OFFERING CIRCULAR

BANCA POPOLARE DI MILANO S.C.A R.L. (incorporated with limited liability in the Republic of Italy) €10,000,000,000 Euro Medium Term Note Programme This offering circular (the "Offering Circular") constitutes a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (and amendments thereto, including the Directive 2010/73/EU, to the extent implemented in a Member State of the European Economic Area) (the "Prospectus Directive"). Under this €10,000,000,000 Euro Medium Term Note Programme (the "Programme"), S.C.a r.l. (the "Issuer" or the "" or "BPM") may from time to time issue non- equity securities in the meaning of Article 22 no. 6(4) of Commission Regulation (EC) No. 809/2004 of 29 April 2004, as amended (the "Notes") denominated in any currency agreed between the Issuer and the relevant Dealer (as defined below). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed €10,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein. In the event of such increase, a supplement to this Offering Circular will be prepared by the Issuer, which shall be approved by the CSSF in accordance with Article 13 of the loi relative aux prospectus pour valeurs mobilières dated 10 July 2005, as amended (the "Luxembourg Prospectus Law"). The Notes may be issued on a continuing basis to one or more of the Dealers specified under "Description of the Programme" and any additional Dealer appointed under the Programme from time to time by the Issuer (each a "Dealer" and together the "Dealers"), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the "relevant Dealer" shall, in the case of an issue of Notes being subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see "Risk Factors". Application has been made to the Commission de Surveillance du Secteur Financier (the "CSSF") in its capacity as competent authority under the Luxembourg Prospectus Law to approve this document as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be admitted to trading on the regulated market of the Luxembourg Stock Exchange and to be listed on the Official List of the Luxembourg Stock Exchange. References in this Offering Circular to Notes being listed (and all related references) shall mean that such notes have been admitted to trading on the regulated market of the Luxembourg Stock Exchange (Bourse de Luxembourg) and have been "listed" on the Official List of the Luxembourg Stock Exchange. The Luxembourg Stock Exchange's regulated market (the "Regulated Market") is a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2004/39/EC). Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and any other terms and conditions not contained herein which are applicable to each Tranche (as defined under "Terms and Conditions of the Notes") of Notes will be set out in the applicable final terms (the "Final Terms") or in a separate offering circular specific to such Tranche (the "Drawdown Offering Circular"). With respect to Notes to be listed on the Luxembourg Stock Exchange, the Final Terms or Drawdown Offering Circular, as the case may be, will be filed with the CSSF. In the case of a Tranche of Notes which is the subject of a Drawdown Offering Circular, each reference in this Offering Circular to information being specified or identified in the applicable Final Terms shall be read and construed as a reference to such information being specified or identified in the relevant Drawdown Offering Circular unless the context requires otherwise. By approving the Offering Circular, the CSSF gives no undertaking as to the economic or financial opportuneness of the transaction or the quality and solvency of the Issuer in line with the provisions of Article 7(7) of the Luxembourg Prospectus Law. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchange(s) or markets as may be agreed between the Issuer and the relevant Dealer. The Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market. ARRANGER Citigroup

CO-ARRANGER Banca Akros S.p.A. - Gruppo Bipiemme Banca Popolare di Milano

DEALERS

Banca Akros S.p.A. - Gruppo Bipiemme Banca Popolare di Banca IMI Milano Banca Popolare di Milano BofA Merrill Lynch Citigroup Crédit Agricole CIB Goldman Sachs International J.P. Morgan - Banca di Credito Finanziario S.p.A. Morgan Stanley Nomura Société Générale Corporate & The Royal

The date of this Offering Circular is 26 July 2016.

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The Issuer (the "Responsible Person") accepts responsibility for the information contained in this Offering Circular. To the best of the knowledge and belief of the Issuer (having taken all reasonable care to ensure that such is the case) the information contained in this Offering Circular is in accordance with the facts and does not omit anything likely to affect the import of such information.

Subject as provided in the applicable Final Terms, the only persons authorised to use this Offering Circular in connection with an offer of Notes are the persons named in the applicable Final Terms as the relevant Dealer or the Managers, as the case may be.

Copies of Final Terms will be available from the registered office of the Issuer and the specified office set out below of each of the Paying Agents (as defined below) and, in the case of listed Notes, will be published on the website of the Luxembourg Stock Exchange (www.bourse.lu).

This Offering Circular is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see "Documents Incorporated by Reference" below) and with any supplements hereto. This Offering Circular shall be read and construed on the basis that such documents are incorporated in and form part of this Offering Circular.

Neither the Dealers nor the Trustee have independently verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Dealers or the Trustee as to the accuracy or completeness of the information contained or incorporated in this Offering Circular or any other information provided by the Issuer in connection with the Programme. No Dealer or the Trustee accepts any liability in relation to the information contained or incorporated by reference in this Offering Circular or any other information provided by the Issuer in connection with the Programme.

No person is or has been authorised by the Issuer, the Dealers or the Trustee to give any information or to make any representation not contained in or not consistent with this Offering Circular or any other information supplied in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, any of the Dealers or the Trustee.

Neither this Offering Circular nor any other information supplied in connection with the Programme or any Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer, any of the Dealers or the Trustee that any recipient of this Offering Circular or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer. Neither this Offering Circular nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer, any of the Dealers or the Trustee to any person to subscribe for or to purchase any Notes.

Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealers and the Trustee expressly do not undertake to review the financial condition or affairs of the Issuer or the Issuer and its consolidated subsidiaries during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. Investors should review, inter alia, the most recently published documents incorporated by reference into this Offering Circular when deciding whether or not to purchase any Notes.

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended, (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (see "Subscription and Sale").

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This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Dealers and the Trustee do not represent that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Dealers or the Trustee which would permit a public offering of any Notes outside the European Economic Area or distribution of this Offering Circular in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Offering Circular or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Offering Circular and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Offering Circular and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom and the Republic of Italy) and Japan see "Subscription and Sale".

This Offering Circular has been prepared on the basis that any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of an offering contemplated in this Offering Circular as completed by final terms in relation to the offer of those Notes may only do so in circumstances in which no obligation arises for the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Issuer nor any Dealer have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer or any Dealer to publish or supplement a prospectus for such offer.

This Offering Circular includes forward-looking statements. These include statements relating to, among other things, the future financial performance of the Issuer and the Group (as defined herein), plans and expectations regarding developments in the business, growth and profitability of the Group and general industry and business conditions applicable to the Group. The Group has based these forward-looking statements on its current expectations, assumptions, estimates and projections about future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that may cause the actual results, performance or achievements of the Group or those of its industry to be materially different from or worse than these forward- looking statements. The Issuer does not assume any obligation to update such forward-looking statements and to adapt them to future events or developments except to the extent required by law.

All references in this document to: "Euro", "euro" and "€" refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended; "U.S. dollars", "U.S.$" and "$" refer to United States dollars being the currency of the United States of America; "Sterling" refers to the currency of the United Kingdom; "yen" refers to the currency of Japan; and references to the "Bipiemme Group" or the "Group" are to Banca Popolare di Milano S.C.a r.l. and its subsidiaries.

Stabilisation

In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms may over-allot Notes or effect transactions with a view to supporting the market price of the Notes of the Series (as defined below) of which such Tranche forms part at a level higher than that which might otherwise prevail. However, stabilisation action may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may cease at any time,

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but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or persons acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.

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CONTENTS

Page

RISK FACTORS ...... 1 DESCRIPTION OF THE PROGRAMME ...... 28 DOCUMENTS INCORPORATED BY REFERENCE ...... 34 FORM OF THE NOTES ...... 36 APPLICABLE FINAL TERMS ...... 38 TERMS AND CONDITIONS OF THE NOTES ...... 50 USE OF PROCEEDS ...... 79 SELECTED CONSOLIDATED FINANCIAL DATA ...... 80 DESCRIPTION OF THE ISSUER...... 87 MANAGEMENT ...... 111 TAXATION ...... 118 SUBSCRIPTION AND SALE ...... 128 GENERAL INFORMATION ...... 131

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RISK FACTORS

The Issuer believes that the following factors may affect its ability to fulfil its obligations under Notes issued under the Programme. Most of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below. The Issuer believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with any Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to it or which it may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Offering Circular and reach their own views prior to making any investment decision. Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this Offering Circular have the same meaning in this section. FACTORS THAT MAY AFFECT THE ISSUER'S AND GROUP'S ABILITY TO FULFIL ITS OBLIGATIONS UNDER NOTES ISSUED UNDER THE PROGRAMME Risks related to the Merger Risks related to the Merger between BPM and Società Cooperativa On 23 March 2016, BPM and Banco Popolare Società Cooperativa (“Banco Popolare”) signed a memorandum of understanding (“MoU”) for a merger by incorporation of the two into a new company to be established as a joint stock company (“Merger”). The newly incorporated company will operate both as a bank and as a holding company, and will have operating functions, as well as responsibilities of coordination and management of all companies forming part of the new banking group (“New Parent Company” and “New Group”). On 24 May 2016, following favourable opinion of the BPM Supervisory Board, the Merger was approved by the Management Board of BPM, and by the board of directors of Banco Popolare. It is expected that the name of the New Parent Company will be Banco BPM S.p.A., that the shares of the New Parent Company will be listed on the Mercato Telematico Azionario of the Italian Stock Exchange and that it will have a traditional corporate governance system consisting of the board of directors and a board of statutory auditors. In the context of the Merger, it is envisaged that Banco Popolare shall approve and implement, prior to the date of approval of the Merger by the extraordinary shareholders meetings of BPM and Banco Popolare, a capital increase for a total amount of approximately Euro 1,000,000,000 (“Capital Increase”). The Capital Increase is aimed at strengthening the New Group’s capital position, making such position adequate for the New Group’s role as one of the largest Italian lenders. On 7 May 2016, the extraordinary shareholders meeting of Banco Popolare approved the proposal to carry out the Capital Increase and granted its board of directors the delegated powers to carry out a divisible capital increase, for a total maximum amount of Euro 1,000,000,000, inclusive of share premium. On 10 May 2016, following approval by the shareholders, Banco Popolare’s board of directors resolved to implement the Capital Increase by issuing ordinary shares with no par value and with regular dividend rights to be offered pre-emptively to those who, at the commencement of the subscription period, were the shareholders of Banco Popolare, in proportion to the number of shares held. On 1 July 2016, Banco Popolare announced that as a result of (i) the rights offering, during which 99.377 per cent. of ordinary shares of Banco Popolare offered were subscribed, (ii) the offer on the Italian Stock Exchange of the option rights not exercised during the offer period, upon the completion of which and taking into account the shares subscribed during the offer period, the total of 99.571 per cent. of ordinary shares of Banco Popolare offered were subscribed, and (iii) the subscription by certain banks pursuant to the guarantee agreement of ordinary shares in the amount equal to 0.429 per cent. of the total number of shares offered, the Capital Increase was completed with the subscription of 465,581,304 new ordinary shares of Banco Popolare for an overall amount of €996,343,990.56 to be recorded as the share capital of the bank. In accordance with the MoU, the completion of the Merger is subject to approval by the extraordinary shareholders meetings of BPM and Banco Popolare, the issue of all required approvals and/or

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authorisations by the competent supervisory and regulatory authorities, admission of the shares of the New Parent Company to trading on the Mercato Telematico Azionario, as well as full implementation by Banco Popolare of the Capital Increase, which was completed on 1 July 2016. In the event that, inter alia, the Merger is not approved on or before 1 November 2016 by the extraordinary shareholders meetings of BPM and Banco Popolare respectively, the MoU shall cease to have effect. On 16 March 2016, the European (“ECB”) communicated to BPM and Banco Popolare, inter alia, that in view of the fact that the entity resulting from the Merger would become one of the largest banks in Italy, and in line with the role that it would play on the Italian market, the merged entity should at the outset have a strong position in terms of capital and asset quality, including by means of an appropriate capital action. The long-term business plan, which was disclosed to the market on 16 May 2016 (“Strategic Plan”) and the draft articles of association of the New Parent Company have been sent to the ECB further to the ECB’s request. As at the date of this Offering Circular, the Strategic Plan is under review by the ECB and, therefore, it cannot be excluded that as part of the authorization process the authority may require that the plan be amended. The impact of any such amendment on the Strategic Plan and the Merger cannot be fully assessed. Any amendment to the Strategic Plan may have adverse effects on the business, financial condition and/or results of operations of the New Parent Company or the feasibility of the Merger. Furthermore, the Strategic Plan is based on a number of hypothetical assumptions, some of which relate to events not fully controlled by the management of the New Parent Company. The feasibility of Strategic Plan cannot be guaranteed. Failure to implement the Strategic Plan to the extent and in time envisaged could have material adverse effects on the financial position and results of operations of the New Parent Company. As regards the corporate governance, the ECB stated that the entity resulting from the Merger should take into account current best practices to ensure transparent and efficient system of corporate governance, and in particular, the functioning of the governing bodies (shareholders meeting, board of directors and executive committee). The ECB further stated that in the framework of the Merger it would not be possible to issue new banking licenses to the entities different from the entity resulting from the Merger. Implementation of the Merger will transform each of BPM and Banco Popolare into a joint stock company, and entitle dissenting shareholders of BPM and Banco Popolare who did not approve the Merger to withdraw from the company of which they are shareholders, pursuant to Article 2437, paragraph 1, of the Italian Civil Code. Pursuant to the provisions of Law Decree No. 3/2015, the right of the shareholders’ withdrawal may be restricted by the New Parent Company where it is necessary to ensure that the common equity represented by the dissenting shareholders is computed in the bank’s Tier 1 capital. On 10 May 2016, BPM announced that the confirmatory due diligence agreed upon in the MoU concluded with a positive outcome. As a result, the contributions previously announced to the market by each bank into the New Parent Company were confirmed. On 1 July 2016, following the completion of the Capital Increase, BPM and Banco Popolare announced the following exchange ratios of the Merger (in compliance with the respective contributions): (i) 1 (one) share in the share capital of the New Parent Company for each share of Banco Popolare outstanding at the time of the Merger, and (ii) 1 (one) share in the share capital of the New Parent Company for every 6.386 shares of BPM outstanding at the time of the Merger. Merger transactions in general involve risks that include, inter alia, loss of customers, legal risks, risks related to the integration of IT systems which can be implemented in times and manner different from those envisaged, and risks related to the integration of the existing structures and services of the banks. These could have adverse effect on the operations and synergies in production, distribution, and commercial expectations of the New Group, with consequent negative effects on the business, financial condition and results of operations of the entity resulting from the Merger. Risks related to the potential challenge to the Merger by creditors Pursuant to Article 2503 of the Italian Civil Code and Article 57 of the Italian Banking Act, the Merger will become fully effective following the expiration of a fifteen day period after the extraordinary shareholders meeting resolution approving the Merger and other relevant documents are deposited for registration with the companies register. During such fifteen day period, the creditors of BPM and Banco Popolare can bring a claim opposing the Merger, unless pursuant to Article 2503 and Article 2501 of the Italian Civil Code the merging banks (i) reach an agreement with all creditors prior to the date when the merger plan is deposited for registration with the companies register or published on the merging banks

