E-encyclopedia of banking, stock exchange and finance

Selected letter: L


    All the different land cover types that characterize a landscape, principally due to local climate and human action that can alter its form. Land use can be seen as the immediate result of land cover transformations. The driving forces of these processes are a multitude and based on socio-economic, cultural, technological, institutional, as well as demographic factors.
    Editor: Melania MICHETTI
    © 2009 ASSONEBB


    All human action directly related to land and the functioning of land cover. There are many categories of land use and land cover, which go from urban zones, forests and protected areas to agricultural land, national parks, etc. The strong interest in land use and land cover changes over time is due to their direct relation with, and interference in, fundamental ecological processes such as land productivity, biodiversity of plant and animal species, hydrological and biochemical cycles (Mucher et al., 1993).
    Mucher, C.A., Stomph T.J. and Fresco, L.O. (1993). Proposal for a global land use classification. FAO/ITC/WAU. Rome, Vageningen, pp. 37
    Editor: Melania MICHETTI
    © 2009 ASSONEBB


    Part of the gross capital employed in the distinctive activity of a factory farm.
    All the elements immobile by nature, such as land and improvements are assigned to the land value.
    Land is a differential capital characterized by the fact of being a production factor not susceptible to damage.
    The improvements of the land are the investments that the entrepreneur has done in order to make the land productive, such as streets, repair of the ground (levelling, construction of dykes, draining), buildings (houses, livestock and machinery shelters, warehouses), tree plantations (orchards, vineyards, land containment systems) and fixed installations in general (derivation plants for irrigation water, greenhouses, etc…).
    The improvements of the land are differentiated components of the capital and are susceptible to partial damage; they can indeed be used only for a limited number of years.
    In businesses in which the owner has to pay a rent, land value is not entirely the property of the entrepreneur: in order for him to use it, he has to pay an annual fee.
    Editor: Barbara PANCINO
    © 2009 ASSONEBB


    Lehman Brothers filed a petition in the United States Bankruptcy Court for the Southern District of New York seeking relief under chapter 11 of the United States Bankruptcy Code on September 15, 2008. This represents the first and only relevant bankruptcy of the US financial system. Other financial intermediaries have been rescued by using public money (Bear Sterns, Fanny Mae and Freddie Mac).
    The history of Lehman started in the 17th century when the Lehman Brothers started to commerce cotton, woods and other raw materials with America. They moved from Holland to America and made their fortune in dealing with challenging and developing businesses. In the 20th and 21st century, Lehman has been a leading firm in M&As; in Italy, Lehman became famous after the unexpected success of the takeover of Telecom Italia by a little tycoon, Mr. Colaninno.
    Editor: Chiara OLDANI
    © 2010 ASSONEBB

  • LEVEL 1

    EU directives (such as MiFID) which contain framework principles and which empower the Commission acting at Level 2 to adopt delegated acts or implementing acts.

    ©2012 Editor: House of Lords

  • LEVEL 2

    EU directives or regulations which represent the exercise of delegated authority under Level 1 directives or implement such directives.

