Bond Montepaschi Siena S.p.A. 10.5% ( XS2031926731 ) in EUR

Issuer Montepaschi Siena S.p.A.
Market price refresh price now   100 %  ▼ 
Country  Italy
ISIN code  XS2031926731 ( in EUR )
Interest rate 10.5% per year ( payment 1 time a year)
Maturity 22/07/2029



Prospectus brochure of the bond Banca Monte dei Paschi di Siena S.p.A XS2031926731 en EUR 10.5%, maturity 22/07/2029


Minimal amount 100 000 EUR
Total amount 300 000 000 EUR
Next Coupon 23/07/2026 ( In 327 days )
Detailed description Banca Monte dei Paschi di Siena S.p.A. is a historic Italian bank headquartered in Siena, Tuscany, facing significant challenges including past financial scandals and ongoing restructuring efforts.

The Bond issued by Montepaschi Siena S.p.A. ( Italy ) , in EUR, with the ISIN code XS2031926731, pays a coupon of 10.5% per year.
The coupons are paid 1 time per year and the Bond maturity is 22/07/2029








BASE PROSPECT US dated 22 July 2020


Banca Monte dei Paschi di Siena S.p.A.
50,000,000,000
Debt Issuance Programme
Under this 50,000,000,000 Debt Issuance Programme (the " Programme"), Banca Monte dei Paschi di Siena S.p.A. (the " Issuer" or " BMPS "
or " Bank") may from time to time issue notes governed by English Law (the " English Law Notes") and notes governed by Italian Law (the
" Italian Law Notes" and together with the English Law Notes, 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 50,000,000,000 (or
its equivalent in other currencies calculated as 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 " General 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 Base Prospectus to the " relevant Dealer" shall, in the case of
an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreein g to purchase such Notes.
An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see " Risk Factors".
This Base Prospectus has been approved as a base prospectus by the Commission de Surveillance du Secteur Financier (the " CSSF"), as
competent authority under Regulation (EU) 2017/1129 (the " Prospectus Regulation") and the Luxembourg act relating to prospectuses for
securities dated 16 July 2019 (Loi du 16 juillet 2019 relative aux prospectus pour valeurs mobilières et portant mise en oeuvre du règlement
(UE) 2017/1129) (the " Lux embourg Prospectus Law"). The CSSF only approves this Base Prospectus as meeting the standards of
completeness, comprehensibility and consistency imposed by the Prospectus Regulation. Approval by the CSSF should not be considered as an
endorsement of the Issuer or of the quality of the Notes. Investors should make their own assessment as to the suitability of investing in the
Notes.
The CSSF assumes no responsibility for the economic and financial soundness of the transactions contemplated by this Base Prospectus or the
quality or solvency of the Issuer. Application has been made to the Luxembourg Stock Exchange for Notes issued under the Prog ramme to be
admitted to trading on the Luxembourg Stock Exchange's regulated market and to be listed on the Oficial List of the Luxembourg Stock
Exchange.
References in this Base Prospectus to Notes being " listed" (and all related references) shall mean that such Notes have been admitted to trading
on the Luxembourg Stock Exchange's regulated market and have been admitted to the Official List of the Luxembourg Stock Exchange. The
Luxembourg Stock Exchange's regulated market is a regulated market for the purposes of the Markets in Financial Instruments Directive
(Directive 2014/65/EU).
This Base Prospectus (as supplemented as at the relevant time, if applicable) is valid for 12 months from its date of approval in relation to Notes
which are to be admitted to trading on a regulated market in the European Economic Area and/or offered to the public in the European Economic
Area other than in circumstances where an exemption is available under Article 1(4) and/or 3(2) of the Prospectus Regulation. The validity of
this Base Prospectus ends upon expiration of 22 July 2021. For these purposes, reference(s) to the EEA include(s) the United Kingdom. The
obligation to supplement this Base Prospectus in the event of a significant new factor, material mistake or material inaccuracy does not apply
when this Base Prospectus is no longer valid.








