Obligation Banco BPM S.p.A 6.125% ( XS2089968270 ) en EUR

Banco BPM S.p.A

93.07 % ⇌

Italie

XS2089968270 ( en EUR )

6.125% par an ( paiement semestriel )

Perpétuelle

Prospectus brochure de l'obligation Banco BPM S.p.A XS2089968270 en EUR 6.125%, échéance Perpétuelle

200 000 EUR

400 000 000 EUR

21/07/2024 ( Dans 65 jours )

L'Obligation émise par Banco BPM S.p.A ( Italie ) , en EUR, avec le code ISIN XS2089968270, paye un coupon de 6.125% par an.
Le paiement des coupons est semestriel et la maturité de l'Obligation est le Perpétuelle

PROSPECTUS DATED 17 JANUARY 2020

BANCO BPM S.P.A.
(incorporated as a joint stock company (società per azioni) in the Republic of Italy)
400,000,000 6.125% Additional Tier 1 Notes
The 400,000,000 Additional Tier 1 Notes (the "Notes") will be issued by BANCO BPM S.p.A. (the "Issuer" or the "Bank" or "Banco BPM"). Defined terms used hereunder
shall have the meanings given to such terms below or in the terms and conditions of the Notes (the "Conditions" and each of them, a "Condition").
The Notes will constitute direct, unsecured and subordinated obligations of the Issuer, as described in Condition 3 (Status of the Notes) and will be governed by, and construed
in accordance with, Italian law, as described in Condition 18 (Governing Law and Submission to Jurisdiction) in the Conditions. The Notes will bear interest on their
Outstanding Principal Amount, payable semi-annually in arrear on 21 January and 21 July in each year (each, an "Interest Payment Date"), as follows: (i) in respect of the
period from (and including) 21 January 2020 (the "Issue Date") to (but excluding) 21 January 2025 (the "First Reset Date"), at the rate of 6.125 per cent. per annum (the
"Initial Rate of Interest"); and (ii) in respect of each period from (and including) the First Reset Date and each fifth anniversary thereof (each, a "Reset Date") to (but
excluding) the next succeeding Reset Date (each such period, a "Reset Interest Period"), at the rate per annum (first calculated on an annual basis and then converted to a
semi-annual rate in accordance with market convention), corresponding to the sum of 6.348% (the "Margin") and the 5-year Mid-Swap Rate in relation to that Reset Interest
Period, all as determined in accordance with Condition 4 (Interest) (the "Reset Rate of Interest").
Interest on the Notes will be due and payable only at the sole discretion of the Issuer, and the Issuer shall have sole and absolute discretion at all times and for any reason to
cancel (in whole or in part) for an unlimited period and on a non-cumulative basis any interest payment that would otherwise be payable on any Interest Payment Date. In
addition, the Issuer shall not make an interest payment on the Notes (and such interest payment shall therefore be deemed to have been cancelled and shall not be due and
payable) in the circumstances described in Condition 5.2 (Restriction on interest payments). Any interest cancelled (whether in whole or in part) shall not be due and shall
not accumulate or be payable at any time thereafter nor constitute any default for any purpose on the part of the Issuer, and holders have no rights thereto whether in a
bankruptcy or liquidation of the Issuer or otherwise, or to receive any additional interest or compensation as a result of such cancellation or deemed cancellation. See further
Condition 5 (Interest Cancellation). Further, following the occurrence of a Trigger Event and a Write-Down of the Notes in accordance with Condition 6 (Loss Absorption
following a Trigger Event), any accrued and unpaid interest on the Notes through to the Write-Down Effective Date (whether or not such interests have become due for
payment) shall be automatically cancelled and following each Write-Down, interest will accrue on subject to any subsequent Write-Down(s) or Principal Reinstatement(s)
- the Outstanding Principal Amount of each Note as reduced by the Write-Down Amount from (and including) the relevant Write-Down Effective Date.
If the CET1 of the Issuer on a solo basis (or of the Group on a consolidated basis) falls below 5.125%, then the Issuer shall write down the Outstanding Principal Amount of
the Notes, on a pro rata basis with the write-down or conversion into equity of other Loss Absorbing Instruments, as described in Condition 6 (Loss Absorption following a
Trigger Event). Following any Write-Down of the Notes, the Issuer may, at its sole and absolute discretion, but subject to a positive Net Income or Consolidated Net Income
being recorded, reinstate and write-up the Outstanding Principal Amount of the Notes on a pro rata basis with other Loss Absorbing Written-Down Instruments, subject to
compliance with the reinstatement limit under Applicable Banking Regulations, on the terms and subject to the conditions set forth in Condition 6.3 (Principal Reinstatement).
The Notes are perpetual and have no fixed redemption date. The Notes will mature on the date on which voluntary or involuntary winding up, dissolution, liquidation or
bankruptcy (including, inter alia, Liquidazione Coatta Amministrativa) proceedings are instituted in respect of the Issuer (otherwise than for the purposes of an Approved
Reorganization), in accordance with, as the case may be, (i) a resolution passed at a shareholders' meeting of the Issuer, (ii) any provision of the By-laws of the Issuer (which,
as at 17 January 2020 provide for the duration of the Issuer to expire on 23 December 2114, but if such expiry date is extended, maturity of the Notes will be correspondingly
