Italian Courts take position on interest compounding in banking transactions: the prohibition is effective since the 1st of January 2014

Following to the amendments made by Law no. 147 of December 27, 2013 (so called “2014 Stability Law”), art. 120 of the Italian Consolidated Banking Act (“CBA”, Legislative Decree No. 385/1993) explicitly prohibits the interest compounding, by providing that “interest periodically compounded cannot generate further interest which shall accrue only on the principal".