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web-sites, (ii) settle any outstanding debt to non-consenting creditors, or (iii) deposit on a bank account sums sufficient to satisfy the claims of non-consenting creditors, save when an independent auditors firm prepare a report expressing an opinion that the capital positions and financial conditions of both banks are satisfactory for the purposes of guaranteeing the rights of their respective creditors. Any potential opposition to the Merger by the creditors of the two banks, may cause delays in the implementation of the Merger and could have a material adverse effect on the Bank’s and/or the Group's business, financial condition and results of operations. Risks related to the merger and failure to generate synergies if the Merger is approved The Merger involves risks inherent in any merger of a corporate group, i.e. risks relating to the management and personnel coordination, integration of businesses and services offered, information systems, structures, as well as the possible loss of customers and key personnel by the companies participating in the Merger. The Merger involves, inter alia, the need for convergence of information systems and the operating models into a single model of reference. This process presents risks related to the aggregation of companies, including the risk that the Merger is not completed in agreed time and manner, or gives rise to additional costs. As at the date of this Offering Circular the successful completion of the Merger cannot be guaranteed, including with reference to centralization of operational structure of the group companies, information systems, rationalization of products and services offered by the New Group and the harmonization of resources with the group's management policy. Despite these risks, BPM believes that the New Parent Company resulting from the Merger will benefit from the synergies arising from, inter alia, lower costs and higher revenues. The achievement of such synergies will depend, among others, on the ability to integrate various companies, to reduce the existing agency network preserving at the same time the customer portfolio and increasing productivity while reducing costs. There is a risk that failure to implement, in whole or in part, the aforementioned synergies could have negative effects in terms of, inter alia, higher cost and lower revenue growth. The full merger of BPM and Banco Popolare may also give rise to unforeseen negative events, unexpected costs or liabilities, or reductions in revenues deriving, among others, from negative synergies, and as a result could require from the New Parent Company an extraordinary management attention which could have material negative effects on the business, financial condition and/or results of operations of the New Group. Furthermore, the Merger is subject to approval by the Antitrust Authority (Autorita Garante della Concorrenza and Mercato). Should the Antitrust Authority establish that the Merger creates or strengthens a dominant position of the group resulting from the Merger within the Italian market, it cannot be excluded that the Authority may require measures to be taken in order to restore conditions of effective competition and remove any effects that distort it, which in turn could have negative effect on the Strategic Plan. Risks related to the effects of the Merger Pursuant to the provisions of applicable law, and in particular, Article 2504-bis of the Italian Civil Code, in the event the Merger is completed, the New Parent Company will succeed BPM and Banco Popolare in all their rights and obligations that arose or accrued to the two banks participating in the Merger prior to its completion. Therefore, in the event the Merger is finalised successfully, and as of the date the Merger becomes fully effective, the New Parent Company will take over all the rights, obligations, assets and liabilities and risks of both Banco Popolare and BPM.

Risks related to the impact of the global financial crisis, the Euro Area sovereign debt crisis and the national and international political climate on the performance of the Issuer and of the Group Risks related to the impact of the global financial crisis Performance of BPM is influenced by Italian and EU macroeconomic conditions and by the conditions of the financial markets and, in particular, by the stability and trends in the economies of those geographical areas in which BPM conducts its activity. The earning capacity and solvency of the Group are affected, inter alia, by factors such as investor perceptions, long-term and short-term interest rates fluctuations, exchange rates, liquidity of financial markets, availability and costs of funding, sustainability of sovereign

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debt, family incomes and consumer spending, unemployment levels, inflation and property prices. Adverse changes in these factors, especially during times of economic and financial crisis, could result in potential losses, an increase in the Bank’s and/or the Group’s borrowings costs, or reduction in value of its assets, with possible negative effect on the business, financial condition and/or results of operations of the Bank and/or the Group. A number of uncertainties remain in the current macroeconomic environment, namely: (a) trends in the economy and the prospects of recovery and consolidation of the economies of countries like the US and China, which have shown in the recent years consistent growth; (b) future development of the ECB's monetary policy in the Euro area, and of the Federal Reserve System, in the Dollar area, and the policies implemented by other countries aimed at promoting competitive devaluations of their currencies; (c) sustainability of the sovereign debt of certain countries and related recurring tensions on the financial markets; and (d) the immediate consequences and potential lingering uncertainties caused by the Brexit vote. All these factors, in particular in times of economic and financial crisis, could result in potential losses, an increase in the Bank’s and/or the Group’s borrowings costs, or reduction in value of its assets, with possible negative effect on the business, financial condition and/or results of operations of the Bank and/or the Group. Risks related to the United Kingdom leaving the European Union may affect the Bank’s and/or the Group’s results On 23 June 2016, the UK held a referendum on the country’s membership of the European Union (“Brexit”). The results of Brexit showed that the UK voted to leave the European Union. The referendum does not directly bind the government to specific actions and does not require the government to begin the procedure under Article 50 of the Treaty on European Union or set any time limit for this to be done. However, the full impact of Brexit is currently unknown and would vary depending on the terms of the UK’s withdrawal (if the membership is not renegotiated), which would have to be negotiated with the EU, and on the prevailing economic climate. The consequences of the Brexit are uncertain, with respect to the European Union integration process, the relationship between the United Kingdom and the European Union, and the impact on economies and European businesses. Accordingly, there can be no assurance that the Group’s results of operations, business and financial condition will not be affected by market developments such as the increased exchange rate of British Pound versus the Euro and higher financial market volatility in general due to increased uncertainty. Risks related to the crisis of the Euro Area sovereign debt The global financial crisis contributed to and accelerated the worsening of public debt in European Union countries, causing most damage to banks with greater exposure to sovereign debt with a consequent revaluation of credit risk of sovereigns. During the period from 2011 to 2013 in particular, discussions between the IMF, the European Union and the (“ECB”) on EU aid to Greece, new tensions over Spain’s sovereign debt level and the extraordinary “capital and exchange control” measures adopted in Cyprus (which led to forced withdrawals from current accounts) all contributed to fears surrounding exposure to sovereign debt. Although there are limited signs of a slight recovery, there are continued concerns about possible dissolution of the European Monetary Union, represented by the “Euro” currency, or the exit of individual countries from the monetary union (with a possible return to local currencies), with unpredictable consequences in each scenario. From autumn 2011, the ECB has implemented important measures to support the European economy, including: the SMP (Securities Market Programme) for the purchase of government securities by the ECB itself; the provision of liquidity to banks through the purchase of covered bonds and provisions of loans to banks. In September 2012, the ECB Council approved the plan for secondary market purchases by the ECB of Eurozone sovereign debt securities with a maturity of between one and three years without setting any quantitative limit (so-called Outright Monetary Transactions), to be complemented by the measures of the ESM (European Stability Mechanism) on the primary market upon the imposition of conditions (in the form of macroeconomic adjustments or preventive financial assistance, being the so-called Enhanced Conditions Credit Line or ECCL). On 5 June 2014, the ECB announced its decision to conduct a series of TLTROs over a period of two years, aimed at improving and supporting bank lending to the euro area non-financial private sector. On

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22 January 2015, the ECB launched its Expanded Asset Purchase Programme (more commonly known as Quantitative Easing), under which the ECB has, starting in March 2015, begun purchasing euro- denominated, investment-grade securities issued by euro area governments and European institutions up to Euro 60 billion each month. The programme is intended to be carried out until September 2016, and in any case until there are signs of a sustained adjustment in the path of inflation or deflation that is consistent with the aim of achieving inflation rates approaching 2%. There will be a risk-sharing mechanism in place under which 80% of any losses incurred by the euro system on bond purchases will be borne by national central banks, with the remaining 20% of any losses borne by the ECB. On 10 March 2016, with the view of further facilitating access to funding in the EU and achieving inflation rates of 2%, the ECB announced the increase of monthly average amount of security purchases under Quantitative Easing from Euro 60 billion to Euro 80 billion, expanding the asset purchase programme to the bonds issued by non-financial entities with high credit ratings ("TLTRO-II"). As part of the liquidity support action under TLTRO-II, counterparties have access to financing for up to 30 per cent. of the stock of loans eligible as at 31 January 2016. The interest rates applicable to the transactions will be those that apply to the Eurosystem’s main refinancing transactions at the time of each such transaction and for its entire duration. It should be noted that in recent years Italy has witnessed various downgrades of its sovereign rating and a fluctuating trend in the 10-year BTP/Bund spread. In 2012, the negative estimates for growth in Italy had an adverse impact on Italian public debt with a downgrade of the rating assigned to Italy and an increase in the 10-year BTP/Bund spread. This crisis continued into 2013. In particular, the -1.9% decline in GDP1 and political instability exacerbated concerns about Italian sovereign debt with a consequent increase of the 10-year BTP/Bund spread in the first quarter of 2013 and further downgrading by certain rating agencies. As a result of moderate improvements in political and economic conditions in Italy there has been a gradual improvement of its sovereign debt quality in the period of 2014-2015 and the first quarter of 2016. However, the lingering uncertainties arising from the Brexit vote and potential withdrawal of the UK from the European Union could have a material adverse effect on the economies of the EU Member States in general, and Italian economy in particular, with a consequential deterioration of the sovereign debt crisis. All the factors described above, and particularly any further deterioration of the sovereign debt crisis, could result in potential losses to the Issuer, an increase in its borrowing costs, or a reduction in the value of its assets, with possible negative effects on the economic and financial situation of the Bank and/or the Group. Risks related to national and international political instability The dynamics described in the previous paragraphs and the consequent effects on the Group’s activities are influenced by the international and Italian socioeconomic context and its impact on financial markets. Risks related to competition in the banking and finance sector The Bank and the other companies of the Group operate in a highly competitive market, with particular reference to the geographical areas where the activity is mainly concentrated (in particular, Lombardy, Italy). Competitive pressure may arise either from consumer demand of new services as well as technological demand, with the consequent necessity to make investments, or as a result of competitors’ specific competitive actions. In the event that the Group is not able to respond to increasing competitive pressure by, for example, offering profitable and innovative services and products that meet client demands, the Group could lose market share in a number of business sectors and/or fail to increase or maintain the volumes of business and/or profit margins it has achieved in the past, with possible adverse effects on the business, financial condition and/or results of operations of the Bank and/or of the Group. Risks relating to the Issuer's business Credit risk

1 The chained volume measure of GDP of 2013 with respect to 2012 (Source: ISTAT Press Release “Annual National Accounts 2013 – second release”, 22 September 2014).

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The business, economic and financial solidity of the Group, as well as its profits, depend, among other things, on the credit rating of its customers. Credit risk is the risk that debtors may not fulfil their obligations or that their credit rating may suffer a deterioration (such debtors include the counterparties of financial transactions involving OTC (over the counter) derivatives traded outside of regulated markets: see “- Market Risk - Counterparty risk” below) or that the Group’s companies grant credit that they would not otherwise have granted or would have granted upon different terms, on the basis of information that is untruthful, incomplete or inaccurate. A number of factors affect a bank’s credit risk in relation to individual credit exposures or for its entire loan book. These include the trend in general economic conditions or those in specific sectors, changes in the rating of individual counterparties, deterioration in the competitive position of counterparties, poor management on the part of firms or counterparties given lines of credit and other external factors, also of a legal and regulatory nature. The cost of credit (a ratio of annualized net loan adjustments to total loans outstanding) decreased from 132 as at 31 December 2014 to 100 basis points as at 31 December 2015; and the cost of credit decreased from 91 basis points as at 31 March 2015 to 77 basis points as at 31 March 2016. Asset quality is measured by means of various indicators, including historic data of bad loans as a percentage of loans to customers. At a macroeconomic level, good asset quality is an important prerequisite for the due performance of the financial sector in general and permits individual banks to operate with a high level of efficiency. For further information on the risks connected to the deterioration of the credit quality, see “Risks rating to the Issuer’s business – Risks connected to the deterioration of the credit quality of the Issuer”. The Group has a significant exposure to real estate; for further information, see “Risks related to exposure to the real estate”. In addition, the Issuer is exposed to counterparty risk and the risk of concentration; for further information, see “Market Risk - Counterparty risk” and “Risks related to the sectoral and geographical areas of reference of the Group”.

Risk management methodologies, assessments and processes used by the Group to identify, measure, evaluate, monitor, prevent and mitigate any risks to which the Group is or might be exposed, guarantee adequate capital resources and an adequate liquidity profile of the Group.

For further information see “Part E – Information on risks and related hedging policies” of the 2015 Audited Consolidated and Non-Consolidated Annual Financial Statements.