adjusted), or (iii) any applicable legal provision, or any decision of any judicial or administrative authority. Upon maturity, the Notes will become due and payable at an
amount equal to their Outstanding Principal Amount together (if any and excluding any interest cancelled in accordance with Condition 5 (Interest Cancellation)) with interest
accrued to (but excluding) the date of redemption and any additional amounts due and payable pursuant to Condition 9 (Taxation).
The Issuer may, at its option, redeem the Notes in whole but not in part: (a) on the First Reset Date and on any Interest Payment Date thereafter, pursuant to Condition 8.4
(Redemption at the option of the Issuer (Issuer Call)), (b) upon the occurrence of a Regulatory Event pursuant to Condition 8.3 (Redemption for regulatory reasons), or (c)
following a Tax Event pursuant to Condition 8.2 (Redemption for tax reasons), in each case, at their prevailing Outstanding Principal Amount together with any accrued
interest (if any and excluding any interest cancelled in accordance with Condition 5 (Interest Cancellation)) and any additional amounts due and payable pursuant to Condition
9 (Taxation) and subject to satisfaction of certain conditions set out in Condition 8.7 (Regulatory conditions for call, redemption, repayment or purchase).
This prospectus constitutes a prospectus for the purposes of Part IV of the Luxembourg law on prospectuses for securities dated 16 July 2019. The Notes are admitted to the
official list of the Luxembourg Stock Exchange (the "Official List") and admitted to trading on the Euro MTF market of the Luxembourg Stock Exchange (the "Euro MTF
Market"). The Euro MTF Market is not a regulated market pursuant to the provisions of Directive 2014/65/EU (as amended, "MiFID II") but is subject to the supervision
of the financial sector and exchange regulator, the Commission de Surveillance de Secteur Financier (the "CSSF"). References in this document to the Notes being "listed"
(and all related references) shall mean that such Notes have been admitted to the Official List and admitted to trading on the Euro MTF Market. This Prospectus does not
constitute a prospectus for the purposes of Regulation (EU) 2017/1129 (the "Prospectus Regulation").
The Notes are expected, on issue, to be rated "B3" by Moody's France SAS ("Moody's") and "B" by DBRS Ratings GmbH ("DBRS"). Each of Moody's and DBRS is
established in the EEA and is included in the list of registered credit rating agencies published on the website of the European Securities and Markets Authority at
http://www.esma.europa.eu/supervision/credit-rating-agencies/risk as being registered under Regulation (EU) No. 1060/2009, as amended (the "CRA Regulation").
Payments of interest or other amounts relating to the Notes may in certain circumstances be subject to a substitute tax (referred to as imposta sostitutiva) of 26 per cent.
pursuant to Legislative Decree No. 239 of 1 April 1996. In order to obtain exemption at source from imposta sostitutiva in respect of payments of interest or other amounts
relating to the Notes, each Noteholder not resident in the Republic of Italy is required to comply with the deposit requirements described in "Taxation Italian Taxation" and
to certify, prior to or concurrently with the delivery of the Notes, that such Noteholder is, inter alia, (i) resident in a country which allows for a satisfactory exchange of
information with the Republic of Italy (such countries are listed in the Ministerial Decree of 4 September 1996, as amended and supplemented from time to time and possibly
further amended by future decrees issued pursuant to Article 11(4)(c) of Legislative Decree No. 239 of 1 April 1996) and (ii) the beneficial owner of payments of interest,
premium or other amounts relating to the Notes, all as more fully set out in "Taxation Italian Taxation".
On each Reset Date, interest amounts payable under the Notes will be calculated by reference to the mid-swap rate for euro swaps with a term of five years which appears at
the relevant time on the "ICESWAP/ISDAFIX2" page, which is provided by the ICE Benchmark Administration Limited, or by reference to EURIBOR, which is provided
by the European Money Markets Institute. At the date of this Prospectus, ICE Benchmark Administration Limited and the European Money Markets Institute appear on the
register of administrators and benchmarks established and maintained by the European Securities and Markets Authority ("ESMA") pursuant to Article 36 of Regulation
(EU) No. 2016/1011 (the "Benchmarks Regulation").
An investment in the Notes involves certain risks. The principal risk factors that may affect the ability of the Issuer to fulfil its obligations under the Notes are discussed
under "Risk Factors" below.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, (the "Securities Act") or with any securities regulatory
authority of any state or other jurisdiction of the United States, and notes in bearer form are subject to U.S. tax law requirements. The Notes may not be offered, sold or
delivered within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act ("Regulation S")) except in certain
transactions exempt from the registration requirements of the Securities Act.
MIFID II product governance / target market The Notes are not intended to be sold and should not be sold to retail clients in the EEA, as defined in MiFID II. Prospective
investors are referred to the section headed "Restrictions on marketing, sales and resales to retail investors" hereunder for further information.

