Obbligazione EmilianoCredito Spa 3.625% ( XS1644438928 ) in EUR

EmilianoCredito Spa

100 EUR ▲

Italia

XS1644438928 ( in EUR )

3.625% per anno ( pagato 1 volta l'anno)

10/07/2027

Prospetto opuscolo dell'obbligazione Credito Emiliano Spa XS1644438928 en EUR 3.625%, scadenza 10/07/2027

100 000 EUR

100 000 000 EUR

10/07/2026 ( In 247 giorni )

Credito Emiliano SpA è una banca italiana operante principalmente in Emilia-Romagna, con attività di credito, investimento e gestione patrimoniale.

The Obbligazione issued by EmilianoCredito Spa ( Italy ) , in EUR, with the ISIN code XS1644438928, pays a coupon of 3.625% per year.
The coupons are paid 1 time per year and the Obbligazione maturity is 10/07/2027

CREDITO EMILIANO S.p.A.
(incorporated with limited liability in the Republic of Italy)
Issue of 100,000,000 Subordinated Callable Fixed Rate Reset Notes due 10 July 2027
The 100,000,000 Subordinated Callable Fixed Rate Reset Notes due 10 July 2027 (the Notes) will be issued by Credito
Emiliano S.p.A. (the Issuer or Credem, and along with its subsidiaries, the Credem Group). The Notes will constitute direct,
unsecured and subordinated obligations of the Issuer, as described in Condition 2 (Status) in "Terms and Conditions of the Notes".
The Notes will bear interest at the applicable Rate of Interest (as defined in Condition 3 (Interest)) from and including 10 July
2017 (the Issue Date), payable annually in arrear on 10 July in each year. The Rate of Interest for each Interest Period (i) from
(and including) the Issue Date to (but excluding) 10 July 2022 (the Reset Date) will be 3.625 per cent. per annum and (ii) from (and
including) the Reset Date to (but excluding) 10 July 2027 (the Maturity Date) will be the Reset Rate of Interest, each as defined in
Condition 3 (Interest). The first payment representing a full year's interest shall be made on 10 July 2018.
Unless previously redeemed or purchased and cancelled as provided in "Terms and Conditions of the Notes", the Notes will
be redeemed at 100 per cent. of their principal amount on 10 July 2027. Noteholders do not have the right to call for the redemption
of the Notes. The Issuer may, at its option (subject to the approval of the Bank of Italy or any successor or replacement thereto, or
other authority having primary responsibility for the prudential oversight and supervision of the Issuer (the Supervisory Authority)),
redeem the Notes in whole, but not in part, on 10 July 2022 (the Call Date) at their principal amount, together with interest accrued
to the date fixed for redemption. The Issuer may also, at its option (but subject to the approval of the Supervisory Authority),
redeem the Notes in whole but not in part at their principal amount, together with interest accrued to the date fixed for redemption,
upon occurrence of a change in the regulatory classification of the Notes that would be likely to result in their exclusion, in whole, as
Tier 2 Capital of the Issuer or the Credem Group, as further described in Condition 5.4 (Redemption for Regulatory Reasons
(Regulatory Call)). The Notes may also be redeemed by the Issuer, at its option, at their principal amount, together with interest
accrued to the date fixed for redemption, for taxation reasons as described in Condition 5.2 (Redemption for Taxation Reasons).
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, as amended (the Luxembourg Act) on prospectuses for securities to
approve this document (the Prospectus) as a prospectus and to the Luxembourg Stock Exchange for the listing of the Notes on
the Official List of the Luxembourg Stock Exchange and admission to trading on the Luxembourg Stock Exchange's regulated
market. The CSSF assumes no responsibility for the economic and financial soundness of the transactions contemplated by this
Prospectus or the quality or solvency of the Issuer in accordance with Article 7(7) of the Luxembourg Act.
This Prospectus (together with the documents incorporated by reference herein) is available for viewing on the website of the
Luxembourg Stock Exchange (www.bourse.lu). Payments of interest or other amounts relating to the Notes may be subject to a
substitute tax (referred to as imposta sostitutiva) of 26 per cent. in certain circumstances. 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 Taxation in the Republic of Italy"
and to certify, prior to or concurrently with the delivery of the Notes, that such Noteholder is (i) resident in a country which
recognises the Italian tax authorities' right to an exchange of information pursuant to terms and conditions set forth in the relevant
treaty (such countries are listed in the Ministerial Decree of 4 September 1996, as amended by Ministerial Decree of 23 March
2017 and possibly further amended by future decrees issued pursuant to Article 11(4)(c) of Decree No. 239 of 1st April 1996, as
amended), 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 Taxation in the Republic of Italy" on page 72.
The Notes are expected to be rated "BBB-" by Fitch Ratings Ltd. (Fitch). Fitch is established in the European Union and is
registered under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). As such it is 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 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
assigning rating agency. Please also refer to "Credit ratings may not reflect all risks" in the "Risk Factors" section of this Prospectus.
The Notes will initially be represented by a temporary global note (the Temporary Global Note), without interest coupons,
which will be deposited on or about the Issue Date with a common depositary for Euroclear Bank SA/NV (Euroclear) and
Clearstream Banking, société anonyme (Clearstream, Luxembourg). Interests in the Temporary Global Note will be exchangeable
for interests in a permanent global note (the Permanent Global Note and, together with the Temporary Global Note, the Global
Notes), without interest coupons, on or after 19 August 2017 (the Exchange Date), upon certification as to non-U.S. beneficial
ownership. Interests in the Permanent Global Note will be exchangeable for definitive Notes only in certain limited circumstances -
see "Overview of Provisions relating to the Notes while in Global form".
An investment in the Notes involves certain risks. Prospective purchasers of the Notes should ensure that they
understand the nature of the Notes and the extent of their exposure to risks and that they consider the suitability of the
Notes as an investment in the light of their own circumstances and financial condition. For a discussion of these risks see
"Risk Factors" below.
Sole Lead Manager

