
common such features:
Notes subject to optional redemption by the Issuer
An optional redemption feature of Notes is likely to limit their market value. During any period when
the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially
above the price at which they can be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate
on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at
an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do
so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other
investments available at that time.
The Notes may be redeemed prior to maturity
Unless in the case of any particular Tranche of Notes the relevant Final Terms specifies otherwise, in
the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any
withholding or deduction for or on account of, any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of
Italy or any political subdivision thereof or any authority therein or thereof having power to tax, the Issuer
may redeem all outstanding Notes in accordance with the Conditions.
In addition, if in the case of any particular Tranche of Notes the relevant Final Terms specifies that the
Notes are redeemable at the Issuer's option in certain other circumstances the Issuer may choose to redeem
the Notes at times when prevailing interest rates may be relatively low. In such circumstances an investor
may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as
high as that of the relevant Notes.
Index Linked Notes and Dual Currency Notes
The Issuer may issue Notes with principal or interest determined by reference to an index or formula,
to changes in the prices of securities or commodities, to movements in currency exchange rates or other
factors (each, a Relevant Factor). In addition, the Issuer may issue Notes with principal or interest payable
in one or more currencies which may be different from the currency in which the Notes are denominated.
Potential investors should be aware that:
(i)
the market price of such Notes may be volatile;
(ii)
they may receive no interest;
(iii)
payment of principal or interest may occur at a different time or in a different currency than
expected;
(iv)
they may lose all or a substantial portion of their principal;
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