GLOBAL COORDINATOR AND JOINT BOOKRUNNER

Citigroup

JOINT BOOKRUNNERS
Barclays
BNP PARIBAS
Credit Suisse
Morgan Stanley
Banca Akros S.p.A. 
Gruppo Banco BPM

RESPONSIBILITY STATEMENT

The Issuer (the "Responsible Person") accepts responsibility for the information contained in this
Prospectus. To the best of the knowledge of the Issuer (having taken all reasonable care to ensure
that such is the case) the information contained in this Prospectus is in accordance with the facts and
does not omit anything likely to affect the import of such information.

This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated
herein by reference (see "Documents Incorporated by Reference" below). This Prospectus shall be
read and construed on the basis that such documents are incorporated in and form part of this
Prospectus.

None of the Global Coordinator and Joint Bookrunners nor any of their respective affiliates have
authorised this Prospectus or any part thereof nor 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 any Global Coordinator and Joint Bookrunner or any of their
respective affiliates as to the accuracy or completeness of the information contained or incorporated
in this Prospectus or any other information provided by the Issuer in connection with the Notes. No
Global Coordinator and Joint Bookrunner accepts any liability in relation to the information
contained or incorporated by reference in this Prospectus or any other information provided by the
Issuer in connection with the Notes.

No person is or has been authorised by the Issuer or the Global Coordinator and Joint Bookrunners
to give any information or to make any representation not contained in (or not consistent with) this
Prospectus or any other document entered into in relation to the Notes or any information supplied
by the Issuer or such other information as is in the public domain and, if given or made, such
information or representation must not be relied upon as having been authorised by the Issuer or
any of the Global Coordinator and Joint Bookrunners.

Neither this Prospectus nor any other information supplied in connection with the 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 or the Global Coordinator and Joint Bookrunners that any recipient
of this Prospectus or any other information supplied in connection with the 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 and the Group (as defined herein).

Neither the delivery of this Prospectus 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
Notes is correct as of any time subsequent to the date indicated in the document containing the same.
The Global Coordinator and Joint Bookrunners expressly do not undertake to review the financial
condition or affairs of the Issuer or the Issuer and the Group during the life of the Notes or to advise
any investor in the Notes of any information coming to their attention.

The Notes have not been and will not be registered under the Securities Act or with any securities
regulatory authority of any state or other jurisdiction of the United States, and notes in bearer form
are subject to U.S. tax law requirements. The Notes may not be offered, sold or delivered within the
United States or to, or for the account or benefit of, U.S. persons as defined in Regulation S under
the Securities Act except in certain transactions exempt from the registration requirements of the
Securities Act. See "Subscription and Sale".

This Prospectus 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 Prospectus and the offer or sale of Notes may be restricted by
law in certain jurisdictions. The Issuer and the Global Coordinator and Joint Bookrunners do not
represent that this Prospectus 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 or the Global
Coordinator and Joint Bookrunners which would permit a public offering of any Notes or
distribution of this Prospectus in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Prospectus nor
i

any advertisement or other offering material may be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with all applicable laws and regulations.
Persons into whose possession this Prospectus or any Notes may come must inform themselves about,
and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of
Notes. In particular, there are restrictions on the distribution of this Prospectus and the offer or sale
of Notes in the United States, the European Economic Area, the United Kingdom, the Republic of
Italy and Japan. See "Subscription and Sale".