Morgan Stanley
The date of this Prospectus is 6 July 2017

This Prospectus constitutes a prospectus for the purposes of Article 5.3 of the Prospectus Directive
and for the purposes of the Luxembourg Act. Prospectus Directive means Directive 2003/71/EC (as
amended, including by Directive 2010/73/EU) and includes any relevant implementing measure in a
relevant member state of the European Economic Area.
The Issuer 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 al documents which are deemed to be incorporated
herein by reference (see "Documents Incorporated by Reference"). This Prospectus shal be read and
construed on the basis that such documents are incorporated and form part of this Prospectus.
The Sole Lead Manager named under "Subscription and Sale" below has not expressly verified the
information contained herein. Accordingly, no representation, warranty or undertaking, express or
implied, is made by the Sole Lead Manager or any of its affiliates and no responsibility or liability is
accepted by the Sole Lead Manager or by any of its affiliates as to the accuracy or completeness of the
information contained or incorporated in this Prospectus or of any other information provided by the
Issuer in connection with the Notes. Neither the Sole Lead Manager, nor any of its affiliates, 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 to give any information or to make any
representation not contained in or not consistent with this Prospectus or any other 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 the Sole Lead
Manager.
No person is or has been authorised 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
issuance of 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 the Sole Lead Manager.
Neither this Prospectus nor any other information supplied in connection with the issuance of 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 Sole Lead Manager or any of its affiliates that any recipient of this
Prospectus or any other information supplied in connection with the Notes should purchase the 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 its group.
Neither this Prospectus nor any other information supplied in connection with the Notes constitutes an
offer or invitation by or on behalf of the Issuer or the Sole Lead Manager or any of its affiliates to any
person to subscribe for or to purchase the Notes.
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 Sole Lead Manager that any recipient of this Prospectus or of 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
conditions and affairs, and its own appraisal of the creditworthiness, of the Issuer and its group. Neither
this Prospectus nor any other information supplied in connection with the issue of the Notes constitutes
an offer or invitation by or on behalf of the Issuer or the Sole Lead Manager to any person to subscribe
for or to purchase any Notes.
The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain
jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are
required by the Issuer and the Sole Lead Manager to inform themselves about and to observe any such
restrictions (see "Subscription and Sale").

