OREANDA-NEWS. UBI Banca's transformation into a limited company on 10 October is likely to be an isolated case this year and Fitch Ratings does not expect other Italian cooperative banks to take similar steps in 2015. This means the sector's much-needed consolidation is likely to be delayed until 2H16 at the earliest.

UBI is the first cooperative bank to meet the requirements set out in a decree issued at the start of 2015 forcing cooperative banks ("banche popolari") with total assets of more than EUR8bn to transform themselves into limited companies and end their one-shareholder one-vote system by end-2016. These changes should favour sector consolidation. But we believe this might still be a long way off due to potential resistance from senior management, strong regional interests and differing corporate governance styles among the cooperative banks.

Transformations at other Fitch-rated Italian cooperative banks are taking place at different speeds. Banca Popolare di Milano's (BPM) board has agreed a plan to transform by 1H16. BPM's credit profile was markedly affected by widespread governance weaknesses in the past and transformation was one element underpinning the upgrade of its Viability Rating in July 2015. Banco Popolare, Banca Popolare dell'Emilia Romagna and Credito Valtellinese have indicated a 4Q16 transformation objective. Banca Popolare di Vicenza has recently announced a capital increase of up to EUR1.5bn by 2Q16 to coincide with transformation into a limited company and a public listing of its shares. Banca Popolare di Sondrio has been silent on its plans.

The implementation of laws to speed up cooperative bank transformation has been frustrated by some minority shareholders who applied to Italy's Administrative Court for suspensions. These were rejected last week but two further claims, which question the constitutional legitimacy of the decree, will be subject to a ruling in February 2016.

We previously commented that transformation is positive for Italy's cooperative banking sector because in their present form the banks are more vulnerable to internal and external interference and their voting rules can hinder effective decision-making.