FORWARD-LOOKING STATEMENTS

This Prospectus includes forward-looking statements. These include statements relating to, among
other things, the future financial performance of the Issuer and the Group, 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 Issuer 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.

DEFINITIONS, INTERPRETATION AND ROUNDING

All references in this document to: "Euro", "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; and references to the "Banco BPM Group" or the "Group" are
to BANCO BPM S.p.A. and its subsidiaries.

The language of this Prospectus is English. Certain legislative references and technical terms have been
cited in their original language in order that the correct technical meaning may be ascribed to them
under applicable law.

References to websites or uniform resource locators ("URLs") are inactive textual references and are
included for information purposes only. The contents of any such website or URL shall not form part
of, and shall not be deemed to be incorporated into, this Prospectus.

STABILISATION
In connection with the issue of the Notes, Citigroup Global Markets Limited acting as the stabilising
manager (the "Stabilisation Manager") (or persons acting on its behalf) may over allot Notes or effect
transactions with a view to supporting the market price of the Notes at a level higher than that which
might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may
begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is
made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the
issue date of the Notes and 60 days after the date of the allotment of the Notes. Such stabilising shall be
conducted in accordance with all applicable laws and rules. Any loss or profit sustained as a
consequence of any such over-allotment or stabilising shall, as against the Issuer, be for the account of
the Stabilising Manager (or persons acting on its behalf).

ii

Restrictions on Marketing, Sales and Resales to Retail Investors

The Notes are complex financial instruments and are not a suitable or appropriate investment for all investors.
In some jurisdictions, regulatory authorities have adopted or published laws, regulations or guidance with
respect to the offer or sale of securities such as the Notes to retail investors.

In particular, in June 2015, the UK Financial Conduct Authority published the Product Intervention
(Contingent Convertible Instruments and Mutual Society Shares) Instrument 2015, which took effect from 1
October 2015 (the PI Instrument). In addition: (i) on 1 January 2018, the provisions of Regulation (EU) No.
1286/2014 on key information documents for packaged and retail and insurance-based investment products
(as amended or superseded, the PRIIPs Regulation) became directly applicable in all EEA member states
and (ii) MiFID II was required to be implemented in EEA member states by 3 January 2018. Together, the PI
Instrument, the PRIIPs Regulation and MiFID II are referred to as the Regulations.

The Regulations set out various obligations in relation to: (i) the manufacture and distribution of financial
instruments; and (ii) the offering, sale and distribution of packaged retail and insurance-based investment
products and certain contingent write down or convertible securities, such as the Notes.

Potential investors in the Notes should inform themselves of, and comply with, any applicable laws,
regulations or regulatory guidance with respect to any resale of the Notes (or any beneficial interests therein),
including the Regulations.

Each of the Global Coordinator and Joint Bookrunners (and/or their affiliates) are required to comply with
some or all of the Regulations. By purchasing, or making or accepting an offer to purchase, any Notes (or a
beneficial interest in such Notes) from the Issuer and/or any Global Coordinator and Joint Bookrunner, you
represent, warrant, agree with and undertake to the Issuer and each of the Global Coordinator and Joint
Bookrunners that:

(a)
you are not a retail client in the EEA (as defined in MiFID II);

(b)
whether or not you are subject to the Regulations, you will not:

(i)
sell or offer the Notes (or any beneficial interests therein) to retail clients (as defined in MiFID
II); or

(ii)
communicate (including by the distribution of this Preliminary Prospectus) or approve any
invitation or inducement to participate in, acquire or underwrite the Notes (or any beneficial
interests therein) where that invitation or inducement is addressed to or disseminated in such a
way that it is likely to be received by a retail client (in each case, within the meaning of MiFID
II) and in selling or offering the Notes or making or approving communications relating to the
Notes you may not rely on the limited exemptions set out in the PI Instrument;

(c)
you will at all times comply with all applicable laws, regulations and regulatory guidance (whether
inside or outside the EEA) relating to the promotion, offering, distribution and/or sale of the Notes (or
any beneficial interests therein), including (without limitation) MiFID II and any other applicable laws,
regulations and regulatory guidance relating to determining the appropriateness and/or suitability of
an investment in the Notes (or any beneficial interests therein) by investors in any relevant jurisdiction;

(d)
if you are a purchaser in Singapore, you are an accredited investor or an institutional investor as defined
in Section 4A of the Securities and Futures Act (Chapter 289 of Singapore) and you will not sell or
offer the Notes (or any beneficial interest therein) to persons in Singapore other than such accredited
investors or institutional investors;

(e)
you will act as principal in purchasing, making or accepting any offer to purchase any Notes (or any
beneficial interest therein) and not as an agent, employee or representative of any of the Global
Coordinator or Joint Lead Managers; and

(f)
if you are a Hong Kong purchaser, your business involves the acquisition and disposal, or the holding,
of securities (whether as principal or as agent) and you fall within the category of persons described
as "professional investors" under the Securities and Futures Ordinance (Cap.571) of Hong Kong (the
SFO) and any rules made under the SFO.