2

The Notes have not been and will not be registered under the U.S. Securities Act of 1933 (the
Securities Act) and are subject to U.S. tax law requirements. Subject to certain exceptions, 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 the U.S. Internal Revenue Code of 1986, as amended, and
regulations thereunder). The Notes may be offered and sold outside the United States to non-U.S.
persons in reliance on Regulation S (Regulation S) under the Securities Act. For a description of
certain restrictions on offers, sales and deliveries of the Notes and on the distribution of this
Prospectus and other offering material relating to the Notes, see "Subscription and Sale".
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy the 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 Sole Lead Manager 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 Sole Lead Manager which is intended to 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 any advertisement or other offering material may be distributed or published in any jurisdiction,
except under circumstances that wil result in compliance with any 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 of America, the United Kingdom and the Republic of Italy (see "Subscription
and Sale").
This Prospectus has been prepared on the basis that any offer of the Notes in any Member State of
the European Economic Area (each, a Relevant Member State) wil 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 the Notes. Accordingly, any person making or intending to make an
offer in that Relevant Member State of the Notes may only do so in circumstances in which no obligation
arises for the Issuer or the Sole Lead Manager 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 the Sole Lead Manager has authorised, nor do
they authorise, the making of any offer of the Notes in circumstances in which an obligation arises for the
Issuer or the Sole Lead Manager to publish or supplement a prospectus for such offer.
Each prospective investor in the Notes must determine, based on its own independent review and
such professional advice as it deems appropriate under the circumstances, that its acquisition of the
Notes is fully consistent with its financial needs, objectives and condition, complies and is fully consistent
with al investment policies, guidelines and restrictions applicable to it and is a fit, proper and suitable
investment for it, notwithstanding the clear and substantial risks inherent in investing in or holding the
Notes.
A prospective investor may not rely on the Issuer, the Sole Lead Manager or any of their respective
affiliates in connection with its determination as to the legality of its acquisition of the Notes or as to the
other matters referred to above.
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 financial circumstances and investment
objectives, and only after careful consideration with their financial, legal, tax and other advisers. In
particular, each potential investor should:

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 Prospectus and any applicable supplements;

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;

3

have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Notes, including where the currency for principal or interest payments is different from the
potential investor's currency;

understand thoroughly the terms of the Notes and be familiar with the behaviour of financial
markets; and

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
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) the Notes are legal investments for it, (2) the Notes can be used as collateral for various types
of borrowing and (3) other restrictions apply to its purchase or pledge of the Notes. Financial institutions
should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of
the Notes under any applicable risk-based capital or similar rules.
The 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 and appropriate
addition of risk to their overal 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 wil have on the potential investor's overall investment portfolio.
Each prospective investor should consult its own advisers as to legal, tax and related aspects in
connection with any investment in the Notes. An investor's effective yield on the Notes may be
diminished by certain charges such as taxes, duties, custodian fees on that investor on its investment in
the Notes or the way in which such investment is held.
Some statement in this Prospectus, including the documents incorporated by reference herein, may
be deemed to be forward-looking statements. Such items in this Prospectus include, but are not limited
to, statements made under "Risk Factors" and "Description of the Issuer". Such statements include
statements concerning the Issuer's plans, objectives, goals, strategies, future operations and
performance and the assumptions underlying these forward looking statements. They can be general y
identified by the use of terms such as "aims", "anticipates", "believes", "could", "estimates", "expects",
"intends", "may", "plans", "seeks", "should", "wil " and "would", or by comparable terms and the negatives
of such terms. By their nature, forward looking statements and projections involve risk and uncertainty,
and the factors described in the context of such forward looking statements and targets in this
Prospectus could cause actual results and developments to differ materially from those expressed in or
implied by such forward looking statements. The Issuer has based forward-looking statements on its
expectations and projections about future events and on the current view of its management with respect
to future events and financial performance as of the date such statements were made. These forward-
looking statements are subject to risks, uncertainties and assumptions about Credito Emiliano S.p.A. and
the Credem Group, including, among other things, the risks set out under "Risk Factors". Although the
Issuer believes that the expectations, estimates and projections reflected in its forward looking
statements are reasonable as of the date of this Prospectus, if one or more of the risks or uncertainties
materialise, including those identified below or which the Issuer has otherwise identified in this
Prospectus, or if any of the Issuer's underlying assumptions prove to be incomplete or inaccurate, the
Issuer's actual results of operation may vary from those expected, estimated or predicted.
The risks and uncertainties referred to above include:

the Issuer's ability to achieve and manage the growth of its business;

the performance of the markets in Italy, where the Issuer primarily operates;

the Issuer's ability to realise the benefits it expects from projects and investments it is
undertaking or plans to or may undertake;