The requirement to publish a prospectus under the Prospectus Regulation only applies to Notes which are to be admitted to trading on a regulated
market in the EEA and/or offered to the public in the EEA other than in circumstances where an exemption is available under Article 1(4) and/or
3(2) of the Prospectus Regulation (and for these purposes, references to the EEA include the United Kingdom). References in this Base
Prospectus to " Exempt Notes" are to Notes for which no prospectus is required to be published under the Prospectus Regulation. The CSS F has
neither approved nor reviewed information contained in this Base Prospectus in connection with Exempt Notes and with the Form of Pricing
Supplement.
Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other
information which is applicable to each Tranche (as defined under " Terms and Conditions for the English Law Notes" or under " Terms and
Conditions for the Italian Law Notes") of Notes will (other than in the case of Exempt Notes, as defined above) be set out in a final terms
document (the " Final Terms") which will be filed with the CSSF. Copies of Final Terms in relation to Notes to be listed on the Luxembourg
Stock Exchange will also be published on the website of the Luxembourg Stock Exchange (www.bourse.lu). In the case of Exempt Notes, notice
of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other information
which is applicable to each Tranche will be set out in a pricing supplement document (the " Pricing Supplement").
The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets
as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes and/or Notes not admitt ed to trading on
any market.
In certain circumstances, payments of interest relating to the Notes are subject to a deduction by way of " imposta sostitutiva" or withholding tax
as more fully set out in Condition 6 (Taxation) of the Terms and Conditions for the English Law Notes or in Condition 6 (Taxation) of the Terms
and Conditions for the Italian Law Notes and in " Italian Taxation".
The rating of certain Series of Notes to be issued under the Programme may be specified in the Form of Final Terms. Whether or not each credit
rating applied for in relation to relevant Series of Notes will be issued by a credit rating agency established in the European Union and registered
under Regulation (EC) No 1060/2009 (as amended) (the " CRA Regulation") will be disclosed in the Final Terms. Such credit rating agency will
be included in the list of credit rating agencies published by the European Securities and Markets Authority on its website ( at
http://www.esma.europa.eu/page/List-registered-and-certified-CRAs) in accordance with the CRA Regulation. A credit rating is not a
recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the as signing Rating
Agency. Please also refer to " Ratings of the Notes" in the " Risk Factors" section of this Base Prospectus.
Amounts payable under the Floating Rate Notes and/or the Reset Notes may be calculated by reference to the euro interbank offered rate
(" EURIBOR") or the London interbank offered rate (" LIBOR"), as specified in the relevant Final Terms. As at the date of this Base Prospectus,
the ICE Benchmark Administration (as administrator of LIBOR) and the European Money Markets Institute (as administrator of EURIBOR) are
included in the register of administrators maintained by the European Securities and Markets Authority (" ESMA") under Article 36 of the
Regulation (EU) No. 2016/1011 (the " Benchmarks Regulation").

ARRANGER
NatWest Markets
DEALERS
Barclays
BofA Securities
Citigroup
Crédit Agricole CIB
Credit Suisse
Deutsche Bank
Goldman Sachs International
HSBC
J.P. Morgan
Mediobanca - Banca di Credito Finanziario S.p.A.
Morgan Stanley
MPS Capital Services Banca per le Imprese S.p.A.
NatWest Markets
Société Générale Corporate & Investment Banking
UBS Investment Bank

0011398-0005265 EUO2:
2

1550253072.29




IMPORTANT INFORMATION
Responsibility Statement
The Issuer accepts responsibility for the information contained in this Base Prospectus , any supplement
thereto and the Final Terms for each Tranche of Notes issued under the Programme. 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 Base Prospectus is in accordance with the facts and does not omit
anything likely to affect the import of such information.
This Base Prospectus constitutes a base prospectus for the issuance of Notes under the Programme by
BMPS. This base prospectus constitutes a base prospectus in respect of all Notes other than Exempt
Notes issued under the Programme for the purposes of Article 8 of the Prospectus Regulation. When
used in this Base Prospectus, Prospectus Regulation means Regulation (EU) 2017/1129.
This Base Prospectus is to be read in conjunction with all documents which are incorporated herein by
reference (see "Documents Incorporated by Reference" below). This Base Prospectus shall be read and
construed on the basis that such documents incorporated by reference and form part of this Base
Prospectus.
Other than in relation to the documents which are incorporated by reference (s ee "Documents
Incorporated by Reference"), the information on the websites to which this Base Prospectus refers does
not form part of this Base Prospectus and has not been scrutinis ed or approve d by the CSSF.
Save for the Issuer, no party has 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 as to the accuracy or completeness of the information contained or
incorporated in this Base Prospectus or any other information provided by the Issuer in connection
with the Programme. No Dealer accepts any liability in relation to the information contained or
incorporated by reference in this Base Prospectus or any other information provided by the Issuer in
connection with the Programme.
No person is or has been authorised by the Issuer to give any information or to make any representation
not contained in or not consistent with this Base Prospectus or any other infor mation 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 or any of the Dealers.
Neither this Base Prospectus nor any other information supplied in connection with the Programme or
any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be
considered as a recommendation by the Issuer or any of the Dealers that any recipient of this Base
Prospectus 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 and/or the Group. "Group" means BMPS and its Subsidiaries (as
defined in the Agency Agreement for the English Law Notes and in the Agency Agreement for the
Italian Law Notes). Neither this Base Prospectus , any supplement thereto, 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 or any of the Dealers to any person to subscribe for or to purchase any
Notes.
Neither the delivery of this Base 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 Programme
is correct as of any time subsequent to the date indicated in the document containing the same. The