Risks connected to the deterioration of the credit quality The Group is subject to credit risk. The Bipiemme Group’s policies for managing and controlling the quality of the loan portfolio and the associated risks are based on rules of sound and prudent management. The policies are implemented through the processes of distributing, managing and monitoring credit risk that varies according to the circumstances of the market and business sector and the characteristics of each borrower. Under its business model, Bipiemme Group operates as a “local bank” giving preference to development of Italian households and companies in order to help them achieve sustainable growth, with the goal of increasing profitable long-term relationships, encouraging development and attracting new customers, in compliance with objectives of proper management of the risk/return profile. The loan portfolio is closely monitored on a continuous basis in order to promptly identify any signs of imbalance and to take corrective measures aimed at preventing any deterioration. The persistent crisis in the financial markets and the global economic slowdown have reduced and may further reduce the disposable income of households, as well as the profitability of companies and/or adversely affect the ability of bank customers to honour their commitments, resulting in a significant deterioration in credit quality in the areas of activity of the Issuer. Bipiemme Group has increased its coverage of non-performing exposures over the years, from 38.5% as at 31 December 2014 to 39.6% as at 31 December 2015 and 40.1% as at 31 March 2016. The trend in coverage of bad loans was 55.9% as at 31 December 2014, 54.5% as at 31 December 2015 and 54.3% as at 31 March 2016. See further the paragraphs headed “Principal balance sheet aggregates – Asset quality” in the section “Report on operations of the Bipiemme Group” contained in the 2015 Audited Consolidated and Non-consolidated Annual Financial Statements and in the section “Interim report on

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operations of the Bipiemme Group” contained in the 2016 Consolidated Interim Report which sets forth, inter alia, a classification of the Group’s loan portfolio as at 31 March 2016, based on the revised loan classifications adopted by the as of 1 January 2015. The following table sets forth certain main indicators regarding the Group’s loans portfolio as at 31 March 2016, and certain main indicators regarding the Group’s loans portfolio as at 31 December 2015 and 31 December 2014, compared to (where available) corresponding data of the banking system.

31.3.2016 31.12.2015 31.12.2014 Bipiemme Bipiemme Banking Bipiemme Banking Group Group System Group System Gross bad loans/Total gross loans to 9.2% 8.9% 9.5% (*) 8.8% 8.3% (*) customers Net bad loans/Total net loans to 4.5% 4.4% 4.8%(**) 4.2% n/a customers Gross non-performing exposures/Total 16.4% 16.3% 17.7% (*) 16.9% 15.8% (*) gross loans to customers Net non-performing exposures/Total net 10.6% 10.6% 10.8%(**) 11.2% n/a loans to customers Bad loans coverage ratio 54.3% 54.5% 58.6% (*) 55.9% 56.9% (*) Non-performing exposures coverage ratio 40.1 % 39.6% 43.4% (*) 38.5% 40.8% (*) Net bad loans/Shareholders’ equity 33.39% 34.36% n/a 31.23% n/a

Large exposures(1)(weighted n/a 5.0% n/a 3.1% n/a average)/Total net loans to customers Large exposures(2) (book value)/Total net n/a 51.8% n/a 56.6% n/a loans to customers ______(1) (2) “Large exposures” as defined CRR I Regulation and CRD IV. (*) With reference to “Large banks” only, and refers to banks belonging to groups or independent banks with total assets greater than €21.5 billion. (**) With reference to all banks belonging to groups or independent banks of the Italian banking system.

Even though the Group periodically makes provisions to cover potential losses, on the basis of its experience and statistics, the Group may have to increase these provisions further should there be a rise in bad loans or an increasing number of the Group’s debtors subject to insolvency proceedings (including bankruptcy or creditors’ composition). In this regard, any significant increase in the provisions for non- performing exposures, change in the estimates of credit risk or any losses that exceed the level of the provisions already made could have a negative impact on the business, financial condition and/or results of operations of the Bank and/or the Group. Liquidity risk Liquidity risk is the risk that the Bank may not have the cash resources to be able to meet its payment obligations, scheduled or unscheduled, when due. “Funding Liquidity Risk” refers to the risk that the Bank is not able to meet its scheduled or unscheduled payment obligations in an efficient manner due to its inability to access funding sources, without prejudicing its banking activities and/or financial condition. “Market Liquidity Risk” refers to the risk that the Bank can realise its assets only at a loss as a result of the market conditions and/or timing requirements. Having access to adequate liquidity and long- term funding, in any form, to run its core activity is also crucial for BPM to achieve its strategic objectives. Starting in 2007, the international economic environment has been subject to long periods of high volatility and extraordinary uncertainty and instability in the financial markets, initially caused by the default of certain financial institutions and then by the sovereign debt crisis in certain countries, including Italy. During these periods, this state of uncertainty and volatility has led to considerable difficulties in finding liquidity on the wholesale market, a contraction in inter-bank loans and a significant increase in the cost of funding in the retail markets, worsened by the growing distrust towards European bank operators, substantially limiting access to credit by operators. In this market context and with a view to strengthening its liquidity position, at the beginning of 2014 BPM issued unsecured senior bonds for €500 million with a five-year maturity and a fixed interest rate of

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4.25% addressed to institutional investors. Although BPM was able to tap the market on this occasion, a deterioration of market conditions, further loss of investors’ confidence in financial markets, an increase in speculation about the solvency or credit standing of the financial institutions present in the market (including that of the Bank) or that of the country where they are based can adversely impact the ability of banks to obtain funding in future. The inability of BPM or any Group company to access the debt market (Funding Liquidity Risk) or sell its assets (Market Liquidity Risk) would, in turn, adversely affect the Group’s ability to achieve its objectives. The Group constantly monitors its own liquidity risk and has begun adopting measures for this purpose as part of its Business Plan. There can, however, be no assurance that any negative developments in the conditions of the markets, in the general economic environment and/or in the Bank’s credit standing, combined with the need to align the Bank’s liquidity position to Basel III regulatory requirements, would not have a negative impact on the business, financial condition and/or results of operations of the Bank and/or the Group. The Loan to Deposit Ratio of the Group as at 31 December 2015 and 2014 amounted to 90.9% and 87.1%, respectively, while the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) estimates of the Group, at a consolidated level, as at 31 December 2015 had values of 109% and 99%, respectively. The LCR minimum requirement is 70%, which will gradually increase to 100% by 1 January 2018, according to the (EU) Regulation No. 575/2013 (CRR); as for the NSFR, although the proposal of the Basel Committee foresaw a minimum threshold of 100% to be complied with as of 1 January 2018, the CRR does not provide for a regulatory limit on structural liquidity. The liquidity profile of the Group is furthermore boosted by the availability of unused eligible assets at the ECB amounting, net of haircut, to €5.1 billion as of 31 December 2015, comprised of highly liquid assets of which more than 98% were Italian government bonds. Therefore, in consideration of its liquidity profile, BPM believes that, as at the date of this Offering Circular, Funding Liquidity Risk and Market Liquidity Risk are adequately covered by the available liquidity reserves. For further information see “Part E – Information on risks and related hedging policies” of the 2015 Audited Consolidated and Non-consolidated Annual Financial Statements. Operational risk Operating risk is defined and governed by the Supervisory Regulations2 and the CRR I Regulation3 (Part 1 “General Provisions”, Article 4 – “Definitions”, paragraph 52 and Part 3, Title III), and refers to the risk of loss resulting from the inadequacy or malfunction of procedures, errors or misuse by personnel of internal procedures and IT systems, or external events. Such risks include the possibility of losses from fraud, human error, service interruptions, system unavailability and risks associated with increasing use of automation and outsourcing for business functions, contractual breach, calamities, failings and shortcomings in IT security and legal risk, but not strategic or reputational risks. In addition, the Supervisory Regulations provide that banks must adopt management systems for operational risk appropriate to their size and risk profile. The systems must guarantee identification, valuation and control of such risks. Operating risks are different from other risks typical of banking and financial business (credit and market risk), because they are not assumed by the Bank on the basis of its strategic decisions, but are inherent in and present throughout its operations. The Group has in place procedures to mitigate and monitor operational risks to limit the adverse consequences arising from such risks. These risks are managed and supervised by the Bank and by other Group companies through a structured series of processes, functions and resources for the identification, measurement, valuation and control of risks that are characteristic of the Group’s activities. The activities of risk management and control are performed by BPM’s Chief Risk Officer, which is responsible for, inter alia, the monitoring and supervising market risks and is responsible for ensuring a unified management, at Group level, of those risks within its area of competence (credit risk, counterparty risk, market risk, interest rate risk in respect of the banking book, liquidity (both structural and operating),

2 Supervisory Regulations means the Bank of Italy Circular No. 285 of 17 December 2013 that contains supervisory measures adopted to implement the provisions of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (CRD IV). 3 CRR I Regulation means Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms amending Regulation (EU) No. 648/2012.

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reputational risk, concentration risk and operating risk, with the exception of compliance risk and anti- money laundering which are the responsibility of the Compliance functions). The Parent Company’s Chief Risk Officer is also responsible for implementing: (i) risk management procedures for the identification, measurement/valuation, monitor, prevention/mitigation, control and disclosure of the relevant risks to which the Group is exposed; and (ii) procedures to measure the adequacy of the Group’s liquidity in light of the Group’s risk exposure and risk profile as well as macroeconomic and market conditions. For the calculation of capital requirements on operational risks on a consolidated group level, the Group adopts the Standardised Approach (TSA). Nonetheless, the procedures and policies employed by the Group to manage its risks may be found to be inadequate, thereby exposing the Group to unforeseen risks or risks that have not been quantified accurately, if events occur that are unanticipated and/or are beyond the Group’s control (including suppliers’ breaches of their contractual obligations, fraud and deceit, losses arising out of employee misconduct, the breach of control procedures, viral attacks on IT infrastructure, the malfunction of electricity and telecommunications services and terrorist attacks). These may have adverse effects upon the Bank’s and/or the Group’s business, financial conditions and/or results of operations. For further information see Part E of the 2015 Audited Consolidated and Non-consolidated Annual Financial Statements. Market risk The Group is exposed to market risk, being the risk that the value of a financial asset or liability could vary because of a trend in market factors, such as share prices, the rate of inflation, interest rates, exchange rates and their volatility, as well as changes in the credit rating of the relevant issuer. Market risk arises both in relation to the trading portfolio, which includes the financial instruments used for trading and the derivatives linked to them, and in relation to the banking portfolio, which includes financial assets and liabilities other than those in the trading portfolio. The market risk relating to the trading portfolio derives from trading activities in markets for interest rates, exchange rates, equity or debt securities, while the market risk of the banking portfolio is generally linked to differences in interest rates in different reference periods and credit spreads of the issuers of debt securities. Market risk generally also includes settlement risk deriving from operations in securities, exchange rates or commodities, as well as counterparty risk, which is the risk of a counterparty in derivatives or forward contracts defaulting. Market risks related to the trading portfolio only are measured using “Value-at-Risk” or “VaR”. Given a portfolio of financial instruments, the VaR expresses the maximum potential loss that could result from unfavourable market parameter movements over a certain time horizon, with definite probability. The market parameters considered are interest rates, foreign exchange rates and the prices of stock, indexes, funds and related volatility. As at 31 December 2015, the average regulatory VaR4 (99% confidence level and 1 day holding period) amounted to €518 thousand, of which €443 thousand were attributable to interest rate risk, €235 thousand to equity price risk and €123 thousand to exchange risk, with the difference between aggregate of the individual market variables and the overall VaR attributed to the so- called “diversification effect”. Furthermore, the value of VaR was not indicated in the Interim Management Report as at 31 March 2016 and therefore is not available. Even though the Group’s trading activity is limited, it is not possible to exclude that a decline in the value of a financial asset or liability caused by changes in market factors such as share prices, inflation, interest rates, exchange rates, their volatility as well as a change in the credit rating, could have a material adverse effect on its business, financial condition and/or results of operations. For further information see Part E of the 2015 Audited Consolidated and Non-consolidated Annual Financial Statements. (a) Risks related to interest rates The Group’s performance is influenced by interest rate trends and fluctuations, mainly in the European markets, which in turn are caused by different factors beyond the control of the Group, such as monetary policies, general trends in the national and international economy and the political conditions of Italy. The performance of the Group’s banking and financing operations depends on the management and

4 Regulatory VaR means the measure of risk on which Banca Akros has received authorization from the Bank of Italy for its use for the purpose of calculating capital requirements for market risk. Regulatory VaR does not include the specific risk on debt securities.

