Golden Power 2026: Navigating the Latest Italian FDI Screening Developments

In this article, first published in the the June issue of Butterworths Journal of International Banking and Financial Law, we consider Italy’s Law No. 4 of 15 January 2026 which amends its foreign investment screening mechanism. We assess how the reform materially reshapes the procedural framework applicable to transactions concerning Italian banks, insurers and other financial institutions, as well as recent judicial developments affecting notification triggers for security interests in financing transactions and draw comparison with the UK National Security and Investment Act 2021.

Introduction

Few investment-screening regimes in Europe have evolved as restlessly as Italy’s. Over a little more than a decade, Italy’s foreign investment screening mechanism, established under Law Decree No. 21 of 15 March 2012, as subsequently amended (the “Golden Power” regime), has been extended from defence and strategic assets to energy, transport, telecommunications, financial infrastructure, technology and, most importantly, banking and insurance. Successive emergency decrees have added further notification triggers, leaving a legislative framework that has grown increasingly.

The latest chapter, Law No. 4 of 15 January 2026 (Law No. 4/2026), represents Italy’s response to the European Commission’s (EC’s) infringement proceedings opened in the wake of the aborted UniCredit/Banco BPM proposed merger. It materially reshapes the procedural framework applicable to transactions in the financial, credit and insurance sectors.

For practitioners advising on cross-border M&A, leveraged finance and securities offerings involving targets active in Italy, the reform is consequential in two respects.

• First, it introduces a sequencing rule that subordinates the Italian government’s Golden Power review to prior decisions of the EC and the European Central Bank (ECB). This has implications for deal timetables and conditionality.
• Secondly, it elevates “national economic and financial security” to the status of a recognised essential interest for the purposes of the government’s intervention powers. This raises questions under established Court of Justice jurisprudence on the permissible scope of the public security exception.

Set against the imminent recast of the EU foreign direct investment (FDI) Screening Regulation and the parallel refinement of the UK National Security and Investment regime, the Italian reform is best understood as a partial recalibration rather than the broader overhaul that the market has been calling for.

The Catalyst: UniCredit/Banco BPM and the Commission’s Twin Objections

The reform’s immediate trigger was the UniCredit offer for Banco BPM, launched in November 2024 and conditioned on, among other clearances, EC merger control approval, ECB prudential authorisation under the Single Supervisory Mechanism Regulation (SSMR), and Italian Golden Power clearance.

In April 2025, the Italian government granted Golden Power clearance subject to conditions binding on the merged bank, including a five-year floor on the loan-to-deposit ratio, restrictions on the project finance portfolio in Italy, a sovereign bond commitment for Banco BPM’s asset manager Anima SGR, and a requirement that UniCredit discontinue its Russian operations within nine months. UniCredit ultimately abandoned the transaction in July 2025, after an Italian administrative court substantially upheld the government’s decision.

The Commission opened proceedings on two parallel fronts. Under Art 21 of the EU Merger Regulation (EUMR), the EC took the preliminary view that the conditions could not be justified by reference to “public security” as construed by the Court of Justice (ie a real and sufficiently serious threat to a fundamental interest of society), nor by any other legitimate interest listed in Art 21(4). It also considered that Italy had failed to comply with the prior notification and standstill obligations applicable to member state measures affecting EU-dimension concentrations.

In November 2025, the EC opened a parallel infringement procedure under Art 258 of the Treaty on the Functioning of the European Union (TFEU), asserting that Italy’s broad discretionary FDI powers in the banking sector breach the SSMR, the Capital Requirements Directive, and Arts 49 and 63 TFEU on freedom of establishment and the free movement of capital. Italy’s response, filed in late January 2026, expressly relied on the legislative changes introduced by Law No. 4/2026.

Law No. 4/2026: A New Procedural Architecture for the Financial Sector

Three features of the reform deserve particular attention.