    ©2012 Editor: House of Lords


    This type of insurance covers the risks linked to the length of human life by ensuring the payment of a sum of money upon the occurrence, at a future time but uncertain in advance, of an event connected with the life of the insured subject. Technical and economic characteristics vary depending on whether the policy covers life, death or a mix of the two risks.
    Life insurance policies provide a monetary payment if the insured person is still alive at an established age, so as to have sufficient income to maintain the habitual standard of living. These policies appear to have the features of a saving investment product in support of social-security purposes.
    Death insurance policies are contracted to prevent that the disappearance of a given person could cause serious financial difficulties to other subjects. A particular type of coverage is that which is stipulated in conjunction with a mortgage, in which case the contract provides for the payment of a lump sum equal to the debt to be paid to the bank at the time of the event of death.
    Comprehensive insurance covers both the risk of death and that of longevity. In this type of policy, the element of uncertainty is reduced, while the financial component is enhanced insofar as against the payment of a premium, the insurance will repay at maturity the original sum, plus interest accrued over time.
    Under index-linked policies1, the capital varies according to the evolution of a given index; in the unit-linked instead, the capital is determined on the basis of the performance obtained from internal fund management similar to unit trusts or mutual funds. These policies have many similarities with mutual funds and show a strong financial setting in the determination of the premium.
    In life insurance, the premium is a function of the assessment regarding the likelihood that the feared event will occur during the life of the contract ( "demographic assumptions"), which constitutes the actuarial component of the premium. The financial component which complements the actuarial one is based on the considerations about the length of time between the time of payment of premiums and the payment of principal/income, and about the need to update the capital insured on the basis of an estimate of expected returns on the sums paid2.
    1In index linked policies, the final capital is determined by using default parameters set in the policy.
    2In general, the following formula applies: P = s * v * p. For each: s: insured sums; v: discount factor based on the technical rate; p: probability that the risk event materializes; P: prize.
    Cucinotta G., Nieri L. (2005) "Le assicurazioni, la gestione del rischio in una economia moderna", Il Mulino editore.
    Desiderio Luigi, Molle Giacomo. (2005) "Manuale di diritto bancario e dell'intermediazione finanziaria", Giuffrè editore.
    Guida Roberto. (2004) "La Bancassicurazione: modelli e tendenze del rapporto tra banche e assicurazioni", Cedam editore.
    Locatelli Rossella, Morpurgo Cristina, Zanette Alfeo. (2002) "L'integrazione tra banche e compagnie di assicurazione e il modello dei conglomerati finanziari in Europa", Enaudi editore.
    Patroni Griffi and Ricolfi. (1997) "La distribuzione bancaria di prodotti assicurativi in banche ed assicurazioni fra cooperazione e concorrenza", Giuffrè editore.
    Quagliariello Mario. (2001) "I rapporti tra banche e assicurazioni in Italia e in Europa: aspetti empirici e problemi di regolamentazione", Luiss University Press.
    Quagliariello Mario. (2003) "La bancassicurazione: profili operativi e scelte regolamentari", Luiss University Press.
    Ruozi Roberto. (2004) "Economia e gestione della banca", Egea editrice.
    Editor: Alberto Maria SORRENTINO
    © 2009 ASSONEBB


    Liquidityis the capacity that the market gives to an individual/agent to buy/sell assets at a given price in a short length of time between the initial order and the operation close. This delta in time should be zero for a high liquidity market, and the buy/sell price should be the initial one.
    Another measure for liquidity can be the inverse distance (in terms of time) for a generic asset to become money.
    This market capacity depends on regulations that define the market microstructure. Indeed, the process that completes the exchange is important in defining how from the bid/ask in the book value the market defines the close price.
    Liquidity also depends on the market structure. In a competitive market, liquidity is different from markets where agents or assets are limited or subject to limitations. Market depth is closely related to liquidity.
    One common way to define market liquidity is the difference between the bid price and the asking price in the book value. The higher this difference, the lower the liquidity in the market. This happens because it is not easy to match the buy side to the sell side at a particular price in a short period of time. This leads to a situation where both sides of the market need to modify the price in order to settle the exchange. This mechanism is iterated up to the point where the two prices have a zero difference. The shorter the length of time for this iterated mechanism, the higher the liquidity in the market. In this sense, it represents a proxy to measure liquidity.
    Liquidity is also determined by the law of asset pricing of the existing microstructure on the basis of the existing economic conditions. A market can be liquid in a certain period of time and non-liquid in others.
    O’Hara, M., 1997, Market Microstructure Theory, Blackwell, Oxford, UK;
    Grossman, S. J., Stiglitz, J. E., 1990, Informazione e sistemi di prezzi concorrenziali, in Informazione e teoria economica, E. Saltari, a cura di, Il Mulino, Bologna.
    Editor: Rocco CICIRETTI
    © 2009 ASSONEBB

  • LISBON TREATY (Encyclopedia)


    The Treaty of Lisbon (Treaty) is the result of the new push for European integration subsequent to the non-ratification of the European Constitution in 2005. The Treaty was signed on 13 December 2007 and entered into force on 1 January 2009, after ratification by all 27 Member States.