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sensitivity of their interest rate exposure, i.e. the effect of changes in interest rates in the relevant markets on the interest margin and economic value of the Group. Any mismatch between the interest income accrued by the Group and the interest expense incurred (in the absence of protection taken out to cover this mismatch) could have material adverse effects on the Group’s and/or the Bank’s business, financial condition or results of operations (such as the increase of the cost of funding that is more marked than any increase in the yield from assets or the reduction in the yield from assets that is not matched by a decrease in the cost of funding). On the basis of the information available as at 31 December 2015, the Issuer believes that (all things being equal) a parallel shift in the interest rate curve would have an impact on the interest rate margin of the Group (excluding Banca Arkos) of approximately €43 million (in case of 100 basis points increase in the interest rates) and approximately €1 million (in the case of a 100 basis points reduction in interest rate). The interest model is calculated using internal methodologies of Asset & Liability Management (ALM) that currently provide for the application of a non-negativity constraint to market interest rates (floor of 0%). The Group has specific policies and procedures to identify, monitor and manage these types of risk. However, it is not possible to rule out that unexpected variations of market interest rates may have a negative impact on the business, financial condition and/or results of operations of the Bank and/or of the Group. (b) Risks related to the performance of financial markets The Group’s results depend in part on the performance of financial markets. In particular, the unfavourable development of the financial markets in recent years has affected: (i) the placement of products relating to assets under management and assets under administration, with resulting adverse effects on the amounts of placement commissions received; (ii) management commissions due to the reduced value of assets (direct effect) and redemptions resulting from unsatisfactory performance (indirect effect); (iii) the operations of the Treasury & Investment Banking line of business, in particular with respect to placement of financial products and customer dealing, with adverse effects on the amount of commissions received; and (iv) results from the management of the banking and trading portfolios. With reference to its government securities portfolio as at 31 December 2015, the Bank estimates that (all other conditions remaining equal) a parallel shift in the interest rate curve would have an impact on the interest margin of the Group (excluding Banca Akros) of + €15 million (in the case of a 100 basis points increase in interest rate) and €0 million (in the case of a 100 basis points reduction in interest rate). These estimates are calculated using the internal model of ALM, which currently provides for the application of a constraint of non-negativity of the market interest rate (floor of 0%). The Group has specific policies and procedures to identify, monitor and manage these types of risk. However, the volatility and possible insufficient liquidity of the markets, as well as the change of investor preferences towards different kinds of products and/or services, may have an adverse effect on the business, financial condition and results of operations of the Bank and/or of the Group. (c) Counterparty risk In the conduct of its operations, the Group is exposed to counterparty risk, the risk that a counterparty to a transaction (including operations in derivatives and repurchase agreements) involving particular financial instruments may default before the transaction is settled. The Group trades derivative contracts with a wide variety of underlying assets and instruments, including interest rates, exchange rates, equity indices, commodities and loans, with counterparties from the financial services sector, commercial banks, government entities, financial and insurance firms, investment banks, funds and other institutional clients as well as with non-institutional clients. Transactions in derivatives and in repurchase transactions expose the Group, in addition to market risks and operational risks, to the risk that the counterparty defaults or becomes insolvent before settlement of the transaction where the Bank or other Group company has an outstanding claim against such counterparty. The financial derivatives on the Group’s trading book as at 31 December 2015 had a positive fair value of €1,224.1 million and a negative fair value of €1,144.5 million. As at 31 December 2015, over the counter financial derivatives held by the Issuer for hedging and trading purposes, or the derivatives contracts whose counterparty risk is borne by the Issuer, had an overall positive value of €1,264.7 million (of which €40.6 million held for hedging purposes) and a negative value of €1,193.1 million (of which €48.6 million held for hedging purposes). Such risk, which became accentuated as a result of the financial crisis and the consequent volatility in

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financial markets, could result in further adverse effects, if collateral provided to the Bank or other companies of the Group cannot be realised or liquidated according to the envisaged timetable, in a manner, or to an extent, sufficient to cover the exposure to the counterparty. Any breach by the counterparties of the obligations they assume under derivative or repurchase contracts they have made with the Bank or other companies of the Group, and/or the realisation or liquidation of such collateral as they have provided that delivers a lower value than expected, may result in adverse effects on the business, financial condition and/or results of operations of the Bank and/or of the Group. Risks related to the Strategic Plan On 16 May 2016, the Management Board of BPM and the board of directors of Banco Popolare approved the Strategic Plan of the New Group, containing the strategic guidelines and economic, financial and capital objectives of the group resulting from the Merger for the period of 2016-2019. The Strategic Plan contains objectives of the New Parent Company through to 2019 (“2019 Objectives” or “Projections”) prepared on the basis of macroeconomic projections and strategic actions that need to be implemented. The Merger is subject to approval by the regulatory and supervisory authorities, as well as by the extraordinary shareholders meetings of BPM and Banco Popolare. The Strategic Plan is based on numerous assumptions and hypotheses some of which relate to events not fully controlled by the board of directors and management of the New Parent Company. In particular, the Strategic Plan contains a set of assumptions, estimates and predictions that are based on occurrence of future events and actions to be taken by management and the board of directors of Banco Popolare, the Management Board of BPM and the board of directors of the New Parent Company, in the period of 2016-2019, which include, among other things, hypothetical assumptions of different nature subject to risks and uncertainties arising from the current economic environment, relating to future events and actions of directors and the management of the New Parent Company that may not necessarily occur, events, actions, and other assumptions including those related to performance of main economic and financial values or other factors that affect their development over which the directors and management of the New Parent Company do not have, or have a limited, control. The Strategic Plan further assumes the achievement of expected synergies and the absence of unexpected costs and liabilities arising from the Merger (“Hypothetical Assumptions”). The Hypothetical Assumptions may or may not occur to an extent and at times different from those projected. Furthermore, the events may occur which are unpredictable at the time of approval of the Strategic Plan. Given that the assumptions underlying the Strategic Plan are inherently affected by subjective assessments, hypotheses and discretionary judgments, should one or more of the underlying assumptions fail to materialise (or materialise only in part) or should the actions taken and choices made by management in the implementation of the Strategic Plan produce effects different from those expected, the targets set forth in the Strategic Plan may not be met (or may be met only partially) and the actual results of the New Group may differ, possibly significantly, from the estimated results of the New Group envisaged in the Strategic Plan with a consequential negative impact on the business, financial conditions and/or results of operations of the New Parent Company and/or the New Group.

Risks related to the sectoral and geographical area of reference of the Group

The risk of sectoral and geographical concentration is the risk that arises from particularly high exposures to single counterparties or groups of connected counterparties, or those belonging to the same economic sector, engaged in the same activities or in the same geographic area. For further information, see “Risks related to the impact of the global financial crisis, the Euro Area sovereign debt crisis and the national and international political climate on the performance of the Issuer and of the Group - Risks related to the impact of the global financial crisis”.

As at 31 December 2015, the Group operated mainly in Lombardy, Lazio and Piedmont, which together account for 82% of the Group's total gross loans. With reference to the concentration of lending to customers by type of a counterparty, 86.53% of the counterparties were families and businesses (the Group had insignificant exposure to the public administration sector (1.44% compared with 14.60% of the banking system)). The main areas to which the Group is exposed are, in addition to real estate (20.4% of total gross loans), manufacturing and trade (13.4% and 7.3%, respectively, of total gross loans of the Group). The Group’s credit policy for the next two years provides for a credit mix with greater exposure to the

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manufacturing sector and a consequential reduction in exposure to the real estate sector. The Group has a strong local network comprised of 655 retail branches in Italy as of 31 December 2015, 91.3% of which were situated in Lombardy, Piedmont, Lazio and Puglia. As at the same date, 91.2% of the deposits and 84.4% of the financings of the Group were concentrated in the same areas. Although the Group operates mainly in one of the most economically and financially developed areas of Italy, the territorial concentration of its activities exposes the Group to risks linked to social, economic and political conditions of the aforementioned areas, with possible negative effects on the economic and financial situation of the Group. The continuation of the crisis in credit markets, despite some weak signs of recovery and reform measures adopted by the Italian government and/or local administrations, could further reduce disposable household incomes and the profitability of businesses. This could affect the estimated profits of banks with a consequential negative impact on their business, financial condition and/or results of operations, as a result of deterioration in the asset quality due to a worsening of the customers’ ability to honour their commitments. Risks related to inspection by the Supervisory Authority The Group is subject to enquiries and inspections by the Supervisory Authority in the ordinary course of its business. The outcomes of any such enquiries and inspections may lead to organizational interventions and the Group may be required to implement certain measures aimed at rectifying any shortcomings detected in the process of such enquiries and inspections. The Supervisory Authority may also take a range of disciplinary actions against the representatives of the Issuer with administrative, management or control functions. On 24 August 2015, the Bank of Italy communicated to BPM the outcome of transparency inspections conducted at a number of BPM’s branches in the fourth quarter of 2014. The inspections revealed certain limited critical failings related to customer contracts, commissions payable on loans and overdraft facilities, and notices to the customers. Upon the request of the Bank of Italy, BPM provided to the authority a plan of actions taken to address the emerged failings. In May and July 2016, in compliance with the requirement of the Bank of Italy to provide updates on the measures aimed at resolving the failings that arose during the inspection, BPM further provided to the authority an update on the status of ongoing activities aimed at resolving such failings, some of which arose in the areas under ongoing investigation by the Bank of Italy. On 17 September 2015, as part of ongoing supervision of the major European banking groups, the ECB announced its intention to start routine inspection of BPM (so-called, on-site inspection) related to the Group and market risk, liquidity and interest rate risk in the banking book (IRRBB). This inspection was concluded in January 2016. On 19 July 2016, the ECB communicated to BPM the outcomes of the inspection and its recommendations on the areas of improvement. For further information, see “Description of the Issuer - Inspection by Supervisory Authority”. On 18 January 2016, the ECB commenced an assessment of the Non-Performing Loans strategy, governance, processes and methodology of BPM as part of the ongoing supervision process which involves, among other Italian and European banks, also BPM. As at the date of this Offering Circular, the results of the assessment have not be published. On 30 May 2016, the ECB started an inspection related to the credit risks of the Group, and in particular, the inspection focused on the management of credit and counterparty risk and the risk control system of BPM. As at the date of this Base Prospectus, the inspection is still ongoing. Furthermore, on 4 July 2016, the ECB commenced an inspection concerning the accuracy of the calculation of the Group's financial position. As at the date of this Offering Circular, the inspection is ongoing. Risks related to legal proceedings The Group is subject to litigation in the ordinary course of its business, including civil and administrative legal proceedings, as well as several arbitration and tax proceedings. Negative outcomes in such proceedings or in any investigation by the supervisory authority may create liabilities which reduce the Bank’s ability to meet its obligations. Given the complexity of the relevant circumstances and corporate transactions underlying these proceedings, together with the issues relating to the interpretation of applicable law, it is inherently difficult to estimate the potential liability to which the Group may be exposed when such proceedings are

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decided. The overall amount claimed in pending legal proceedings against the Group amounted to €320.5 million as at 31 December 2015. The Bank has included provisions in the amount of €68.2 million for litigation in its consolidated financial statements to cover the possible losses that could arise from legal proceedings or other pending disputes, also taking into account indications provided by external legal counsel. In particular, the 2015 Consolidated Financial Statements include: (i) provisions for legal proceedings of approximately €43,550 thousand covering the estimated liabilities from the legal actions and proceedings in which the Group is involved; (ii) provisions for the coverage of estimated losses for disputes with employees of €1,654 thousand; (iii) provisions for the coverage of tax disputes of €5,216 thousand; (iv) provisions for the coverage of claw back actions against the Bank and the Group’s companies of €12,010 thousand; and (v) provisions for the coverage of operational and counterparty risk of €5,724 thousand. As at 31 March 2016, there was no significant change to the provisions made in the 2015 Consolidated Financial Statements. Although the Bank believes that the provisions have been made after having considered the risks related to all disputes and in compliance with IAS/IFRS, there can be no assurance that legal proceedings not included in these provisions would not in the future give rise to additional liabilities, nor that the amounts already set aside in these provisions will be sufficient to fully cover the possible losses deriving from these proceedings if the outcome is worse than expected. This could have a material adverse effect on the business, financial condition or results of operations of the Bank and/or of the Group. The Group is furthermore subject, in the course of its ordinary activities, to inspections by the supervisory authority that could require organisational interventions or strengthening of internal functions aimed at addressing weaknesses identified during inspections which might, furthermore, result in sanction proceedings being brought against officers of the Bank. For further information regarding the legal proceedings involving the Group, see “Description of the Issuer – Legal Proceedings”. Risks related to the Group’s exposure to sovereign debt The sovereign debt crisis has affected the markets and the economic policies of many European countries. The Group is exposed to the sovereign debt of certain countries, especially Italy, in the form of both debt securities issued by central and local governments and loans granted to local governments and governmental entities. The carrying amount and nominal value of the Group’s overall exposure to sovereign debt amounted to €9,441.6 million and €9,029 million, respectively, as at 31 December 2015. The worsening of the sovereign debt situation, especially that of Italy, could have a negative effect on the business, financial conditions and/or results of operations of the Group. In particular, any downgrading in the credit rating of Italy could result in increased margin requirements, with a consequential negative impact on the Group’s liquidity and on its financial conditions and results of operations. As at 31 December 2015, the majority of this exposure was comprised of debt securities issued by central governments, the carrying value of which amounted to €8,938.4 million, of which €8,907.2 million of Italian government securities. The Group’s overall exposure to Italian sovereign debt, including loans granted to the Italian government and public entities for €503.2 million, amounted to €9,410.4 million as at 31 December 2015. The book value of the Group’s exposure to the Italian government securities represented, as at 31 December 2015, 88.1% of the total financial assets of the Group. As at 31 December 2015, the Groups exposure to the Italian government securities represented 17.7% of the total assets of the Group, allocated almost entirely to the “Financial assets available for sale”. The Group’s exposure to the sovereign debt of other countries is not significant. Finally, in terms of sovereign exposure in the form of debt securities by residual duration, as at 31 December 2015, the book value of government securities with a residual duration of less than 5 years amounted to €5,800.2 million (or approximately 65% of total exposures to the sovereign debt), those with residual duration from 5 to 10 years amounted to €3,124.1 million (or approximately 35% of total), while the remainder, being government securities with a residual duration over 10 years, was not significant. The Group is therefore exposed to sovereign debt, with particular reference to the Italian government securities. Possible tensions in the government securities market and the volatility of such securities may have a negative impact on the business, financial conditions and/or results of operations of the Bank and/or of the Group.

