March 21, 2018 / 6:15 PM / 4 months ago

Italian court rejects appeals against cooperative bank reform

ROME, March 21 (Reuters) - Italy’s constitutional court rejected on Wednesday various appeals against a reform of large cooperative banks in a decision which should save the lenders from a wave of compensation claims from former shareholders.

“The cases were considered groundless,” the court said in a statement.

The government of former Prime Minister Matteo Renzi passed in 2015 a long-awaited reform which forced large Italian mutual lenders to become joint-stock companies, in an effort to improve governance and boost their appeal for potential investors.

Of the 10 largest ‘popolari’ banks targeted by the reform only two, Banca Popolare di Sondrio and Popolare di Bari, have yet to embrace the required changes.

To shield the banks from costly claims, the reform allowed banks to limit the amount of money they could use to reimburse shareholders that exercised their withdrawal rights.

For example, UBI Banca paid out only 13.2 million euros to shareholders who opposed its transformation against requests for 258 million euros.

The reform forced Italy’s ‘popolari’ to shed a status that granted shareholders one vote each regardless of the size of their stake.

The ‘one-head, one-vote’ rule, together with ownership restrictions and limits on proxy voting, were blamed for distorting governance at these lenders, by allowing minority shareholders to block change. (Editing by Crispian Balmer)

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