    The project of a European Constitution

    The Nice Treaty already contemplated a further study of the fundamental issues concerning a better definition of the competences of the Union and of the Member States, the European Convention for the Protection of Human Rights and Fundamental Freedoms, the simplification of the Treaties and the role of the national parliaments. With the Laeken declaration of December 2001, the European Council specified that the reform would develop through a Convention, in order to prepare an intergovernmental conference.
    The Convention was composed of representatives from national governments and parliaments in the Member States and candidate countries, and representatives from the European Parliament and the Commission. Its inaugural session was held on 28 February 2002 and works came to an end after seventeen months of discussions. The Convention produced a draft Treaty establishing a European Constitution that was presented to the Thessaloniki European Council. The draft Constitution served as a basis for the work of the intergovernmental conference, convened in October 2003. The draft finalized by the Conference was signed by the Heads of State and Government on 29 October 2004. The entering into force of the Constitution was conditioned to ratification by all Member States, in accordance with each one's constitutional rules. Due to the difficulties encountered in certain States, the Heads of State and Government decided, at the European Council meeting on 16 and 17 June 2005, to launch a period of reflection.

    The drafting of the Lisbon Treaty

    The debate following the European Council of June 2005 allowed to gradually clarify the aims of the European Union until the Member States, at the fiftieth year anniversary of the signing of the Rome Treaties (in march 2007), reaffirmed their determination to continue with the institutional and political integration (Berlin Declaration). This lead to the decision, at the European Council meeting on 21 and 22 June 2007, to convene an intergovernmental conference to draft, instead of a Constitution, a reform treaty for the European Union.
    The intergovernmental conference began its works on 23 July 2007, based on a very detailed mandate on principles and contents to be developed, with the goal of adopting a reform treaty, instead of a Constitution, although it was specified that the profound innovations set further by the 2004 intergovernmental conference were to be taken into account. The result was the Treaty of Lisbon, which entered into force on 1 December 2009 as it is summarized below.

    Description of the Treaty

    Structure and general principles

    The Treaty entered into force on 1 December 2009, after ratifications by all 27 Member States and includes relevant institutional and procedural reforms, aimed at addressing the enlargement of the current 27 Member States.
    The Treaty amends the Treaty on European Union (TEU, also knows as Maastricht Treaty) and the Treaty establishing the European Community (TEC, previously known as Rome Treaty), redenominated Treaty on the Functioning of the European Union (TFEU), without replacing them. Even after renouncing to the constitutional level, the Treaty reproduced many of the items included in the Constitution for Europe in 2004.
    The basic principles introduced in the TEU and included in a specific Title denominated "Provisions on democratic services" are:
    -equality of citizens toward the institutions of the Union (Article 9);
    -representative democracy, according to which citizens shall be represented within the institutions of the Union (directly in the European Parliament, indirectly in the European Council and in the Council of Ministers, through the domestic governments which are accountable to their parliaments … Article 10);
    -democratic participation, contemplating that citizens and their organisations can actively participate in the Union, which has to interact with them (Article 11).
    Human rights have an important recognition, with regards to the
    Charter of Fundamental Rights of the European Union, annexed to the Lisbon Treaty, and to the European Convention for the Protection of Human Rights and Fundamental Freedoms, to which the Union adheres (Article 6).
    The TEU … composed of 55 Articles … includes a description of the institutions and an ample section (Title V) on the external action of the Union and on
    common foreign and security policy.
    Finally, adhesion procedures to the Union and the right of National parliaments to be informed on submitted requests are described, as well as the right for a Member State to leave the Union.

    Institutional reform

    The Treaty intervenes on the whole institutional framework of the Union, both by reallocating power and by introducing new institutions. The new framework, as revised by the Treaty and now detailed in Title III TEU, "Provisions on the institutions" (articles 13-19) and in the TFEU (consisting of 345 articles), is described below.