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For indications of the potential effects of the government securities portfolio on the Group’s margin of interest, please see the section headed “Market Risk” in Part E (Information on risks and related hedging policies) of the 2015 Consolidated Financial Statements. Risks relating to the real estate market The Group is exposed to the real estate sector, as it is a lender to companies in the real estate sector and to real estate investment funds, whose cash flows are mainly, or exclusively, backed by proceeds deriving from the construction, lease and/or sale of real estate. In order to better monitor the Group’s exposure to the real estate sector, starting from June 2012, customers have been reclassified in accordance with the Bank of Italy’s ATECO codes, thus enabling a comparison of the Group’s concentration risk with market data in the territories in which the Group operates. The “real estate sector” includes loans to construction and real estate companies/economic groups, to real estate investment funds and to private individuals (in the form of mortgage loans or finance leases to buy a house), together with loans to companies categorised within this sector but whose core business is not real estate (indotto immobiliare) as well as to companies in the public infrastructure construction sector. As at 31 December 2015, the Group’s exposure to the companies operating in the real estate sector amounted to €7,656 million (20.4% of the total amount of gross loans granted by the Group), representing decline in both volumes and percentage terms compared to the previous year. During the last three years the Group’s exposure to the companies operating in the real estate sector showed a decline in absolute terms of 17.6% in the period of 2012 to 2015 mainly concentrated in 2014. Excluding infrastructure and the real estate supporting industry (indotto), the weighing of the real estate sector on the Group’s total gross value of the loans decreased to 18.3%. At the same time, mortgage loans to private customers amounted to €9,459 million representing 25.2% gross loans granted by the Group. The Group's exposure to the real estate companies, as at 31 March 2016, amounted to €7,788 million, representing approximately 20.7% of gross loans to customers. The real estate sector has been particularly affected by the economic and financial crisis resulting in a fall in asset prices as well as in the number of transactions, accompanied by an increase in the cost of funding and greater difficulties in obtaining access to credit. Companies operating in the real estate sector have consequently experienced a decrease in transactions both in terms of volumes and margins, an increase in financial expenses, as well as greater difficulties in refinancing their debt. Continuing stagnation of the Italian economy in those geographic areas where the Group operates, an increase in unemployment and reduced earnings of customers in the real estate sector could increase the bankruptcy rate of both individual and corporate borrowers of the Group, resulting in defaults in the payment of lease and/or mortgage instalments. In this scenario, falling prices in the real estate market could adversely affect the Group, both directly as a result of the impact on customers operating in this sector, and indirectly as a result of the fall in the value of real estate properties posted as collateral for loans granted by the Group. The Group has put in place procedures to handle and monitor the risk of default by the borrowers and is supported, where appropriate, by external and internal experts to evaluate any real estate projects and any exposure to the real estate sector is subject to increased capital requirements imposed by the Bank of Italy. Notwithstanding the foregoing, any further deterioration of the real estate market conditions or of the economic and financial conditions in general and/or fall in the value of real estate properties placed as collateral could adversely affect the debt servicing ability of the Group’s borrowers and, in turn, have a negative adverse impact on the business, financial conditions and/or results of operations of the Bank and/or of the Group. Concentration of the Group’s borrowers in the real estate sector may also have an impact on the Group’s credit risks, as described under “Credit risk and risks connected with the deterioration of the quality of credit” above.

Risks related to legislative reforms for popular banks Legislative Decree 3/2015 “Urgent measures for the banking system and investments” (the “Decree”) published in the Official Gazette on 24 January 2015 provides, inter alia, that the management board of popular banks with assets of over €8 billion on a consolidated basis must convene a shareholders’ meeting to consider steps to be taken by the bank. Pursuant to the Decree, if the popular bank’s assets do not fall below such threshold and the shareholders fail to resolve in favour of the bank’s conversion into a joint stock company (or alternatively, its liquidation), the Bank of Italy (taking into consideration the

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circumstances and the amount by which the €8 billion threshold is exceeded) may take a series of measures, ranging from a prohibition on enter into new operations pursuant to Article 78 of the Decree, measures envisaged under Chapter IV, Title 1, Section II of the Legislative Decree No. 383 of 1 September 1993, as amended from time to time, a proposal to the ECB to revoke the license for banking activities and a proposal to the Minister of Economy and Finance for the bank’s liquidation. Popular banks whose assets exceed the established threshold have a period of 18 months following the entry into force of Bank of Italy’s implementing provisions to comply with the requirements of the Decree. BPM, in view of the size of its assets, falls within the scope of the Decree and accordingly, will have to either reduce its assets to below the €8 billion threshold or convert into a joint stock company, and in case of conversion, the “one-head one-vote” principle characteristic of popular banks will no longer apply. On 29 September 2015, after the consultation with the Supervisory Board, the Management Board of BPM established that the Bank has exceeded the €8 billion threshold and approved the plan of actions to be implemented to bring the Bank in compliance with the requirements of the Decree. The Decree furthermore introduces for popular banks a restriction on shareholders’ right to redemption in case of withdrawal following the bank’s conversion into a joint stock company, where it is necessary to ensure the eligibility of its shares as Tier 1 capital of the bank. In this connection, the Bank of Italy may also restrict the right of redemption of other capital instruments issued. Accordingly, in case of conversion, there may be restrictions on the right of redemption of those dissenting shareholders of BPM who have not voted in favour of the conversion. The Decree was converted, with amendments, into Law No. 33 of 24 March 2015 ("Law No. 33"). Law No. 33/2015 furthermore provides that the by-laws of joint stock companies resulting from the conversion of popular banks, or from a merger involving one or more popular banks, may limit the voting rights of any one shareholder to 5% (or, at the bank’s discretion, a higher percentage) of the bank’s voting capital, for a period (to be stated in the by-laws) not exceeding 24 months after the entry into force of the Law. The Bank of Italy has the task of issuing regulatory provisions to implement Law No. 33 and published “Disposizioni di vigilanza Banche Popolari” (Supervisory regulations for Popular Banks) in April 2015. The consultation concerned primarily the criteria for determining the €8 billion threshold and the limitation on the redemption rights of withdrawing shareholders, in line with the provisions of Regulation (EU) No. 575/2013. Following conclusion of the consultation on 9 May 2015, the Bank of Italy published an amendment to its supervisory regulations (the 9th update of 9 June 2015 to Bank of Italy Circular No. 285 of 17 December 2013) to implement the reforms on popular banks described above. These amendments entered into force on 27 June 2015. The implementation of the reforms on popular banks has been completed. Accordingly, popular banks with assets in excess of €8 billion (including BPM) have a period of 18 months from 27 June 2015 to comply with the Decree. The Issuer intends to comply with the provisions of the Decree by merging with Banco Popolare. The Merger, which will be implemented through the establishment of the New Parent Company in the form of a joint stock company will in turn allow the transformation of each of BPM and Banco Popolare into a joint stock company. Investors should note that the governance structure of BPM may undergo significant changes as a direct/indirect consequence of the legislative reforms on popular banks, and the precise nature and/or extent of these changes are unclear as at the date of this Offering Circular. Risks related to regulatory changes in the banking and financial sectors and to the changes of the other laws applicable to the Group The Group, as with all banking groups, is subject to extensive regulations and to the supervision (being for regulatory, information or inspection purposes, as the case may be) by the Bank of Italy, CONSOB and the Istituto per la vigilanza sulle assicurazioni, the insurance supervisory authority (“IVASS”), with respect to its bancassurance operations. Starting from 3 November 2014, the Group is also subject to the supervision of the ECB which, pursuant to rules establishing a single supervisory mechanism (the "Single Supervisory Mechanism" or "SSM"), has the duty to, among other things, guarantee the uniform application of the rules of the Euro currency area. In particular, the Group is subject to the laws and regulations applicable to companies with financial instruments listed on regulated markets, the rules governing banking services (aimed to maintain the stability and the solidity of the banks as well as to limit their risk exposure) and financial services (that govern, among other things, the sale and placement of financial instruments as well as marketing operations) and to the regulations applicable in other countries, also different from Italy, where the Group

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operates. Supervisory authorities have broad administrative power over many aspects of the financial services business, including liquidity, capital adequacy and permitted investments, ethical issues, money laundering, privacy, transparency, record keeping, and marketing and selling practices. Banking and financial services laws, regulations and policies currently governing the Group and its subsidiaries may change at any time in ways which have an adverse effect on the business, financial condition and results of operations of the Group as well as on the products and services offered by the Bank and/or the Group. The same adverse effects may occur in the event that the competent supervisory authorities shall deny the authorisations requested by the Bank or the Group, leading the Bank or the Group unable to ensure the observance of the applicable laws and regulations. The applicable laws and regulations as well as supervisory activities are subject to continuous evolution. In particular, following the crisis of the financial markets in the last several years, the Basel Committee on Banking Supervision approved a considerable strengthening of capital adequacy requirements and amendments to the regulation of banks’ liquidity (“Basel III”). On 20 July 2011, the legislative proposal of the European Commission for the implementation of the Basel III rules at an European level was published. This proposal provides two separate legislative instruments: a Directive (“CRD IV”) and a Regulation (“CRR I”) whose provision will be directly binding and applicable in each member state. The CRD IV and the CRR I have been approved by the European Council on 20 July 2013 and have entered into force starting from 1 January 2014. Furthermore, on 14 March 2016 the ECB adopted Regulation (EU) 2016/445 on the exercise of options and discretions. Depending on the manner in which these options or discretions were so far exercised by the national competent authorities and on the manner the SSM will exercise such options or discretions in the future, additional or lower capital requirements may be required. With respect to the increase in capital requirements, the Basel III agreements provided for a transition phase with minimum capital requirements which would progressively increase. Once the system is fully operational, a Common Equity Tier 1 Ratio for the banks of at least 7% of the risk-weighted assets, a Tier 1 Capital of at least 8.5% of the risk-weighted assets and a Total Capital Ratio of at least 10.5% of the risk-weighted assets are envisaged. These minimum levels include the Capital Conservation Buffer, i.e. a reserve for further mandatory capital requirements. The Basel III agreements provide for the introduction of a Liquidity Coverage Ratio or LCR, in order to establish and maintain a liquidity buffer which will permit the bank to survive for 30 days in the event of serious stress, and a Net Stable Funding Ratio or NSFR, with a time period of more than one year, introduced to ensure that the assets and liabilities have a sustainable expiry structure. In the case of LCR, CRR provides that it is to be phased in gradually, from 60% commencing on 1 January 2015 to 100% from 1 January 2018. In the case of NSFR, although the proposal of the Basel Committee foresaw that the 100% level is to be met as of 1 January 2018 without any phase in, the CRR does not provide for the regulatory limit on structural liquidity. On 17 December 2015, the European Banking Authority published its report recommending the introduction of the NSFR in the EU to ensure stable funding structures and outlining its impact assessment and proposed calibration. This report from the European Banking Authority will be taken into account by the Commission in proposing a legislative proposal by the end of 2016, with the aim to comply with NSFR implementation in 2018, as per the Basel rules. The strengthening of capital adequacy requirements, the restrictions on liquidity and the increase in ratios applicable to the Group on the basis of laws or regulations that will be adopted in the future could adversely affect the Group’s business, results of operations, cash flow and financial position, as well as the possibility of distributing dividends to the shareholders. In particular, problems could arise when subordinated bonds that are no longer eligible for regulatory capital purposes reach maturity, as they will have to be replaced by alternative funding sources that comply with the new rules. This could make it harder to comply with the new minimum capital requirements, at least with respect to the capital conservation buffer, potentially limiting the Group’s ability to distribute dividends. In addition, supervisory authorities have the power to bring administrative or judicial proceedings against the Group, which could result, among other things, in suspension or revocation of the licences, cease and desist orders, fines, civil penalties, criminal penalties or other disciplinary action. Such proceedings could have adverse effects on the Bank’s and the Group’s business, financial condition or results of operations. The Bank Recovery and Resolution Directive is intended to enable a range of actions to be taken in relation to credit institutions and investment firms considered to be at risk of failing. The implementation of the directive or the taking of any action under it could materially affect the value of any Notes

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The directive providing for the establishment of an EU-wide framework for the recovery and resolution of credit institutions and investment firms (Directive 2014/59/EU) (the “Bank Recovery and Resolution Directive” or “BRRD”) entered into force on 2 July 2014.

The BRRD is designed to provide authorities with a credible set of tools to intervene sufficiently early and quickly in an unsound or failing institution so as to ensure the continuity of the institution's critical financial and economic functions, while minimising the impact of an institution's failure on the economy and financial system.

The BRRD contains four resolution tools and powers which may be used alone or in combination where the relevant resolution authority considers that (a) an institution is failing or likely to fail, (b) there is no reasonable prospect that any alternative private sector measures would prevent the failure of such institution within a reasonable timeframe and (c) a resolution action is in the public interest: (i) sale of business - which enables resolution authorities to direct the sale of the firm or the whole or part of its business on commercial terms; (ii) bridge institution - which enables resolution authorities to transfer all or part of the business of the firm to a "bridge institution" (an entity created for this purpose that is wholly or partially in public control); (iii) asset separation - which enables resolution authorities to transfer impaired or problem assets to one or more publicly owned asset management vehicles to allow them to be managed with a view to maximising their value through eventual sale or orderly wind-down (this can be used together with another resolution tool only); and (iv) bail-in - which gives resolution authorities the power to write down certain claims of unsecured creditors of a failing institution and to convert certain unsecured debt claims including Senior Notes and Subordinated Notes into shares or other instruments of ownership(i.e. shares, other instruments that confer ownership, instruments that are convertible into or give the right to acquire shares or other instruments of ownership, and instruments representing interests in shares or other instruments of ownership) (the “general bail-in tool”), which equity could also be subject to any future application of the general bail-in tool.

The BRRD also provides for a Member State as a last resort, after having assessed and exploited the above resolution tools (including the general bail-in tool) to the maximum extent practicable whilst maintaining financial stability, to be able to provide extraordinary public financial support through additional financial stabilisation tools. These consist of the public equity support and temporary public ownership tools. Any such extraordinary financial support must be provided in accordance with the burden sharing requirement of the EU state aid framework and the BRRD. In particular, a single resolution fund financed by bank contributions at national level is being established and Regulation (EU) No. 806/2014 establishes the modalities for the use of the fund and the general criteria to determine contributions to the fund. In this connection, as at 31 March 2016 BPM’s annual contribution to the single resolution fund amounted to €14.4 million.

An institution will be considered as failing or likely to fail when: it is, or is likely in the near future to be, in breach of its requirements for continuing authorisation; its assets are, or are likely in the near future to be, less than its liabilities; it is, or is likely in the near future to be, unable to pay its debts as they fall due; or it requires extraordinary public financial support (except in limited circumstances).

In addition to the general bail-in tool, the BRRD provides for resolution authorities to have the further power to permanently write-down or convert into equity capital instruments such as Subordinated Notes at the point of non-viability and before any other resolution action is taken (“non-viability loss absorption”). Any shares issued to holders of Subordinated Notes upon any such conversion into equity capital instruments may also be subject to any application of the general bail-in tool.

For the purposes of the application of any non-viability loss absorption measure, the point of non-viability under the BRRD is the point at which the relevant authority determines that the institution meets the conditions for resolution (but no resolution action has yet been taken) or that the institution will no longer be viable unless the relevant capital instruments (such as Subordinated Notes) are written-down/converted or extraordinary public support is to be provided and the appropriate authority determines that without such support the institution would no longer be viable.

