The umpteenth amendments to art. 120 of the Italian Consolidated Banking Act on interest compounding
By virtue of law no. 49 of 14.2.2016 (the “Law”), which came into force on 15 April 2016, the Italian Parliament amended once again art. 120 of the Italian Consolidated Banking Act (Legislative Decree no. 385/1993), regulating interest compounding in banking transactions.
Following to such amendments CICR (“Comitato Interministeriale per il Credito e il Risparmio” - Interministerial Committee for Credit and Savings) is entrusted to enact implementing provisions aimed at ensuring that:
A. interest accrued on current/payment bank accounts (either in favour of the bank or in favour of the account holder) shall be calculated on the same periodical basis which cannot be less than one year;
B. accrued interest cannot generate further interest, except for default interest, and must be calculated only on the principal. Furthermore, in case of bank-account credit facilities and in case of overdrafts without a credit line or beyond the credit line amount:
1) interest must be calculated on the 31st of December and will become due and payable on the 1st of March of the following year (unless the relevant relationship is terminated, in which case interest will become immediately due and payable);
2) the client can authorize (also in advance) the debiting of accrued interest on its current account as soon as it becomes due and payable, in which case the relevant interest amount is considered as principal (the authorization can be revoked at any time before the debiting).