You further acknowledge that:
iii

(a)
the identified target market for the Notes (for the purposes of the product governance obligations in
MiFID II) is eligible counterparties and professional clients; and
(b)
no key information document (KID) under the PRIIPs Regulation has been prepared and therefore
offering or selling the Notes or otherwise making them available to any retail investor in the EEA may
be unlawful under the PRIIPs Regulation.

PRIIPs Regulation / Prohibition of Sales to EEA Retail Investors The Notes are not intended to be
offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to
any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of:
(i) a retail client, as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning
of Directive 2002/92/EC (as amended or superseded), where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document
required by the PRIIPs Regulation for offering or selling the Notes or otherwise making them available to
retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making
them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

MiFID II product governance / Professional investors and ECPs only target market Solely for the
purposes of each manufacturer's product approval process, the target market assessment in respect of the
Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and
professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to
eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or
recommending the Notes (a distributor) should take into consideration the manufacturers' target market
assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market
assessment in respect of the Notes (by either adopting or refining the manufacturers' target market assessment)
and determining appropriate distribution channels.

Where you are acting as agent on behalf of a disclosed or undisclosed client when purchasing, or making or
accepting an offer to purchase, any Notes (or any beneficial interests therein) from the Issuer and/or any of
the Global Coordinator or the Joint Bookrunners, the foregoing representations, warranties, agreements and
undertakings will be given by and be binding upon both you as agent and your underlying client(s).

iv

CONTENTS

Page

RISK FACTORS ............................................................................................................................................. 1
OVERVIEWOF THE NOTES ...................................................................................................................... 36
DOCUMENTS INCORPORATED BY REFERENCE ................................................................................ 43
TERMS AND CONDITIONS OF THE NOTES .......................................................................................... 46
USE OF PROCEEDS .................................................................................................................................... 71
DESCRIPTION OF THE ISSUER................................................................................................................ 72
SELECTED FINANCIAL DATA................................................................................................................. 74
TAXATION .................................................................................................................................................. 80
SUBSCRIPTION AND SALE ...................................................................................................................... 88
GENERAL INFORMATION ....................................................................................................................... 91

v

RISK FACTORS

The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes.
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 the
Notes are also described below.

The Issuer believes that the factors described below represent the principal risks inherent in investing in
Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with
the 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 Prospectus and reach their
own views prior to making any investment decision.

Words and expressions defined in the "Terms and Conditions of the Notes" (the "Conditions" and each of
them, a "Condition") below or elsewhere in this Prospectus have the same meaning in this section.

FACTORS THAT MAY AFFECT THE ISSUER'S ABILITY TO FULFIL ITS OBLIGATIONS
UNDER THE NOTES ISSUED

Risks related to the impact of global macro-economic factors, the Euro Area sovereign debt crisis
and the national and international political climate on the performance of the Issuer and of the Banco
BPM Group

Risks related to the impact of global macro-economic factors

The performance of the Banco BPM Group is influenced by: Italian and EU-wide macroeconomic
conditions, the conditions of the financial markets in general, and in particular, by the stability and trends
in the economies of those geographical areas in which Banco BPM conducts its activity. The earning
capacity and solvency of the Banco BPM Group are affected, inter alia, by factors such as investor
perception, long-term and short-term interest rate fluctuations, exchange rates, liquidity of financial
markets, availability and costs of funding, sustainability of sovereign debt, family incomes and consumer
spending, unemployment levels, inflation and property prices. Adverse changes in these factors, especially
during times of economic and financial crisis, could result in potential losses, an increase in the Issuer's
and/or the Banco BPM Group's borrowing costs, or a reduction in value of its assets, with possible negative
effects on the business, financial condition and/or results of operations of the Issuer and/or of the Banco
BPM Group.

Overall, 2017 was characterized by a global economic recovery. In the favourable international and
European scenario, Italy recorded a period of economic recovery, increasing its GDP compared to previous
recent years. Although still wide, the gap with the best performing economies of the Eurozone was reduced
in 2017.