0011398-0005265 EUO2:
3

1550253072.29




Dealers expressly do not undertake to review the financial condition or affairs of the Issuer 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 Base Prospectus when deciding whether or not to purchase any Notes .
IMPORTANT ­ EEA AND UK RETAIL INVESTORS ­ If the Final Terms in respect of any Notes (or
Pricing Supplement, in the case of Exempt Notes) includes a legend entitled "Prohibition of Sales to EEA and
UK 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 European Economic Area
("EEA") or in the United Kingdom ("UK"). 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 Directive 2014/65/EU (as amended,
"MiFID II"); (i ) a customer within the meaning of Directive (EU) 2016/97 (the "Insurance Distribution
Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article
4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the "Prospectus
Regulation"). Consequently no key information document required by Regulation (EU) No 1286/2014 (as
amended, the "PRIIPs Regulation") for offering or sel ing the Notes or otherwise making them available to
retail investors in the EEA or in the UK has been prepared and therefore offering or selling the Notes or
otherwise making them available to any retail investor in the EEA or in the UK may be unlawful under the
PRIIPs Regulation.
MIFID II product governance / target market ­ The Final Terms in respect of any Notes (or Pricing
Supplement, in the case of Exempt Notes) wil include a legend entitled "MiFID II Product Governance"
which will outline the target market assessment in respect of the Notes and which channels for distribution of
the Notes are appropriate. Any person subsequently o ffering, selling or recommending the Notes (a
"distributor") should take into consideration the 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 target market assessment) and determining appropriate distribution channels.
A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product
Governance rules under EU Delegated Directive 2017/593 (the "MiFID Product Governance Rules "), any
Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither the
Arranger nor the Dealers nor any of their respective affiliates will be a manufacturer for t he purpose of the
MiFID Product Governance Rules.
Notification under Section 309B(1)(c) of the Securities and Futures Act (Chapter 289) of Singapore, as
modified or amended from time to time (the "SFA") ­ Unless otherwise stated in the Final Terms in respect
of any Notes, all Notes issued or to be issued under the Programme shall be prescribed capital markets
products (as defined in the Securities and Futures (Capital Markets Products) Regu lations 2018 of Singapore)
and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment
Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
IMPORTANT INFORMATION RELATING TO THE USE OF THIS BASE PROSPECTUS AND
OFFERS OF NOTES GENERALLY
This Base 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 Base Prospectus and the offer or sale of Notes may be restricted by
law in certain jurisdictions. The Issuer and the Dealers do not represent that this Base 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 Dealers which is intended to permit a public offering of
any Notes or distribution of this document in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Base Prospectus
nor any advertisement or other offering material may be distributed or published in any jurisdiction,

0011398-0005265 EUO2:
4

1550253072.29




except under circumstances that will result in compliance with any applicable laws and regulations.
Persons into whose possession this Base Prospectus or any Notes may come must inform themselves
about, and observe, any such restrictions on the distribution of this Base Prospectus and the offering
and sale of Notes. In particular, there are restrictions on the distribution of this Base Prospectus and
the offer or sale of Notes in the United States, the European Economic Area (including , for these
purposes, the United Kingdom and the Republic of Italy ("Italy")) and Japan, see "Subscription and
Sale".
SUITABILITY OF INVESTMENT
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 may wish to consider, either on its own or with the help of its financial and other
professional advisers, whether it:
(i)
has 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 Base Prospectus or any applicable supplement;
(ii)
has 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)
has 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;
(i v)
understands thoroughly the terms of the Notes and is familiar with the behaviour of any
relevant indices and financial markets; and
(v)
is able to evaluate possible scenarios for economic, interest rate and other factors that may
affect its investment and its ability to bear the applicable risks.
Legal investment considerations may restrict certain investments. The investment activities of certain
investors are subject to legal investment laws and regulations, or review or regulation by certain
authorities. Each potential investor should consult its legal advisers to determine whether and to what
extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of
borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions
should consult their legal advisers or the appropriate regulators to determine the appropriate treatment
of Notes under any applicable risk-based capital or similar rules.
The Notes have not been and will not be registered under the U.S. 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" below).
PRESENTATION OF INFORMATION
All references in this document to "U.S. dollars", "U.S.$" and "$" refer to the currency of the United
States of America and references to "euro", "" and "Euro" 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.