1. Sequencing: the government must wait for Brussels and Frankfurt

For transactions in the financial, credit or insurance sectors that are subject to clearance by the EC under the EUMR and/or by the ECB under the prudential regime, the Italian government is now precluded from blocking a transaction or attaching conditions to its clearance until the relevant EU-level assessments have been completed.

In parallel, the period within which the parties must submit their Golden Power notification is suspended for as long as the EC or ECB proceedings remain pending. Although the statutory text uses the broader formulation “European authorities”, the legislative history confirms that the intended scope is confined to the EC and the ECB; proceedings before national regulators or competition authorities of other member states do not trigger the sequencing obligation.

The mechanism is asymmetric. The government remains free to clear a deal unconditionally, or to confirm that it falls outside the scope of the Golden Power regime, without awaiting the conclusion of the EU proceedings. By contrast, where the government considers that special powers may need to be exercised, it must wait. Parties who have notified prematurely may find their filing rejected and required to be re-submitted once the EC and ECB have ruled. The reform does not, apparently through legislative oversight, expressly empower the government to suspend a procedure already opened.

2. A new substantive interest: “national economic and financial security”

Law No. 4/2026 now expressly includes “national economic and financial security” among the essential national interests that may justify the exercise of the government’s special powers. The legislative materials describe this as a codification of the position the government had already adopted in practice, rather than a substantive expansion of its mandate.

From an EU law perspective, however, this is a sensitive development. The Court of Justice has repeatedly held that economic considerations do not, of themselves, fall within the concept of “public security”, and that member states must demonstrate a genuine and sufficiently serious threat to a fundamental interest of society before restricting the Treaty freedoms on that ground. Whether the EU courts would accept the new wording as a permissible clarification or treat it as an unjustified expansion of the public security exception, remains to be seen.

3. Deference to sectoral regulation

The reform also reinforces the principle that the government is required to assess whether existing regulatory frameworks already afford sufficient protection to national interests before resorting to its special powers. For this purpose, it expressly identifies EU merger control and financial-sector prudential supervision as relevant regulatory safeguards. This is an attempt to introduce a form of subsidiarity into the analysis and, in turn, to confine the residual scope for Italian intervention to genuinely national interests not addressed by EU-level review.

Beyond the Reform: Two Notable Developments Shaping Practice

Law No. 4/2026 is only the most prominent of several recent developments.

Share pledges: the Council of State narrows the notification trigger

In a significant decision overturning a long line of administrative practice, the Italian Council of State has held that a pledge over shares in a company holding strategic assets does not, of itself, give rise to a Golden Power notification obligation. The court’s reasoning centres on whether the pledge produces an immediate and concrete alteration of governance at the point of its constitution.

Where, as is standard in leveraged and syndicated finance structures, the pledgor retains all voting, administrative and economic rights until a default has occurred, and where the pledge instrument makes any enforcement step conditional on prior Golden Power clearance, no shift in control arises at that stage and no filing obligation is triggered. By contrast, if the pledge agreement provides for an upfront transfer of voting rights to the secured creditor, control passes at that moment, and a notification must be made before the pledge takes effect.

The decision provides clarity for syndicated lenders, leveraged finance teams and security agents, and is likely to reduce the precautionary filing burden long associated with share pledge structures over Italian targets in strategic sectors.

Although issued by the highest administrative court, the judgment (Council of State, Section IV, No. 9619, published on 5 December 2025) has not yet become definitive, with the Presidency of the Council of Ministers retaining the ability to appeal to the Court of Cassation within six months of publication (ie by 5 June 2026). Pending the expiry of this deadline without challenge, the prudent course is for market participants to refrain from broadly adapting established market practice and to continue a case-by-case assessment of share pledge agreements over Italian strategic targets. Confirmatory filings remain advisable, especially in borderline situations, at least until the expiry of the appeal period for the Council of State’s judgment. Early decisions by the Italian government pending the expiry of such appeal do not yet seem to provide clear guidance.