Subsequently, an inconclusive general election in Italy in March 2018 led to a prolonged period of
negotiation among the rival parties and the Italian president and a coalition government was formed at the
beginning of June 2018 between the political parties "Movimento Cinque Stelle" and "Lega Nord". Frequent
political disputes between leaders of the coalition government has resulted in prolonged periods of market
instability, culminating in the collapse of the government in August 2019. A new coalition government
based on an alliance between the political parties "Movimento Cinque Stelle" and "Partito Democratico"
has since been formed and formally took office on 5 September 2019. As of the date of this Prospectus,
there can be no assurance whether, and when, the proposed programme of the coalition government will be
implemented, and it is not possible to predict the full economic implications of the policies that will be
introduced to implement the final programme.

In addition, a number of uncertainties remain in the current macroeconomic environment, namely: (a)
confirmation of growth trend, or recovery and consolidation perspectives, for US and China economies,
which have shown consistent progresses in recent years but now are losing momentum; (b) the ongoing
commercial dispute between the US and China, which have impacted international trade and therefore
global supply chains and global production; (c) European Central Bank's ("ECB"), in the Euro area, and
the Federal Reserve System, in the US, monetary policy effectiveness and their future developments,
adverse future developments in the Dollar area, policies implemented by other countries aimed at promoting
1

their currencies' competitive devaluations; (d) sovereign debt sustainability of certain countries and the
related recurring tensions on the financial markets; (e) the consequences and potential lingering
uncertainties caused by the Brexit ongoing process, resulting in a key U.K. general election on 12 December
2019; and (f) increased tensions between Iran and USA in the Middle East, as well as ongoing geopolitical
tensions in other countries.

All of these factors, in particular in times of economic and financial crisis, could result in potential losses,
an increase in the Issuer's and/or the Banco BPM Group's borrowing costs, or a reduction in value of its
assets, with possible negative effects on the business, financial conditions and/or results of operations of
the Issuer and/or the Banco BPM Group.

Risks related to the crisis of the Euro Area sovereign debt

The global financial crisis contributed to and accelerated the worsening of public debt problems in European
Union countries with large public debts and budget deficits, causing the most damage to banks that had
greater exposure to domestic sovereign debt and a revaluation of sovereigns' credit risk. As a consequence,
in several euro-area countries yield spreads on government bonds with respect to the German Bund widened
markedly and domestic banks' funding capacity was affected, especially in the wholesale segment. The
repercussions of the global economic slowdown and market turmoil were particularly severe in Italy.

From autumn 2011, the ECB implemented important measures to support the European economy and
financial stability, including: the SMP (Securities Market Programme) that entails the purchase of
government securities by the ECB itself; the provision of liquidity to banks through the purchase of covered
bonds, and provisions of loans to banks.

In September 2012, the ECB Council approved the plan for secondary market purchases by the ECB of
Eurozone sovereign debt securities with a maturity of between one and three years and without setting any
quantitative limit (so-called Outright Monetary Transactions). The plan was to be complemented by the
ESM's (European Stability Mechanism) measures on the primary market upon the imposition of conditions
(in the form of macroeconomic adjustments or preventive financial assistance, being the so- called
Enhanced Conditions Credit Line or ECCL).

On 5 June 2014, the ECB announced its decision to conduct a series of Targeted Longer-Term Refinancing
Operations (TLTROs) over a period of two years, aimed at improving and supporting bank lending to the
euro area non-financial private sector. On 22 January 2015, the ECB launched its Expanded Asset Purchase
Programme (more commonly known as Quantitative Easing), under which the ECB began purchasing euro-
denominated, investment-grade securities issued by euro area governments and European institutions up to
Euro 60 billion each month. The programme was intended to be carried out until September 2016, and in
any case until there were signs of a sustained adjustment in the path of inflation or deflation that is consistent
with the aim of achieving inflation rates approaching 2%.

On 10 March 2016, with a view to further facilitating access to funding in the EU and achieving inflation
rates of 2%, the ECB announced an increase of the monthly average amount of security purchases under
"Quantitative Easing" programme, from Euro 60 billion to Euro 80 billion, expanding the asset purchase to
the bonds issued by non-financial entities with high credit ratings, which was reduced back to Euro 60
billion from April 2017. As part of the liquidity support action, the ECB introduced a new series of Targeted
Longer-Term Refinancing Operations (TLTRO-II) with even more favourable terms: counterparties had
access to financing for up to 30 per cent of the stock of loans eligible as at 31 January 2016 and interest
rates applicable to the transactions were those that applied to the Eurosystem's main refinancing
transactions at the time of each such transaction and for its entire duration.