    European Parliament. Based on the principle of representative democracy, the role of the Parliament is strengthened by widening the recourse to the co-decision legislative procedure. The Parliament’s role is also strengthened in its budgetary functions. The Parliament will also have a political role of control through the election of the President of the European Commission, which will confer more democratic legitimacy to the latter institution. The Parliament now consists of 751 members, excluded the President, with each State having between 9 and 96 seats.
    Council of Ministers. This institution, which was formerly denominated Council, is formed by ministerial representatives from the Member States and has competences in the legislation, balance and definition of coordination policies. The council is no longer presided on the basis of a six-month rotation, but instead by a group of 3 Member States for an 18-month term. As for voting, qualified majority is extended versus unanimity. A new system of qualified majority is introduced, inclusive of 55% of the States (i.e. 15) representing 65% of the Union's population.

    European Council. This body, which has also previously gathered the Heads of State and Government in order to agree on the general political lines of action of the Union, now becomes an institution. Presidency will last 2 and a half years, renewable once.

    European Commission. The Commission remains the institution holding the power of legislative initiative; it promotes the general interest of the Union and it plays the role of “watchdog” on the respect of the Treaties and of the European Union law. Until 1 November 2014, the Commission will consist of a representative for each Member State. Subsequently, its composition will be reduced to 18. The President will be elected by the Parliament.

    High Representative of the Union for Foreign Affairs and Security Policy.The Treaty introduces this new institution, which unifies the functions previously held by the Commissioner for External Relations and the High Representative for the Common Foreign and Security Policy (CFSP). The High Representative is appointed by the European Council, it presides over the Foreign Affairs Council and acts as Vice-president of the Commission. The High Representative uses the European diplomatic service, composed of officers from the Council, the Commission and the National diplomacy services.

    Allocation of competences between the Union and the Member States

    Title I (Art. 2-6) of the TFUE better clarifies the allocation of competences between the Union and the Member States, now organised in three categories:
    - exclusive competences of the Union in the sectors where it has the power to legislate1;
    - concurrent competences, on which Member States can legislate where the Union decides not to2;
    - sectors on which competence belongs to Member States and the Union can only act in support3.
    The Treaty does not confer new exclusive competences to the Union, but it introduces new concurrent competences and support actions. Title I also specifies that the allocation of competences is based on three principles:
    -attribution, according to which the Union cannot expand its competences further to the Treaty attributions;
    -subsidiarity, providing that the Union, where its competence is not exclusive, can intervene only insofar as the aims set in the Treaty cannot be adequately pursued by the Member States;
    -proportionality, which ensures that the actions taken by the Union do not exceed what is necessary for achieving the goals of the Treaty. National parliaments oversee the respect of the subsidiarity principle.

    Legislative process

    Procedures are described in Articles 288-299 TFEU. Codecision4, which ensures equal relevance to the role of the Parliament and the Council, is extended to several subjects. This procedure is now extended to fifty areas5.
    Only for the more politically sensitive matters … such as defence and security … unanimity in the Council remains the rule. The Treaty also allows the Council, by a unanimous decision, to move some areas from unanimous to majority decision. The Council can also decide to subject to codecision matters that would not belong to such procedure. The Treaty also attributes i) to the National parliaments the right to raise objections to proposals by the Commission, thus determining their review, and ii) to the citizens a right of initiative, with the right to have the Commission adopt a legislative proposal when a million signatures are collected from a relevant number of Member States. Moreover, the meetings of the Council of Ministers where legislative proposals are discussed will be public.

    Main policies of the European Union

    The Treaty, in updating the policies within the TFUE, deals with subjects of great interest for the 21st century, such as climate change, globalisation, and security. Moreover, in developing policies in favour of citizens, the Union shall also consider, besides the growth of competitiveness, the effects of social protection. These policies shall also include employment, social protection and fight against exclusion.
    The Policies of the Union represent the widest part of Section Three of the TFEU, with about 200 articles. Below are some issues on the main changes or new policies:
    Climate change and environment. The Treaty strengthens the action of the Union in these sectors, by introducing the goals of fight to climate change and promoting International measures on environmental issues.

