ROME: Italy's upper house of parliament on Tuesday approved a reform that aims to convert the country's 10 largest cooperative banks into joint stock companies, a measure that is expected to spur mergers in the sector.
The Senate voted 155 to 92 to pass the decree that scraps ownership limits and a voting system that gives shareholders one vote each regardless of the size of their stake.
The reform had already been approved in the Chamber of Deputies and so has now completed its passage through parliament.
However, the banks affected by the changes will have 18 months once the Bank of Italy puts its seal on the plan to shed their cooperative status.
Analysts expect them to engage in defensive mergers to boost their size and profitability as they fear becoming takeover targets.
This prospect has fueled sharp gains in their shares.
In a temporary reprieve for the lenders who are against the changes, the government amended the initial reform scheme to allow the introduction of a 5 percent cap to voting rights for a period of two years.
Prime Minister Matteo Renzi has hailed the measure as a stride towards improving governance and efficiency at Italy's top cooperative banks, which include UBI Banca, Banco Popolare and Banca Popolare di Milano.
"The governance model of cooperative lenders had certainly become unsuitable given the size reached by the largest "popolari" banks," said Gennaro Casale, a partner at The Boston Consulting Group.
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