Structural remedies: a new dimension in Italian practice

Italian Golden Power “prescriptions” have traditionally been behavioural (ie imposing ongoing obligations on the company’s operations) including the appointment of Italian nationals to key positions, restrictions on access to information, supply-continuity commitments and similar measures. Structural remedies have been confined to the very limited case of a minority sale to a state-controlled entity.

In late 2025, however, the Italian government reportedly approved the acquisition of Tinexta S.p.A., a digital technologies company, on condition that its cybersecurity division be carved out into a segregated trust vehicle and divested to a purchaser acceptable to the government. The accompanying prescriptions addressed the governance of the trust vehicle, the conduct of the disposal process and the interim management of the carved-out business pending completion of the sale.

While the defence and national security character of the target plainly informed the outcome, the precedent should now be addressed in transaction documents, particularly in conditions precedent, deal protection mechanics, allocation of regulatory risk and break-fee constructs.

A Brief UK Comparison

The Italian reform does not occur in a vacuum. In the UK, the government published its response to the consultation on the Notifiable Acquisition Regulations on 12 March 2026, refining rather than recasting the National Security and Investment Act 2021. The scope of mandatory sectors is to be expanded, with new standalone schedules for Critical Minerals, Semiconductors and Water, and a narrower formulation of the Artificial Intelligence schedule that excludes “off-the-shelf” systems used for routine business purposes.

The direction of travel is recognisably different. The UK is engaged in a self-declared streamlining exercise designed to reduce friction for low-risk transactions while sharpening focus on genuine national security risks. Italy, by contrast, has reacted to EU-law pressure rather than to domestic over-notification concerns. The procedural sequencing it now imposes will, in practice, lengthen rather than shorten timetables in financial-sector deals.

Practical Implications for Market Participants

The principal implications for banking and finance counsel are as follows. Transaction timetables for deals concerning Italian banks, insurers and other financial institutions that meet the EUMR thresholds, or that require ECB authorisation under the SSMR, must now be planned on the basis that the Italian Golden Power procedure will no longer run in parallel with EU-level assessments where the government is considering exercising its intervention powers.

By contrast, transactions in non-financial sectors continue to benefit from a parallel-track review, creating a notable timing difference by sector that may itself influence transaction structuring. Conditions precedent, long-stop dates, interim covenants and material adverse change provisions should be revisited accordingly. Parties should also consider whether to file early, even where the notification period is effectively suspended, to obtain an unconditional clearance or a confirmation of scope where available.

The continued availability of “national economic and financial security” as a basis for intervention means that residual Italian discretion remains material, even after EC and ECB clearance. Conditionality risk has not been eliminated; it has been re-sequenced. Acquirers should also factor in the now-demonstrated possibility of structural remedies in Italy, reflected in transaction documentation through appropriately calibrated regulatory efforts clauses, hell-or-high-water carve-outs and remedy caps.

On the financing side, the Council of State’s clarification on share pledges should reduce, but does not eliminate, the need for Golden Power analysis in security packages. Pledge documentation should expressly preserve voting rights with the pledgor until enforcement and make any enforcement step conditional on Golden Power clearance.

Early co-ordination between legal, regulatory and financing workstreams will be critical to managing these timing and conditionality risks.

Conclusion

Law No. 4/2026 is best understood as a corrective rather than a comprehensive reform. It addresses the most acute of the EC’s objections by sequencing Italian Golden Power review behind EU prudential and merger-control assessments in the financial sector, and it formally embeds the principle of deference to sectoral regulation. At the same time, it preserves, and arguably enlarges, the Italian government’s substantive discretion through the introduction of “national economic and financial security” as a protected interest. Whether the reform will satisfy the Commission, and whether it will withstand judicial scrutiny if tested, remains to be seen.

The forthcoming recast of the EU FDI Screening Regulation, with its mandatory minimum scope, harmonised timelines and targeted list of in-scope financial entities, will require further amendment of the Italian regime. Until that broader reform materialises, banking and finance practitioners should anticipate continued complexity, differential treatment of financial-sector transactions, and possibly further legislative intervention in this area.

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