    Civil Protection. The Treaty acknowledges that climate change causes natural disasters, which require cooperation between Member States. A specific legislative foundation is introduced for this cooperation, so as to improve prevention and protection from natural and man-made disasters.
    Energy. The Treaty provides the Union with a specific policy on Energy and energetic supplies, by defining principles such as the functioning of the Energy market, efficiency and safety of supplies. The principle of solidarity in case a State has supply difficulty is introduced.
    Research and technological development. A space policy is introduced by the Treaty, with the aim of supporting research and coordinate efforts for the use of space, coherently with the goal of setting up a European space for research, where researchers, knowledge and technology can freely circulate.
    Economic and monetary policy. The Treaty introduces the possibility for the Commission to address a warning to a Member State, in case there is a risk of excessive deficit, rather than a recommendation by the Council under a proposal by the Commission, as it was previously the case. Solidarity is also expressly mentioned. The so-called "Eurogroup" is also officially introduced in the Treaty.
    Economic, Social and Territorial Cohesion. A special attention is dedicated to rural areas,
    areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps such as the northernmost regions with very low population density and islands, cross-border and mountain regions. Public services, such as schools and health assistance, play an important role. A specific Protocol establishes the principles for ensuring adequate and sufficient services of general interest.
    Health. The Treaty deals with the well-being and health of citizens and extends the competence of the Union on serious trans-border threats. The States need to cooperate to improve the complementarity of their border health services. Measures can be adopted to protect health with regards to tobacco and alcohol.
    Social policy. The Union confirms its aim of supporting employment, improvement of the working and living conditions, social dialogue, fight against social exclusion, and it encourages cooperation between Member States in all fields of social policy.
    Freedom, safety and justice. The Treaty will facilitate decisions in this field, as most of them will no longer require unanimity, since they will pass to the codecision procedure with a qualified majority. The Union’s endeavour to implement a space of freedom, safety and justice is based on the judicial systems of the Member States. The Union will fight against criminality, racism, xenophobia through the coordination and cooperation of police and judiciary authorities. Europol is recognised as an investigative body. Judicial cooperation is strengthened in criminal and civil policies, through the reciprocal recognition of decisions.

    External action. The Treaty confirms the juridical personality of the Union (Article 47), which has negotiating power for the adhesion to international conventions and organisations. External actions will be strengthened by the appointment of the High Representative of the Union for Foreign Affairs and Security Policy.
    Common commercial policy. The Treaty refers to the interest of the Union for the development of world commerce, the end of restrictions to International trade and direct investment, and the reduction of customs barriers.
    Cooperation with third countries. Assistance is contemplated in the field of finance, also for countries different from developing countries. A specific reference is made to humanitarian help for third-country victims of natural or man-made disasters, with the constitution of a specific voluntary body.


    The Treaty was approved at the end of a complex process, which was characterised by the failure of the
    Constitution project. It seems to be the conclusive point of a phase of expansion of the activities of the Union in further areas, besides the economic issues that characterised the original architecture of the Rome Treaty. This phase also saw the adaptation of the institutional framework and functioning to the rapid expansion toward east subsequent to the end of the Cold War. While several observers thought that the new framework would have made new relevant updates unnecessary, the difficulties arising from the economic-financial crises that hit, particularly from 2010, some Member States have brought about discussions on possible reforms of the parameters of the Monetary Union and on the powers of the European Central Bank.
    1Such as customs union; the establishing of the competition rules necessary for the functioning of the internal market; monetary policy for the Member States whose currency is the euro; the conservation of marine biological resources under the common fisheries policy; common commercial policy.
    2Such as internal market; social policy, for the aspects defined in this Treaty; economic, social and territorial cohesion; agriculture and fisheries, excluding the conservation of marine biological resources; environment; consumer protection; transport; trans-European networks; energy area of freedom, security and justice; common safety concerns in public health matters, for the aspects defined in this Treaty.
    3Such as protection and improvement of human health; industry; culture; tourism; education, vocational training, youth and sport; civil protection; administrative cooperation.
    4Article 294 TFUE, formerly 251 of TEC.
    5Some of the main policies are: structural funds, agriculture, matters of freedom, safety and justice, control of external frontiers, illegal immigration, judiciary cooperation in the civil and criminal field.
    Editor: Lucio LANUCARA
    © 2010 ASSONEBB