The BRRD provides that Member States should apply the new “crisis management” measures from 1 January 2015, except for the general bail-in tool applicable from 1 January 2016. In the context of these resolution tools, the resolution authorities have the power to amend or alter the maturity of debt instruments and other eligible liabilities issued by an institution under resolution or amend the amount of interest payable under such instruments and other eligible liabilities, or the date on which the interest

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becomes payable, including by suspending payment for a temporary period, except for those secured liabilities which are subject to Article 44(2) of the BRRD.

The BRRD has been implemented in Italy through the adoption of two Legislative Decrees by the Italian Government, namely, Legislative Decrees No. 180/2015 and 181/2015 (together, the “BRRD Decrees”), both of which were published in the Italian Official Gazette (Gazzetta Ufficiale) on 16 November 2015. Legislative Decree No. 180/2015 is a stand-alone law which implements the provisions of BRRD relating to resolution actions, while Legislative Decree No. 181/2015 amends the existing Consolidated Banking Law (Legislative Decree No. 385 of 1 September 1993, as amended) and deals principally with recovery plans, early intervention and changes to the creditor hierarchy. The BRRD Decrees entered into force on the date of its publication in the Italian Official Gazette (i.e. 16 November 2015), save that: (i) the bail-in tool is applicable from 1 January 2016; and (ii) a “depositor preference” granted for deposits other than those protected by the deposit guarantee scheme and excess deposits of individuals and SME’s will apply from 1 January 2019.

In addition, because (i) Article 44(2) of the BRRD excludes certain liabilities from the application of the general bail-in tool and (ii) the BRRD provides, at Article 44(3), that the resolution authority may partially or fully exclude certain further liabilities from the application of the general bail-in tool, the BRRD specifically contemplates that pari passu ranking liabilities may be treated unequally. With respect to the BRRD Decrees, Legislative Decree No. 180 of 16 November 2015 sets forth provisions regulating resolution plans, the commencement and closing of resolution procedures, the adoption of resolution measures, crisis management related to cross-border groups, powers and functions of the national resolution authority and also regulating the national resolution fund. On the other hand, Legislative Decree No. 181 of 16 November 2015 introduces certain amendments to the Italian Banking Act and the Financial Services Act, by introducing provisions regulating recovery plans, intra-group financial support, early intervention measures and changes to creditor hierarchy. Moreover, this decree also amends certain provisions regulating the extraordinary administration procedure (amministrazione straordinaria), in order to make them compliant with the European regulation. The regulation on the liquidation procedures applied to banks (liquidazione coatta amministrativa) are also amended in compliance with the new regulatory framework and certain new market standard practices.

Pursuant to Article 44 (2) of the BRRD, as implemented by Article 49 of Legislative Decree No. 180 of 16 November 2015, resolution authorities shall not exercise the write down or conversion powers in relation to secured liabilities, including covered bonds or their related hedging instruments, save to the extent that these powers may be exercised in relation to any part of a secured liability (including covered bonds and their related hedging instruments).

Also, Article 108 of the BRRD requires that Member States modify their national insolvency regimes such that deposits of natural persons and micro, small and medium sized enterprises in excess of the coverage level contemplated by deposit guarantee schemes created pursuant to Directive 2014/49/EU have a ranking in normal insolvency proceedings which is higher than the ranking which applies to claims of ordinary, unsecured, non-preferred creditors. In addition, the BRRD does not prevent Member States, including Italy, from amending national insolvency regimes to provide other types of creditors, with rankings in insolvency higher than ordinary, unsecured, non-preferred creditors. Legislative Decree No. 181/2015 has amended the bail-in creditor hierarchy in the case of admission of Italian banks and investment firms to resolution, by providing that, as from 1 January 2019, all deposits other than those protected by the deposit guarantee scheme and excess deposits of individuals and SME’s will benefit from a preference in respect of senior unsecured liabilities, though with a ranking which is lower than that provided for individual/SME deposits exceeding the coverage limit of the deposit guarantee scheme. This means that, as from 1 January 2019, significant amounts of liabilities in the form of large corporate and interbank deposits which under the national insolvency regime currently in force in Italy rank pari passu with any unsecured liability owed to the Noteholders, will rank higher than such unsecured liabilities in normal insolvency proceedings and therefore that, on application of the general bail-in tool, such creditors will be written-down/converted into equity capital instruments only after such unsecured liabilities. Therefore, the safeguard set out in Article 75 of the BRRD (referred to above) would not provide any protection since, as noted above, Article 75 of the BRRD only seeks to achieve compensation for losses incurred by creditors which are in excess of those which would have been incurred in a winding-up under normal insolvency proceedings.

Legislative Decree No. 181/2015 has also introduced strict limitations on the exercise of the statutory rights of set-off normally available under insolvency laws, in effect prohibiting set-off by any creditor in

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the absence of an express agreement to the contrary. Since each holder of Subordinated Notes and, in circumstances where the waiver is selected (as applicable in the relevant Final Terms), the Senior Notes will have expressly waived any rights of set-off, counterclaim, abatement or other similar remedy which it might otherwise have, under the laws of any jurisdiction, in respect of such Senior Notes or Subordinated Notes, it is clear that the statutory right of set-off available under Italian insolvency laws will likewise not apply.

The powers set out in the BRRD will impact how credit institutions and investment firms are managed as well as, in certain circumstances, the rights of creditors. Holders of Senior Notes and Subordinated Notes may be subject to write-down/conversion into equity capital instruments on any application of the general bail-in tool and, in the case of Subordinated Notes, non-viability loss absorption, which may result in such holders losing some or all of their investment. The exercise of any power under the BRRD or any suggestion or perceived suggestion of such exercise could, therefore, materially adversely affect the rights of holders of the Notes, the price or value of their investment in any Notes and/or the ability of the Issuer to satisfy its obligations under any Notes.

The BRRD also requires institutions to maintain at all times a sufficient aggregate amount of own funds and “eligible liabilities”, expressed as a percentage of the total liabilities and own funds of the institution (known as the “minimum requirement for own funds and eligible liabilities” or “MREL”), with a view to facilitating effective resolution of institutions and minimising to the greatest extent possible the need for interventions by taxpayers. “Eligible liabilities” (or bail-inable liabilities) are those liabilities and other instruments that are not excluded by the BRRD from the scope of the bail-in tool. The resolution authority of an institution, after consultation with the relevant competent authority, will set the MREL for the institution based on the criteria to be identified by the EBA in its regulatory technical standards. In particular, the resolution authority may determine that part of the MREL is to be met through “contractual bail-in instruments”. The BRRD does not foresee an absolute minimum, but attributes the competence to set a minimum amount for each bank to national resolution authorities (for banks not being part of the Banking Union) or to the Single Resolution Board (the “SRB”) for banks being part of the Banking Union. The EBA has published the final draft paper on regulatory technical standards which shall further define the way in which resolution authorities/the SRB shall calculate MREL. The EBA consultation paper suggests that the MREL requirements can be implemented for G-SIBs in a manner that is "consistent with" the international framework, and contemplates a possible increase in the MREL requirement over time in order to provide for an adequate transition to compliance with the TLAC requirements that are currently projected to apply from January 2019.

The powers set out in the BRRD will impact how credit institutions and investment firms are managed as well as, in certain circumstances, the rights of creditors, including Notes issued under the Programme. See further “Factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme - Changes in regulatory framework and accounting policies” below.

Waiver of set-off

If waiver of set-off rights is specified as applicable in the applicable Final Terms, each holder of a Senior Note will unconditionally and irrevocably waive any right of set-off, counterclaim, abatement or other similar remedy which it might otherwise have under the laws of any jurisdiction in respect of such Senior Note.

As specified in Condition 3 (Status of the Subordinated Notes), each holder of a Subordinated Note unconditionally and irrevocably waives any right of set-off, counterclaim, abatement or other similar remedy which it might otherwise have, under the laws of any jurisdiction, in respect of such Subordinated Note.

Risks related to forthcoming regulatory changes In addition to the substantial changes in capital and liquidity requirements introduced by Basel III and the CRD IV Package, there are several other initiatives, in various stages of finalization, which represent additional regulatory pressure over the medium term and will impact the EU’s future regulatory direction. These initiatives include, amongst others, a revised Markets in Financial Instruments EU Directive and Markets in Financial Instruments EU Regulation which entered into force on 2 July 2014 with implementation required at Member States level as from January 2018 subject to certain transitional arrangements. The Basel Committee on Banking Supervision (“BCBS”) has also published certain

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proposed changes to the current securitisation framework which may be accepted and implemented in due course.

Moreover, the BCBS has embarked on a very significant RWA variability agenda. This includes the Fundamental Review of the Trading Book, revised standardized approaches (credit, market, operational risk) and a consultation paper on a capital floor. The regulator’s primary aim is to eliminate unwarranted levels of RWA variance. The finalization of the new framework is likely to be expected by 2016 year end for all the relevant work streams, while their implementation will follow in 2019 at the earliest. The new setup will have a revolutionary impact on risk modelling: directly on the exposures assessed via standardized approach, but also indirectly on internal ratings based approach (“IRB”), due to the introduction of capital floors that, according to the new framework, will be calculated basing on the revised standardized approach. In addition, as mentioned, the European Commission intends to develop the net stable funding ratio with the aim of introducing it from 1 January 2018.

Risks related to the ratings assigned to the Issuer The ratings assigned to the Issuer by the main international rating agencies is an indication of the credit ratings of the Issuer itself and the outlook represents the parameter that indicates the expected trend in the near future regarding the ratings assigned to the Issuer. However, such indications may not promptly reflect developments in the solvency position of the Issuer and the Group. As at the date of this Offering Circular, the Bank is assigned ratings by the international agencies Fitch Ratings and Moody’s Investors Services. On 31 October 2011, such rating agencies were registered in accordance with Regulation No. 1060/2009/EC of the European Parliament and the Council dated 16 September 2009 relating to credit rating agencies. On 25 January 2016, during the rating review involving several Italian banks, Moody’s Investors Services increased the rating of the long-term deposits of the Issuer by one notch from “Ba3” to “Ba2”. Moody’s also affirmed both the senior unsecured debt rating and the Issuer rating at “Ba3”, in addition to downgrading its outlook from “Stable” to “Negative”. According to the Moody's Investors Services’ rating scale, rating "Ba2" indicates that the risk of default is currently high, especially in the event of persistent adverse economic and financial conditions over a long term. On 13 April 2016, Moody’s Investors Services placed on review for upgrade the following ratings of BPM and its supported entities: (i) “Ba2” long-term deposit ratings; (ii) “Ba3” long-term senior debt ratings; (iii) “Ba3” subordinated debt ratings and (iv) the Issuer’s Baseline Credit Assessment (BCA) and adjusted BCA of “b2”. BPM’s short-term senior debt and deposit ratings at Non-Prime have been affirmed. On 21 April 2016, Fitch Ratings placed BPM’s “BB+” long-term issuer default rating (IDR) and its “bb+” Viability Rating (VR) on Rating Watch Negative (RWN). Fitch Ratings confirmed BPM’s short- term rating of “B” and its stable outlook. According to the Fitch Ratings’ rating scale, short-term rating "B" indicates the minimal capacity for timely payment of financial commitments, together with heightened vulnerability to near term adverse changes in financial and economic conditions. Fitch Ratings expects to resolve the RWN on BPM’s ratings upon completion of the Merger, expected by end-November 2016. On 12 February 2016, BPM terminated its existing agreement with Standard & Poor’s governing the ratings assigned to the Issuer and its subsidiary Banca Akros. The decision to terminate the agreements was based on the Issuer’s review and rationalisation of its relations with the rating agencies. The last rating of the Issuer by Standard & Poor's was assigned on 2 December 2015, and at the time of termination of the agreement, the rating was not subject to review by Standard & Poor's. As 12 February 2016, the long-term rating assigned to BPM by Standard & Poor’s was "BB-", short-term rating was "B" and its outlook was "stable." The “Speculative – Non-investment grade” ratings assigned by Fitch Ratings and Moody’s Investors Services to the Issuer’s long and short-term debt indicate the elevated risk of default by BPM, especially in the event of long-term adverse changes in financial and economic conditions. Any reduction of the rating levels assigned to the Issuer could have a negative effect on the opportunities for the Bank and for the Bipiemme Group to access the various liquidity instruments and could lead to an increase in funding costs or require the constitution of additional collateral guarantees for the purpose of accessing liquidity, with consequent adverse effects on the business, financial condition and results of operations of the Bank and/or of the Group.

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Factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme

The Notes may not be a suitable investment for all investors

Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor's currency;

(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor's overall investment portfolio.

Changes in regulatory framework and accounting policies

Investors should be aware that the Bank Recovery and Resolution Directive provides that it will be applied by Member States from 1 January 2015, except for the general bail-in tool which is to be applied from 1 January 2016. On 2 July 2015, the Italian Parliament passed the final text of the law (Legge di delegazione europea 2014) mandating the Italian Government to implement, among other things, the BRRD in Italy. This law stipulates the general principles and criteria whereby the BRRD has to be implemented in the Italian legal framework. The Italian Government will then have to pass the legislative decree implementing the BRRD within 3 months of the entry into force of such law. A draft legislative decree is expected to be published in the coming weeks by the Italian Government.

The powers provided to "resolution authorities" in the Recovery and Resolution Directive include write down/conversion powers to ensure that capital instruments (including Subordinated Notes) and eligible liabilities (including senior debt instruments) fully absorb losses at the point of non-viability of the issuing institution (referred to as the bail-in tool). Accordingly, the Recovery and Resolution Directive contemplates that resolution authorities may require the write down of such capital instruments and eligible liabilities in full on a permanent basis, or convert them in full into CET1 instruments. The Recovery and Resolution Directive provides, inter alia, that resolution authorities shall exercise the write down power in a way that results in (i) CET1 instruments being written down first in proportion to the relevant losses, (ii) thereafter, the principal amount of other capital instruments (including Subordinated Notes) being written down or converted into CET1 instruments on a permanent basis and (iii) thereafter, eligible liabilities being written down or converted in accordance with a set order of priority.