0011398-0005265 EUO2:
5

1550253072.29




Unless otherwise indicated, the financial information contained in this Base Prospectus has been
prepared in accordance with International Financial Reporting Standards as adopted by the European
Union ("IFRS").
Unless otherwise indicated, any reference in this Base Prospectus to "Consolidated Financial
Statements" is to the consolidated financial statements of the Group as at and for the years ended 31
December 2019 and 2018 audited by EY S.p.A., independent accountant, and incorporated by reference
in this Base Prospectus.
The Consolidated Financial Statements are denominated in euro.

0011398-0005265 EUO2:
6

1550253072.29




TABLE OF CONTENTS
Page
Risk Factors ................................................................................................................................ 1
Documents Incorporated by Reference .......................................................................................... 42
General Description of the Programme .......................................................................................... 44
Form of the Notes ...................................................................................................................... 50
Form of Final Terms................................................................................................................... 52
Applicable Pricing Supplement .................................................................................................... 66
Terms and Conditions for the English Law Notes............................................................................ 77
Terms and Conditions for the Italian Law Notes ........................................................................... 114
Use of Proceeds ....................................................................................................................... 149
Banca Monte dei Paschi di Siena S.p.A. ...................................................................................... 150
Management of the Bank........................................................................................................... 208
Regulatory Aspects .................................................................................................................. 217
Taxation ................................................................................................................................. 231
Subscription and Sale ............................................................................................................... 240
General Information ................................................................................................................. 245


0011398-0005265 EUO2:
7

1550253072.29




STABILISATION
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the
Stabilisation Manager(s) (or persons acting on behalf of any Stabilisation Manager(s)) in the Form of
Final Terms or Pricing Supplement 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 relevant Tranche of 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 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 Stabilisation Manager(s)
(or persons acting on behalf of any Stabilisation Manager(s)) in accordance with all applicable laws and
rules.

0011398-0005265 EUO2:
8

1550253072.29




RISK FACTORS
In purchasing Notes, investors assume the risk that BMPS may become insolvent or otherwise be unable t o
mak e all payments due in respect of the Notes. There is a wide range of factors which individually or
together could result in BMPS becoming unable to mak e all payments due in respect of the Notes. It i s n o t
possible to identify all such factors or to determine which factors are most lik ely to occur, as BMPS may
not be aware of all relevant factors and certain factors which it currently deems not to be material may
become material as a result of the occurrence of events outside the control of BMPS. BMPS has identifi e d
in this Base Prospectus a number of factors which could materially adversely affect its businesses and
ability to mak e payments due under the Notes. In addition, factors which are material for the purpose of
assessing the mark et risk s associated with Notes issued under the Programme are also described below.
Any reference in the Risk Factors to "Form of Final Terms" or "Final Terms" shall be deemed to include
a reference to "applicable Pricing Supplement" or "Pricing Supplement" where relevant in the case of
Exempt Notes.
RISK FACTORS RELATING TO THE ISSUER AND THE GROUP
The Issuer believes that the following factors may affect its ability to fulfil its obligations unde r t h e N o t e s
issued under the Programme. Most of these factors are contingencies which may or may not occur an d t h e
Issuer is not in a position to express a view on the lik elihood of any such contingency occurring. In
addition, factors which are material for the purpose of assessing the mark et risk s associated with Notes
issued under the Programme are also described below.
The Issuer believes that the factors described below represent the principal risk s 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 risk s by the Issuer based on information currently available to it or which it may not c u rre n t l y
be able to anticipate. In addition, the order in which the risk factors are presented below is not intended t o
be indicative either of the relative lik elihood that each risk wil l materialise or of the magnitude of their
potential impact on the business, financial condition and results of operations of the Issuer or the Issuer's
group (hereinafter also referred to as the "Group").
Prospective investors should also read the detailed information set out elsewhere in this Base Pro sp e c t u s
and reach their own views prior to mak ing any investment decision.
Words and expressions defined in "Terms and Conditions for the English Law Notes" and "Terms and
Conditions for the Italian Law Notes" or elsewhere in this Base Prospectus have the same meaning i n t h i s
section. Prospective investors should read the entire Base Prospectus.
Factors that may affect the Issuer's ability to fulfil its obligations under the Notes
The risk s below have been classified into the following categories:
A. Risk s relating to the Issuer's financial position;
B. Risk s relating to judicial and administrative proceedings and inspections of the supervisory authoritie s ;
and
C. Risk s relating to the Issuer's business activity and industry.
Risks relating to the Issuer's financial position
Risk s associated with the general economic/financial scenario