4

the Issuer's ability to obtain external financing or maintain sufficient capital to fund its existing
and future investments and projects;

changes in political, social, legal or economic conditions in the markets in which the Issuer and
its customers operate.
Any forward looking statements contained in this Prospectus speak only as at the date of this
Prospectus. Without prejudice to any requirements under applicable laws and regulations, the Issuer
expressly disclaims any obligation or undertaking to disseminate after the date of this Prospectus any
updates or revisions to any forward looking statements contained in it to reflect any change in
expectations or any change in events, conditions or circumstances on which any such forward looking
statement is based.
All references in this Prospectus to EUR, or euro are 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 of those members of the European Union which are participating in the European
economic and monetary union. In addition, all references in this document to U.S. dollars, U.S.$ and $
refer to United States dol ars and references to Sterling and £ refer to pounds sterling.

5

STABILISATION
IN CONNECTION WITH THE ISSUE OF THE NOTES, MORGAN STANLEY & CO. INTERNATIONAL
PLC IN ITS CAPACITY AS STABILISATION MANAGER MAY OVER ALLOT NOTES OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE PRICE OF THE NOTES AT A LEVEL
HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO
ASSURANCE THAT THE STABILISATION MANAGER WILL UNDERTAKE ANY SUCH
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 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 AND 60 DAYS AFTER THE DATE OF THE
ALLOTMENT OF THE NOTES. ANY SUCH STABILISATION ACTIVITIES OR OVER ALLOTMENT
SHALL BE CONDUCTED IN ACCORDANCE WITH ALL APPLICABLE LAWS, REGULATIONS AND
RULES.

6

Table of Contents

Page
Risk Factors ............................................................................................................................................ 8
Overview ............................................................................................................................................... 31
Documents Incorporated by Reference ................................................................................................ 35
Terms and Conditions of the Notes ...................................................................................................... 38
Overview of Provisions relating to the Notes while in Global Form ...................................................... 51
Use of Proceeds .................................................................................................................................... 53
Description of the Issuer ....................................................................................................................... 54
Taxation................................................................................................................................................. 76
Subscription and Sale ........................................................................................................................... 82
General Information .............................................................................................................................. 84

7

RISK FACTORS
The Issuer believes that the following factors may affect its ability to fulfil its obligations under the
Notes. Some 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 the 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. The Issuer has identified in this Prospectus a
number of factors which could materially adversely affect its businesses and ability to make payments
due under the Notes, 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" below or elsewhere in this
Prospectus have the same meanings in this section, unless otherwise stated. References to a
numbered "Condition" shall be to the relevant Condition in the Terms and Conditions of the Notes.
FACTORS THAT MAY AFFECT THE ISSUER'S ABILITY TO FULFIL ITS OBLIGATIONS UNDER
THE NOTES
Risks relating to the Issuer and the Credem Group
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 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.
Market risk relates to the risk arising from market transactions in financial instruments, currencies and
commodities.
Interest rate risk refers to the current or prospective risk to both the capital and earnings of institutions
arising from adverse movements in underlying 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.
Operational risk relates to the risk of loss arising from shortcomings or failures in internal processes,
people or systems and from external events.
Risks relating to economic and financial conditions
The earning capacity and stability of the Issuer are affected by the general state of the economy, the
dynamics of financial markets and, in particular, the strength and growth prospects of the economy in
Italy (and the creditworthiness of its sovereign debt), as wel as that of the Eurozone as a whole. In
this regard, trends in the following factors are of particular significance to the Issuer: expectations and
investor confidence; the level and volatility of interest rates in the short and long term; exchange
rates; the liquidity of financial markets; the availability and cost of capital; the sustainability of