The powers set out in the Recovery and Resolution Directive will impact how credit institutions and investment firms are managed as well as, in certain circumstances, the rights of creditors. Once the Recovery and Resolution Directive is implemented, holders of Senior Notes and Subordinated Notes may

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be subjected to write-down or conversion into equity on any application of the general bail-in tool and, in the case of Subordinated Notes, non-viability loss absorption, which may result in such holders losing some or all of their investment. The exercise of any power under the Recovery and Resolution Directive or any suggestion of such exercise could, therefore, materially adversely affect the rights of Noteholders, the price or value of their investment in any Notes and/or the ability of the Issuer to satisfy its obligations under any Notes.

Risks related to the structure of a particular issue of Notes

A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of the most common such features:

Potential conflicts of interest

Any Calculation Agent appointed under the Programme (whether a Paying Agent or otherwise) is the agent of the Issuer and not the agent of the Noteholders. Potential conflicts of interest may exist between the Calculation Agent (if any) and Noteholders (including where a Dealer acts as a Calculation Agent), including with respect to certain determinations and judgments that such Calculation Agent may make pursuant to the Conditions that may influence amounts receivable by the Noteholders during the term of the Notes and upon their redemption.

Notes subject to optional redemption by the Issuer

An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.

The Notes may be redeemed prior to maturity

If in the case of any particular Tranche of Notes the relevant Final Terms specifies that the Notes are redeemable at the Issuer's option pursuant to Condition 6.4 (Redemption at the option of the Issuer (Issuer Call)) the Issuer may choose to redeem the Notes at times when prevailing interest rates may be relatively low. In such circumstances an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the relevant Notes.

Redemption for tax reasons

In the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes or duties of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction (as defined in Condition 7 (Taxation)), as a result of any change in, or amendment to, the laws or regulations of any Tax Jurisdiction or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes and such obligation cannot be avoided by the Issuer taking reasonable measures available to it, the Issuer may redeem all outstanding Notes in accordance with the Conditions. In such circumstances an investor may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as that of the relevant Notes.

CMS Linked Interest Notes and Floating Rate Notes linked to a Multiplier

The Issuer may issue Notes with interest determined by reference to the CMS Rate or a Multiplier (the "Relevant Factors"). Potential investors should be aware that:

(i) the market price of such Notes may be volatile;

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(ii) they may receive no interest;

(iii) the Relevant Factors may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices;

(iv) if the Relevant Factors is applied to Notes in conjunction with a Multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factors on interest payable likely will be magnified; and

(v) the timing of changes in the Relevant Factors may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factors, the greater the effect on yield.

The historical experience of an index should not be viewed as an indication of the future performance of such index during the term of any CMS Linked Notes or Floating Rate Notes linked to a Multiplier. Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any CMS Linked Notes or Floating Rate Notes linked to a Multiplier and the suitability of such Notes in light of its particular circumstances.

Variable rate Notes with a multiplier or other leverage factor

Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such conversion, this will affect the secondary market and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes.

To the extent that Multiplier or Reference Rate Multiplier applies in respect of the determination of the Interest Rate for the Floating Rate Notes, investors should be aware that any fluctuation of the underlying floating rate will be amplified by such multiplier. Where the Multiplier is less than 1, this may adversely affect the return on the Floating Rate Notes.

Floating Rate Notes

Where the reference rate used to calculate the applicable interest rate turns negative, the interest rate will be below the margin, if any, or may be zero. Accordingly, where the rate of interest is equal to zero, the holders of such Floating Rate Notes may not be entitled to interest payments for certain or all interest periods.

Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.

The Issuer's obligations under Subordinated Notes are subordinated

If the Issuer is declared insolvent and a winding up is initiated, it will be required to pay the holders of senior debt and meet its obligations to all its other unsubordinated creditors (including unsecured creditors) in full before it can make any payments on the Subordinated Notes. If this occurs, the Issuer

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may not have enough assets remaining after these payments to pay amounts due under the Subordinated Notes. Furthermore, repayment of principal on the Subordinated Notes, whether at the Maturity Date or otherwise, is subject to the approval of the Bank of Italy.

The Issuer's obligations under Subordinated Notes will be unsecured and subordinated and will rank junior in priority to the claims of unsubordinated, unsecured creditors (including depositors) of the Issuer. Although Subordinated Notes may pay a higher rate of interest than comparable notes which are not subordinated, there is a real risk that an investor in Subordinated Notes will lose all or some of its investment should the Issuer become insolvent.

For a full description of the provisions relating to Subordinated Notes, see Condition 3 (Status of the Subordinated Notes).

Regulatory classification of the Notes

The intention of the Issuer is for Subordinated Notes to qualify on issue as "Tier 2 capital" for so long as this is permitted under the Bank of Italy's Regulations. Current regulatory practice by the Bank of Italy does not require (or customarily provide) a confirmation prior to the issuance of Subordinated Notes that the Notes will be treated as such.

Although it is the Issuer's expectation that any such Subordinated Notes qualify as "Tier 2 capital", there can be no representation that this is or will remain the case during the life of the Subordinated Notes or that the Subordinated Notes will be grandfathered under the implementation of future EU capital requirement regulations. If the Subordinated Notes cease to qualify as "Tier 2 capital" as a result of a change in Italian law or Applicable Banking Regulations or any change in the official application or interpretation thereof, the Issuer will (if so specified in the relevant Final Terms) have the right to redeem the Subordinated Notes in accordance with Condition 6.3 (Redemption for regulatory reason) of the Terms and Conditions of the Subordinated Notes, subject to the prior approval of the Bank of Italy. There can be no assurance that holders of such Subordinated Notes will be able to reinvest the amounts received upon redemption at a rate that will provide the same rate of return as their investments in the relevant Subordinated Notes.

Risks related to Notes generally

Set out below is a brief description of certain risks relating to the Notes generally:

Modification, waivers and substitution

The Trust Deed (as defined in "Terms and Conditions of the Notes" below) and the conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.

The conditions of the Notes also provide that the Trustee may, without the consent of Noteholders, agree to (i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Notes or (ii) determine without the consent of the Noteholders that any Event of Default or potential Event of Default shall not be treated as such or (iii) the substitution of another company as principal debtor under any Notes in place of the Issuer, in the circumstances described in Condition 14 of the Terms and Conditions of the Notes.

EU Savings Tax Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income ("EU Savings Directive"), Member States were required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to, or collected by such a person for, an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period Austria was instead required (unless during that period it would have elected otherwise) to operate a withholding system in relation to such payments. A number of non EU countries and territories, including Switzerland, adopted similar measures (a withholding system in the case of Switzerland). Italy implemented the EU Savings Directive through Legislative Decree No. 84 of 18 April 2005 (“Decree No. 84”).

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On 10 November 2015, the Council of the European Union adopted Council Directive 2015/2060/EU repealing the EU Savings Directive with effect from 1 January 2017 in the case of Austria and from 1 January 2016 in the case of all other Member States (subject to on-going requirements to fulfil administrative obligations such as the reporting and exchange of information relating to, and accounting for withholding taxes on, payments made before those dates). This is to prevent overlap between the EU Savings Directive and the new automatic exchange of information regime implemented under Council Directive 2011/16/EU on Administrative Cooperation in the field of Taxation (as amended by Council Directive 2014/107/EU). The new regime under Council Directive 2011/16/EU (as amended) is in accordance with the Global Standard released by the Organisation for Economic Cooperation and Development in July 2014. Council Directive 2011/16/EU (as amended) is generally broader in scope than the EU Saving Directive, although it does not impose withholding taxes. Directive 2014/107/EU on automatic exchange of information on tax matters has been enacted in Italy by Decree of 28 December 2015, starting from 1 January 2016. Directive 2015/2060/EU has been enacted in Italy by Law of 7 July 2016 No. 122 in force from 1 January 2016. Accordingly, Decree No. 84 has been repealed effective from 1 January 2016. A transitional period applied until 30 April 2016.

If a payment were to be made or collected through a person within the jurisdiction of Austria and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a Member State other than Austria, i.e. that is not obliged to withhold or deduct tax pursuant to the EU Savings Directive.

Change of law

The conditions of the Notes are based on English law in effect as at the date of this Offering Circular. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Offering Circular.

Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer

Notes issued under the Programme may be represented by one or more Global Notes. Such Global Notes will be deposited with a common depositary or common safekeeper for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the relevant Global Note, investors will not be entitled to receive definitive Notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. While the Notes are represented by one or more Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg.

While the Notes are represented by one or more Global Notes the Issuer will discharge its payment obligations under the Notes once the paying agent has paid Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the relevant Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes.

Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Notes will not have a direct right under the Global Notes to take enforcement action against the Issuer in the event of a default under the relevant Notes but will have to rely upon their rights under the Deed of Covenant.

Notes where denominations involve integral multiples: definitive Notes

In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts that are not integral multiples, of such minimum Specified Denomination. In such case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the

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relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to a Specified Denomination.

If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

Risks related to the market generally

Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk:

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.

Exchange rate risks and exchange controls

The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency-equivalent value of the principal payable on the Notes and (3) the Investor's Currency-equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

Interest rate risks

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Fixed Rate Notes.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to the Notes. Where an issue of Notes is rated, investors should be aware that:

(i) such rating will reflect only the views of the rating agency and may not reflect the potential impact of all risks related to structure, market, additional factors discussed above and other factors that may affect the value of the Notes;

(ii) a rating is not a recommendation to buy, sell or hold securities and may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning rating agency;

(iii) notwithstanding the above, an adverse change in a credit rating could adversely affect the trading price for the Notes; and

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(iv) tranches of Notes issued under the Programme may be rated or unrated and, where an issue of Notes is rated, its rating will not necessarily be the same as the rating applicable to the Programme.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.

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DESCRIPTION OF THE PROGRAMME

The following description does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Offering Circular and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms.

This description constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No. 809/2004 implementing the Prospectus Directive. Words and expressions defined in "Form of the Notes" and "Terms and Conditions of the Notes" shall have the same meanings in this description.

Issuer: Banca Popolare di Milano S.C.a r.l.

Description: Euro Medium Term Note Programme

Arranger: Citigroup Global Markets Limited

Co-Arranger: Banca Akros S.p.A. - Gruppo Bipiemme Banca Popolare di Milano

Dealers: Banca Akros S.p.A. - Gruppo Bipiemme Banca Popolare di Milano Banca IMI S.p.A. Banca Popolare di Milano S.C.a r.l. Barclays Bank PLC Citigroup Global Markets Limited Crédit Agricole Corporate and Investment Bank Deutsche Bank AG, London Branch Goldman Sachs International J.P. Morgan Securities plc Mediobanca - Banca di Credito Finanziario S.p.A. Merrill Lynch International Morgan Stanley & Co. International plc Nomura International plc Société Générale The plc

and any other dealers appointed in accordance with the Programme Agreement.

Certain Restrictions: Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see "Subscription and Sale").

Issuing and Paying Agent: , N.A., London Branch

Trustee: Citicorp Trustee Company Limited

Programme Size: Up to €10,000,000,000 (or its equivalent in other currencies calculated as described under "Description of the Programme") outstanding at any time. The Issuer may increase the amount of the Programme in accordance with the terms of the Programme Agreement.

Distribution: Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis.

Currencies: Euro, Sterling, U.S. dollars, yen and, subject to any applicable legal or regulatory restrictions, any other currency agreed between

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the Issuer and the relevant Dealer.

Maturities: Such maturities as may be agreed between the Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant Specified Currency.

In the case of Subordinated Notes, unless otherwise permitted by current laws, regulations, directives and/or the Bank of Italy's requirements applicable to the issue of Subordinated Notes by the Issuer, Subordinated Notes must have a minimum maturity of five years (or, if issued for an indefinite duration, redemption of such Notes may only occur five years after their date of issue).

Notes having a maturity of less than one year

Notes having a maturity of less than one year will, if the proceeds of the issue are accepted in the United Kingdom, constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 (the "FSMA") unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent, see "Subscription and Sale".

Under the Luxembourg Prospectus Law, prospectuses for the listing of money market instruments having a maturity at issue of less than 12 months and complying also with the definition of securities do not need to be approved by the CSSF but would need to be approved by the Luxembourg Stock Exchange in accordance with Part III of the Luxembourg Prospectus Law.

Notes issued under the Programme may be issued either (1) Final Terms or Drawdown pursuant to this Offering Circular and applicable Final Terms or (2) pursuant to a drawdown offering circular (each a "Drawdown Offering Circular Offering Circular") prepared in connection with a particular Tranche of Notes.

For a Tranche of Notes which is the subject of applicable Final Terms, those applicable Final Terms will, for the purposes of that Tranche only, complete the Conditions and this Offering Circular and must be read in conjunction with this Offering Circular. The terms and conditions applicable to any particular Tranche of Notes which is the subject of applicable Final Terms are the Conditions as completed by the relevant applicable Final Terms.

The terms and conditions applicable to any particular Tranche of Notes which is the subject of a Drawdown Offering Circular will be the Conditions as supplemented, amended and/ or replaced to the extent described in the relevant Drawdown Offering Circular. In the case of a Tranche of Notes which is the subject of a Drawdown Offering Circular, each reference in this Offering Circular to information being specified or identified in the relevant Final Terms shall be read and construed as a reference to such information being specified or identified in the relevant Drawdown Offering Circular unless the context requires otherwise.

Issue Price: Notes may be issued at any price, as specified in the relevant Final Terms. The price and amount of Notes to be issued under the Programme will be determined by the Issuer and the relevant Dealer(s) at the time of issue in accordance with prevailing market

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conditions.

Form of Notes: The Notes will be in bearer form and will on issue be represented by either a Temporary Global Note or a Permanent Global Note as specified in the applicable Final Terms. Temporary Global Notes will be exchangeable for either (i) interests in a Permanent Global Note or (ii) definitive Notes, as indicated in the applicable Final Terms. Permanent Global Notes will be exchangeable for definitive Notes upon either (i) not less than 60 days' written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) to the Agent as described therein or (ii) only upon the occurrence of an Exchange Event as described under "Form of the Notes".