- 1 -




The results of the Issuer and the companies belonging to the Group are significantly affected by general
economic conditions and financial markets dynamics and, in particular, by the performance of the economy
of the Republic of Italy (determined, inter alia, by factors such as the soundness perceived by investors,
expected growth perspectives of the economy and credit reliability ). In particular, since the Republic of
Italy is the country in which the Bank operates on an almost exclusive basis and in which respect the Grou p
has a relevant credit exposure, the Bank's business is particularly sensitive to investor perception of the
country's reliability and solidity of its financial condition as well as prospects of its economic growth.
In particular, the outset of 2020 marked the outbreak of the coronavirus ("COVID-19") which began in
China at the end of January and has expanded globally in a few months, with particular intensity in Europe
and the United States, enough to force the World Health Organization to declare COVID-19 as a pandemic.
The large number of victims forced the majority of affected countries to enter "lockdown" which included
enacting measures of social distancing and strict containment, the closure of schools, the suspension of
public events, restrictions on the movement of people and the interruption of other productive activities.
Italy was the first country affected by COVID-19 in the EU, but the number of infections also rapidly
increased in Spain, France, Germany, as well as in the United Kingdom and the United States, forcing such
countries to implement strict containment measures in line with the ones implemented in Italy.
Despite the actions taken so far by the Italian government , the regulatory bodies of the European Union
("EU") and relevant member states ("Member States") to mitigate the negative impacts of the lockdown
and support the start of a gradual recovery of the economic activity, significant uncertainties remain about
the evolution of the macroeconomic scenario both in Italy and internationally. The current pandemic could
cause further negative impacts on the global and domestic economy, strong disruption in global financial
markets, the rising of sovereign debt tensions and a persistent and severe recession, with a consequent
collapse of consumptions.
It may not be excluded that further measures can be taken in response to the COVID-19 outbreak both at
the EU and national level, but concerns remain for possible tensions in the EU about the possibility of
enacting ambitious fiscal measures, a significant risk sharing among all Member States and maximum
flexibility on the public deficit required by the most affected countries such as Italy.
Finally, the occurrence of tensions in Italy at a political level could negatively affect the country's economic
response to the health and economic emergency.
The prospects of the Italian banking system seem to be seriously compromised by the effects of the
recession.
In fact, the lockdown imposed at a global level has led to a reduction in revenues on the majority of the
corporate customers, an increase of costs related to the actions necessary to contain and p revent the sp re a d
of COVID-19, which has consequential impacts on the ability to pay existing debt and current employment
levels. This has led to a progressive increase in the probability of default on performing loans, with a
consequent increase in loans classified as stage 2 and a continuous increase of default s. Similarly, with
respect to non-performing loans, there has been a progressive extension of the average recovery time (d u e ,
for example, to the closure of the courts), a necessary revision of the existing restructuring agreements on
loans classified as likely to default, whose probability of remedy could be significantly reduced. Such
effects could lead to a progressive increase in the cost of credit and of the NPE stock, which would only see
a decline in the medium-long term. As a result, with reference to the capital requirements, there will be an
increase of risk weighted assets ("RWA") due to an increase in the probability of default. In this respect,
please also see the paragraphs "Risks associated with the Group's exposure to Impaired Loans", "Credit
risk and risk of credit quality deterioration" and "Risks associated with capital adequacy" below.
The actions taken by the Italian government should lead to a reduction in both the deterioration in the
quality of performing loans and RWA. With regard to the deterioration in quality, the moratoria introduced
by law, the new loans assisted by the State guarantee and the redundancy fund should make it possible to
better realign future cash flows with the rescheduling of debt, with a potential significant reduction in past

- 2 -