8

sovereign debt; household incomes and consumer spending; and levels of unemployment, inflation
and housing prices. Negative trends in relation to any of these factors, particularly in times of
economic and financial crisis, may cause the Issuer to suffer losses, increases in funding costs and a
diminution in the value of its assets, with a potential adverse effect on its liquidity, financial position
and results of operations.
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.
Credit risk and risk of credit quality deterioration
In the context of credit activities, the Credem Group is exposed to the risk that contractual
counterparties may not fulfil their payment obligations, as wel as the possibility that Credem may,
based on incomplete, untrue or incorrect information, grant credit that otherwise would not have been
granted or that would have been granted under different conditions.
Other banking activities, besides traditional lending and deposit activities, can also expose the
Credem Group to additional credit risks. "Non-traditional" credit risk can, for example, arise from: (i)
entering into derivative contracts; (i ) buying and sel ing securities, futures, currencies or goods; and
(i i) holding third-party securities. The counterparties of said transactions or the issuers of securities
held by Credem or other entities of the Credem Group could fail to comply with their obligations due to
insolvency, political or economic events, a lack of liquidity, operating deficiencies, or for other
reasons.
The Credem Group has adopted procedures, rules and principles aimed at monitoring and managing
credit risk at both individual counterparty and portfolio level. However, there is the risk that, despite
these credit risk monitoring and management activities, the Credem Group's credit exposure may
exceed the levels determined pursuant to the relevant procedures, rules and principles adopted by
the Credem Group. Therefore, the deterioration of the creditworthiness of key customers and, more
generally, any defaults or repayment irregularities, the launch of bankruptcy proceedings by
counterparties, the reduction of the economic value of guarantees received and/or the inability to
execute said guarantees successfully and/or in a timely manner, as wel as any errors in assessing
the creditworthiness of counterparties, could have major negative effects on the activity, operating
results and capital and financial position of Credem and/or the Credem Group.
The Group has adopted valuation policies for customer loans and receivables that take into account
write-downs recorded on asset portfolios for which objective loss events have not been identified.
These portfolios are subject to a write-down which, taking into account relevant risk factors with
similar characteristics, is calculated partly through statistical y defined coverage levels based on
available information and historical data. However, in the event of a deterioration in economic
conditions and a consequent increase in non-performing loans, it cannot be ruled out that there may
be significant increases in the write-downs to be performed on the various categories of such loans,
and that credit risk estimates may need to be amended. Furthermore, there is a possibility that losses
on loans may exceed the amount of write-downs, which would have a significant negative impact on
the operating result capital and financial position of Credem Group.
On 20 March 2017, the ECB published its "Guidance to banks on non-performing loans" following a
consultation conducted between 12 September and 15 November 2016. These guidelines address
the main aspects of the management of non-performing loans (non-performing loans or NPL),
including the definition of the NPL strategy and of the operational plan to the NPL governance and
operations, and provide several recommendations, based on best practices, that constitute, the ECB
Single Supervisory Mechanism's expectations. The guidelines now form part of the ECB's day-to-day

9

supervisory activities with respect to banks with elevated levels of NPL's in their portfolios.
Specifical y, the guidelines require all banks with a high degree of non-performing loans to establish a
clear strategy in line with their own business plan and risk management framework, aimed at reducing
the amount of non-performing loans, in a credible and timely manner.
Risk relating to the geographical coverage of the Credem Group's business
Credem Group's business is focused primarily on the Italian domestic market and therefore adverse
economic conditions in Italy or a delayed recovery in the Italian market may have particularly negative
effects on the Credem Group's business, financial condition and results of operations.
In addition, any downgrade of the Italian sovereign credit rating or the perception that such a
downgrade may occur, may destabilise the markets and have a material adverse effect on the
Credem Group's operating results, liquidity position, financial condition and prospects as wel as on
the marketability of the Notes.
Operational risks
The Credem Group, 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 equipment or
telecommunication systems, failure to comply with regulatory requirements and Conduct of Business
rules and failure of external systems, for example, those of the Issuer's suppliers or counterparties.
The Credem Group'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 equipment required by law or necessitated by future business
growth may require significant investments.
Reduced interest rate margin
In recent years, the Italian banking sector has been characterised by increasing competition which,
together with the level of interest rates, has caused a sharp reduction in the difference between
borrowing and lending rates, lowering interest rate margins. In particular, such competition has had
two main effects:
(i)
a progressive reduction in the differential between lending and borrowing interest rate, which
may result in the Issuer facing difficulties in maintaining its actual rate of growth in interest
rate margin; and
(i )
a reduction in banking commissions and fees due to competition on prices.
Both of the above factors may adversely affect the Issuer's financial condition and results of
operations. In addition, downturns in the Italian economy could cause pressure on the competition
through, for example, increased price pressure and lower business volumes for which to compete.
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

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