On 13 December 2018, the Governing Council of the ECB decided to end the net purchases under the asset
purchase programmes and announced its intention (which was confirmed again in June 2019) to reinvest
principal payments from maturing securities purchased under the programmes for an extended period of
time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary
to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

On 12 September 2019, the Governing Council of the ECB decided to change certain parameters of the new
series of quarterly targeted longer-term refinancing operations ("TLTRO-III") previously decided for the
period September 2019 to March 2021, namely to increase the maturity of all operations from two years to
three years, introduce a voluntary repayment option and eliminate the spread of 10 basis points above both
the average rate for main refinancing operations and the average rate on the deposit facility, in each case
over the life of the respective TLTRO-III, as applicable. According to the ECB's press release, the TLTRO-
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III and the change in parameters serve to preserve favourable bank lending conditions, ensure the smooth
transmission of monetary policy in Member States whose currency is the euro and to further support the
accomodative stance of monetary policy.

Nonetheless, there is no certainty concerning the duration of (or the level of support offered by) ECB's
accommodation policies and the repercussions that a suspension (or downsizing) of these policies would
have on the Eurozone and Italian economies may likely have negative effects on the financial condition,
results and cash flow of the Issuer. See further the risk factor headed "Governmental and central banks'
actions intended to support liquidity may be insufficient or discontinued".

In recent years Italy has witnessed various downgrades of its sovereign rating and a fluctuating trend in the
10-year BTP/Bund spread. In 2012, the negative estimates for growth in Italy had an adverse impact on
Italian public debt with a downgrade of the rating assigned to Italy and an increase in the 10-year BTP/Bund
spread. This crisis continued into 2013.

As a result of moderate improvements in political and economic conditions in Italy there was a gradual
decrease of Italian Government and corporate bond risk premia in the period between 2014 and 2017. This
trend was interrupted in May 2018 after the inconclusive general elections of March 2018, during the
negotiations to form a coalition government, as financial markets feared the stability of any government
appointed and the critical positions of the involved parties towards the European Commission policies.
After three months of negotiation, the Five Star Movement and the Northern League who have in the past
expressed opposition to the Euro - received approval to form the new government. This period of
uncertainty led to an increase in the BTP/Bund spread to 288 basis points at the end of May 2018 with an
unprecedented widening of up to 120 basis points on the 2-4 year tenors, a segment that was pricing the
redenomination risk.

A narrowing of the spread in the short-term segment of the sovereign curve occurred only in December
2018 when agreement was reached with the European Commission on the contents of the budget package.
The 10-year spread, which had stopped at 280 basis points in May 2018 (from 120 basis points in January
2018), reached 320 basis points in mid-November 2018, before returning to 255 basis points at the end of
2018. Certain material improvement in the Italian sovereign market then led the 10-year spread to below
250 basis points in March 2019, this also because of the postponement of monetary policy normalization,
the prospect of a new liquidity injection through the TLTRO-III.

Nonetheless, in Italy, a climate of uncertainty has brought the 10-year spread to rise again to over 250 basis
points, following the European Parliament elections in May 2019. Since then, the formation of Italy's new
coalition government in September 2019 has contributed to renewed narrowings of the BTP/Bund spread,
which stands currently around 135 basis points. ECB's decision to resume Asset Purchasing Programmes
(APP) starting from November also contributed to lower Italian government bond yield. However, future
political instability may result in market uncertainty resulting in widening of the spreads.

The Group is exposed to Italian government bonds. Consequently, the Issuer is particularly exposed to any
adverse changes and fluctuations in the market for Italian government securities, the political situation and
the sovereign debt rating. A decrease in the market price for Italian government bonds could negatively
affect the value of its assets and therefore have an adverse effect on the Group's business, results of
operations, financial condition and cash flows. In addition, if the credit ratings of Italy and/or of other
countries in which the Group has sovereign exposures deteriorate, the Issuer may be required to revise the
risk weighting attributed to the relevant assets for the calculation of risk-weighted assets ("RWA"), which
could have an adverse effect on the Issuer's capital ratios. The Issuer may also be required to revise the
discount criteria applied by counterparties in refinancing transactions, such as in the ECB's TLTRO
refinancing transactions, resulting in an increase in the collateral required or a reduction in the liquidity
obtained in relation to such collateral.