    The Listing Regime is the regulatory framework for the admission of securities to official stock-exchange listing. The competent authority in setting and enforcing the listing rules (the general standard which gives issuers access to the official listing) can be either a public authority (e.g. the UK Listing Authority) or a stock exchange (e.g. the Italian Borsa Italiana S.p.A.). The main purpose of the listing rules is to grant adequate safeguards for the protection of investors. As a consequence, the issuer shall provide the competent authority with all relevant information and meet all the obligations resulting from admission. The competent authority has also the power to suspend or interrupt normal regular dealings in a security when it deems investors not sufficiently protected. Once the issuer is admitted to the Official List, an information sheet, called Listing particulars, must be published to enable investors to make a correct assessment of the investment profile. A notable example of Listing Regime, revised in 2010, is the UK Listing Regime for the admission to the London Official List. According to the Financial Services and Markets Act of 2000 (FSMA 2000)1, the power over the admission to listing has been transferred from the London Stock Exchange (LSE) to a separate body within the FSA, the UK Listing Authority (UKLA). The UK Listing Regime is composed of two listing segments, Premium and Standard. The Premium segment comprises the listing categories (there are eight "categories" reflecting the issuer and the security type) complying with the so-called super-equivalent UK obligations. In other terms, the Premium segment admission entails additional obligations set by the FSA that do not apply in other parts of the EEA. The Standard segment comprises those categories complying with the directive minimum standards, the requirements imposed by EU Directives (the most important are the Transparency Directive, the Prospectus Directive and the Market Abuse Directive) and that are subject to less comprehensive standards of disclosure and shareholders rights.
    1 The Official List is available on the UKLA website http://www.fsa.gov.uk/ukla/officialMainList.do?view=true.
    2 The LSE maintains a separation between the notion of "admission to the official listing" and "admission to trading", providing that Securities are necessarily admitted to trading.
    Link: http://www.fsa.gov.uk/Pages/doing/ukla/index.shtml

    © 2010 ASSONEBB


    Trading that is subject to public disclosure obligations.

    ©2012 Editor: House of Lords


    The first meeting of the London Club took place in 1976 in response to Zaire's debt payment problems, where the lender met to renegotiate commercial banks’ debt. There is no permanent London Club membership and it has no formal mandate. The PARIS CLUB (ENCYCLOPEDIA) and the London Club are the two principal frameworks for restructuring (or, more practically, for rescheduling) sovereign debt. At a debtor nation’s request, a London Club meeting of its creditors may be formed, and the Club is subsequently dissolved after the restructuring. In the London Club, the interests of the creditor banks’ are represented by a steering committee composed of those banks with the greatest exposure to the debtor country in question.

    Editor: Giovanni AVERSA


    Formerly known as London Fox (London Futures and Options Exchange), the exchange has been renamed London Commodity Exchange to identify the exchange of futures and options, dealing in soft commodities including cocoa, sugar, coffee, wheat, barley, potatoes, and also dry cargo freight futures as a result of its merger with BIFFEX (Baltic International Freight Futures Exchange) in 1991. In September 1996, the LCE merged with the LIFFE (London International Financial Futures and Options Exchange).
    Editor: Claudio DICEMBRINO
    © 2009 ASSONEBB


  • Luxury tax

    Tax in goods considered as not essential.

Selected letter: L English version

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