In addition, the lingering uncertainties arising from geopolitical tensions, including the Brexit vote and the
withdrawal of the UK from the European Union, could have a material adverse effect on the economies of
the EU Member States in general, and the Italian economy in particular, with a consequential upsurge of
the sovereign debt crisis.

Although in recent years the fiscal and macroeconomic imbalances that contributed to the Euro Area
sovereign's debt crisis have been reduced in several countries, there are still concerns about the possible
dissolution of the European Monetary Union, or the exit of individual countries from the monetary union
(with a possible return to local currencies), fostered, among other factors, by the electoral surge of anti- EU
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parties across the euro area. Any scenario of this kind would generate unpredictable consequences.

All the factors described above, and particularly any re-emergence or further deterioration of the sovereign
debt crisis, could result in potential losses to the Issuer and/or the Banco BPM Group, an increase in its
borrowing costs, and/or a reduction in the value of its assets, with possible negative effects on the economic
and financial situation of the Issuer and/or of the Banco BPM Group.

Risks related to Italian economic conditions and political instability

The dynamics described in the previous paragraphs and the consequent effects on the Banco BPM Group's
activities are influenced by the international and Italian socioeconomic context and its impact on financial
markets.

The Banco BPM Group primarily operates in Italy and in particular in Northern Italy. As of 31 December
2018, 1,380 of the overall 1,804 branches of the Banco BPM Group are located in Northern Italy, with
Lombardy, Piedmont and Veneto being the three regions with the highest number of branches (663, 209
and 212, respectively).

The business of the Banco BPM Group is particularly sensitive to adverse macroeconomic conditions in
Italy and in particular in Northern Italy. Any adverse economic condition in Italy could have a material
adverse effect on the business, results of operation or financial condition of the Banco BPM Group.

A return to declining or stagnating GDP, increasing or stagnating unemployment and poor conditions in the
capital markets in Italy could decrease consumer confidence and investment, and result in higher rates of
loan impairment and/or NPLs and default and insolvency, and cause an overall reduction in demand for the
Group's services. Any of the foregoing could have a material adverse effect on the Group's business, results
of operations and financial condition.

One of the elements creating economic uncertainty is the political situation in Italy. An inconclusive general
election in Italy in March 2018 led to a prolonged period of negotiation among the rival parties and the
Italian President and a coalition government was finally formed at the beginning of June 2018. Italy's
government submitted to the European Commission its draft 2019 budget that includes plans to increase
spending. The EC rejected the proposed budget for 2019 and requested the Italian government to review it.
At the end of December 2018, after a period marked by tensions between the European Commission and
Italy's government, an agreement was reached on the basis of a lower deficit.

The EU Commission took the first steps to commence an excessive debt infringement procedure against
Italy and served a warning letter on the Italian government on 29 May 2019, and confirmed on 5 June 2019
that such procedure was warranted for Italy. The Italian government adopted, via its mid-year budget for
2019, a number of measures by way of fiscal correction and pledges, in a letter sent to the EU Commission
on 2 July 2019, to achieve a structural improvement in 2020 in line with the requirements of the Stability
and Growth Pact, as well as to have fiscal consolidation proceed hand in hand with structural reforms aimed
at improving the growth potential of the Italian economy. The EU Commission subsequently concluded
that the package announced by the Italian government is sufficient to avert the infringement procedure,
although the Commission added that it would monitor the situation closely. There can be no assurance that
Italy is able to fulfill the pledges made to the EU Commission and to introduce the necessary corrections to
ensure compliance of its budget with the Stability and Growth Pact. It is furthermore not possible to predict
the economic implications of the policies adopted and to be adopted by the recently formed new coalition
government. Political instability, if material, could negatively affect the country's economic recovery, and
unfavorable changes to economic policies by the new government could have a material adverse effect on
the Group's business, results of operations and financial condition.

Risks related to the United Kingdom leaving the European Union

On 23 June 2016, the UK held a referendum on the country's membership of the European Union
("Brexit"). The results of Brexit showed that the majority of people who participated, voted to leave the
European Union. The referendum does not directly bind the government to specific actions.

On 29 March 2017, the United Kingdom notified the European Council of its intention to withdraw from
the European Union within the meaning and for the purposes of Article 50(2) of the Treaty on European
Union. Article 50(2) requires that, in the light of the guidelines provided by the European Council, the
Union shall negotiate and conclude an agreement with the United Kingdom, setting out the arrangements
for its withdrawal from the European Union (the "Withdrawal Agreement"), taking account of the
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