Interest: Notes may be interest-bearing or non-interest bearing. Interest (if any) may accrue at a fixed rate or a floating rate, or interest may initially accrue at a fixed rate and then switch to a floating rate, or interest may initially accrue at a floating rate and then switch to a fixed rate. The method of calculating interest may vary between the issue date and the maturity date of the relevant Series.

Fixed Rate Notes: Fixed interest will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer.

Floating Rate Notes: Floating Rate Notes will bear interest at a rate determined:

(a) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series) (the "ISDA Definitions"); or

(b) on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or

(c) by reference to the benchmark as may be specified in the relevant Final Terms as adjusted for any applicable margin/multiplier; or

(d) on the basis of the CMS Rate.

Investors should consult the Issuer should they require further information in respect of the ISDA Definitions.

The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes.

Other provisions in relation to Floating Rate Notes may also have a maximum interest rate, a Floating Rate Notes: minimum interest rate or both.

Interest on Floating Rate Notes in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed

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between the Issuer and the relevant Dealer.

Fixed-Floating and Floating- Fixed-Floating Rate Notes will initially bear interest in accordance Fixed Rate Notes: with the Fixed Rate Note provisions and will then switch to bear interest in accordance with the Floating Rate Note provisions, as specified in the relevant Final Terms.

Floating-Fixed Rate Notes will initially bear interest in accordance with the Floating Rate Note provisions and will then switch to bear interest in accordance with the Fixed Rate Note provisions, as specified in the relevant Final Terms.

Zero Coupon Notes: Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest.

Redemption: The applicable Final Terms will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than for taxation reasons or following an Event of Default or, in the case of Subordinated Notes, for regulatory reasons) or that such Notes will be redeemable at the option of the Issuer and/or the Noteholders upon giving notice to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer.

The redemption at maturity of Subordinated Notes shall, to the extent required by the Applicable Banking Regulations, be subject to the prior approval of the Bank of Italy. If such approval is not given on or prior to the relevant redemption date, the Issuer will re-apply to the Bank of Italy for its consent to such redemption forthwith upon its having again satisfied, by whatever means, such conditions. The Issuer will use reasonable endeavours to satisfy such conditions and to obtain such approval. Amounts that would otherwise be payable on the Maturity Date will continue to bear interest as provided in the Trust Deed.

Denomination of Notes: Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer save that the minimum denomination of each Note will be such amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency and save that the minimum denomination of each Note admitted to trading on a regulated market within the European Economic Area or offered to the public in a member state of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive will be €100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency).

Taxation: All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by the Republic of Italy subject as provided in Condition 7. In the event that any such deduction is made, the Issuer will, save in certain limited circumstances provided in Condition 7, be required to pay additional amounts to cover the amounts so deducted.

As more fully described under "Taxation - Italian Taxation" below, interests, premiums and other income paid under Notes that qualify as (a) obbligazioni (b) titoli similari alle obbligazioni pursuant to Article 44 of Italian Presidential Decree No. 917 of

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22 December 1986, as amended, or (c) capital adequacy financial instruments are subject to a substitute tax levied at the tax rate of 26 per cent. stated by Italian Legislative Decree No. 239 of 1 April 1996, as subsequently amended. Particular rules could apply to non-Italian resident Noteholders.

Interest payments relating to Notes that do not qualify as obbligazioni, titoli similari alle obbligazioni or capital adequacy financial instruments but qualify as titoli atipici (atypical securities) for Italian tax purposes, are subject to a withholding tax levied at the rate of 26 per cent. stated by Italian Law Decree No. 512 of 30 September 1983 (converted by Law No. 649 of 25 November 1983), as amended.

Negative Pledge: None

Cross Default: The terms of the Senior Notes will contain a cross default provision as further described in Condition 9.

Status of Notes: Notes issued by the Issuer may be either unsubordinated ("Senior Notes") or subordinated ("Subordinated Notes") as described below.

Status of the Senior Notes: The Senior Notes will constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding.

Status of the Subordinated The Subordinated Notes will constitute direct, unsecured and Notes: subordinated obligations of the Issuer and will rank pari passu and without any preference among themselves.

In the event of the winding up, dissolution, liquidation or bankruptcy (including, inter alia, Liquidazione Coatta Amministrativa, as described in Articles 80 to 94 of Legislative Decree No. 385 of 1 September 1993, as amended from time to time (the "Italian Banking Act") of the Issuer, the payment obligations of the Issuer under each series of Subordinated Notes and any relative Coupons will rank in right of payment: (A) after unsubordinated unsecured creditors (including depositors) of the Issuer and all other creditors of the Issuer holding instruments which are less subordinated than the Subordinated Notes; (B) at least pari passu with all other subordinated obligations of the Issuer which do not rank or are not expressed by their terms to rank junior or senior to such series of Subordinated Notes, and (C) in priority to the claims of shareholders of the Issuer holding instruments which are more subordinated than the Subordinated Notes (including instruments qualifying as Additional Tier 1 capital of the Issuer, as described in Condition 3).

Rating: The rating (if any) of the Notes to be issued under the Programme will be specified in the applicable Final Terms.

Whether or not each credit rating applied for in relation to relevant Series of Notes will be (1) issued by a credit rating agency established in the EEA and registered under the CRA Regulation, or (2) issued by a credit rating agency which is not established in the EEA but will be endorsed by a credit rating agency which is established in the EEA and registered under the CRA Regulation

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or (3) issued by a credit rating agency which is not established in the EEA but which is certified under the CRA Regulation will be disclosed in the Final Terms.

In general, European regulated investors are restricted from using a rating for regulatory purposes unless such rating is (1) issued by a credit rating agency established in the EEA and registered under the CRA Regulation or (2) the rating is provided by a credit rating agency not established in the EEA but is endorsed by a credit rating agency established in the EEA and registered under the CRA Regulation or (3) the rating is provided by a credit rating agency not established in the EEA which is certified under the CRA Regulation.

Approval, Listing and Application has been made to the CSSF to approve this document Admission to Trading: as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be admitted to trading on the regulated market of the Luxembourg Stock Exchange and to be listed on the Official List of the Luxembourg Stock Exchange.

Notes may be listed or admitted to trading, as the case may be, on other or further stock exchanges or markets agreed between the Issuer and the relevant Dealer in relation to the Series. Notes which are neither listed nor admitted to trading on any market may also be issued.

The applicable Final Terms will state whether or not the relevant Notes are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets.

Governing Law: The Notes, and any non-contractual obligations arising out of or in connection with the Notes, will be governed by, and shall be construed in accordance with, English law, save that subordination provisions applicable to Subordinated Notes will be governed by, and construed in accordance with, Italian law.

Selling Restrictions: There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the Republic of Italy and the United Kingdom) and Japan and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see "Subscription and Sale".

United States Selling Regulation S, Category 2. TEFRA C or D, as specified in the Restrictions: applicable Final Terms.

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DOCUMENTS INCORPORATED BY REFERENCE

The following documents which have previously been published or are published simultaneously with this Offering Circular and have been filed with the CSSF shall be incorporated in, and form part of, this Offering Circular:

(a) the audited consolidated and non-consolidated annual financial statements of the Issuer as at and for the years ended 31 December 2014 and 31 December 2015;

(b) the unaudited consolidated interim report on operations of the Issuer as at and for the three months ended 31 March 2015 and 31 March 2016;

(c) the articles of association (statuto) of the Issuer (incorporated for information purposes);

(d) the terms and conditions set out on pages 46 to 74 of the offering circular in respect of the Banca Popolare di Milano S.C.a r.l. Euro Medium Term Note Programme dated 21 October 2014 (the "2014 Offering Circular"); and

(e) the terms and conditions set out on pages 45 to 72 of the offering circular in respect of the Banca Popolare di Milano S.C.a r.l. Euro Medium Term Note Programme dated 20 July 2015 (the "2015 Offering Circular"), save that any statement contained herein or in a document which is incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Offering Circular to the extent that a statement contained in any document which is subsequently incorporated by reference herein by way of a supplement prepared in accordance with Article 16 of the Prospectus Directive modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Offering Circular.

Copies of documents incorporated by reference in this Offering Circular can be obtained from the registered office of the Issuer and from the principal office in Luxembourg of Banque Internationale à Luxembourg SA (the "Luxembourg Listing Agent") for the time being in Luxembourg and will also be published on the Luxembourg Stock Exchange's website (www.bourse.lu).

The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Offering Circular which is capable of affecting the assessment of any Notes, prepare a supplement to this Offering Circular or publish a new Offering Circular for use in connection with any subsequent issue of Notes.

The table below sets out the relevant page references for the notes and the auditor's report in each of the annual consolidated and non-consolidated financial statements of the Issuer as at and for the years ended 31 December 2014 and 31 December 2015, the unaudited consolidated interim report on operations as at and for the three months ended 31 March 2015 and 2016, and the 2014 Offering Circular and 2015 Offering Circular. The supplements to the 2014 Offering Circular and 2015 Offering Circular are not relevant in the context of the update of the programme and, therefore, are not incorporated by reference.

Cross Reference List

Page Document Information incorporated numbers Banca Popolare di Milano S.C.a r.l. Consolidated Financial Statements: Audited Consolidated and Non- Balance sheet 110-111 consolidated Annual Financial Income statement 112 Statements as at and for the Financial Statement of comprehensive income 113 Year Ended 31 December 2014 Statement of changes in shareholders' equity 114-115 (the “2014 Audited Consolidated and Statement of cash flows 116 Non-consolidated Annual Financial Explanatory notes 117-414 Statements”) Report of the Independent Auditors 429-431

Non-consolidated Financial Statements: Balance sheet 480-481

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Page Document Information incorporated numbers Income statement 482 Statement of comprehensive income 483 Statement of changes in shareholders' equity 484-485 Statement of cash flows 486 Explanatory notes 487-772 Report of the Independent Auditors 791-793

Banca Popolare di Milano S.C.a r.l. Consolidated Financial Statements: Audited Consolidated and Non- Balance sheet 112-113 consolidated Annual Financial Income statement 114 Statements as at and for the Financial Statement of comprehensive income 115 Year Ended 31 December 2015 Statement of changes in shareholders' equity 116-119 (the “2015 Audited Consolidated and Statement of cash flows 120 Non-consolidated Annual Financial Explanatory notes 121-438 Statements”) Report of the Independent Auditors 453-455

Non-consolidated Financial Statements: Balance sheet 502-503 Income statement 504 Statement of comprehensive income 505 Statement of changes in shareholders' equity 506-509 Statement of cash flows 510 Explanatory notes 511-776 Report of the Independent Auditors 795-797

Banca Popolare di Milano S.C.a r.l. Consolidated Financial Statements: Unaudited Consolidated Interim Report Balance sheet 68-69 on Operations as at and for the three Income statement 70 months ended 31 March 2015 Statement of comprehensive income 71 (the “2015 Consolidated Interim Statement of changes in shareholders' equity 72-73 Report”) Statement of cash flows 74 Accounting policies 75-81

Banca Popolare di Milano S.C.a r.l. Consolidated Financial Statements: Unaudited Consolidated Interim Report Balance sheet 66-67 on Operations as at and for the three Income statement 68 months ended 31 March 2016 Statement of comprehensive income 69 (the “2016 Consolidated Interim Statement of changes in shareholders' equity 70-73 Report”) Statement of cash flows 74 Accounting Policies 75-82

2014 Offering Circular Terms and Conditions of the Notes 46-74

2015 Offering Circular Terms and Conditions of the Notes 45-72

The information incorporated by reference that is not included in the cross-reference lists above is considered additional information and is not required by the relevant schedules of Commission Regulation (EC) No. 809/2004 (as amended).

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FORM OF THE NOTES

Each Tranche of Notes will be in bearer form and will be initially issued in the form of a Temporary Global Note (a "Temporary Global Note") or, if so specified in the applicable Final Terms, a Permanent Global Note (a "Permanent Global Note") which, in either case, will:

(i) if the Global Notes are intended to be issued in new global note ("NGN") form, as stated in the applicable Final Terms, be delivered on or prior to the original issue date of the Tranche to a common safekeeper (the "Common Safekeeper") for Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream, Luxembourg"); and

(ii) if the Global Notes are not intended to be issued in NGN form, be delivered on or prior to the original issue date of the Tranche to a common depositary (the "Common Depositary") for, Euroclear and Clearstream, Luxembourg.

Whilst any Note is represented by a Temporary Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made (against presentation of the Temporary Global Note if the Temporary Global Note is not intended to be issued in NGN form) only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in such Note are not U.S. persons or persons who have purchased for resale to any U.S. person, as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Agent.

On and after the date (the "Exchange Date") which is 40 days after a Temporary Global Note is issued, interests in such Temporary Global Note will be exchangeable (free of charge) upon a request as described therein either for (a) interests in a Permanent Global Note of the same Series or (b) for definitive Notes of the same Series with, where applicable, receipts, interest coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Notes, to such notice period as is specified in the applicable Final Terms), in each case against certification of beneficial ownership as described above unless such certification has already been given. The holder of a Temporary Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Global Note for an interest in a Permanent Global Note or for definitive Notes is improperly withheld or refused.

Payments of principal, interest (if any) or any other amounts on a Permanent Global Note will be made through Euroclear and/or Clearstream, Luxembourg (against presentation or surrender (as the case may be) of the Permanent Global Note if the Permanent Global Note is not intended to be issued in NGN form) without any requirement for certification.

The applicable Final Terms will specify that a Permanent Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Notes with, where applicable, receipts, interest coupons and talons attached upon either (a) not less than 60 days' written notice from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) to the Agent as described therein or (b) only upon the occurrence of an Exchange Event. For these purposes, "Exchange Event" means that (i) an Event of Default (as defined in Condition 9) has occurred and is continuing, (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system satisfactory to the Trustee is available or (iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Global Note in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition 13 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Global Note) or the Trustee may give notice to the Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the Issuer may also give notice to the Agent requesting exchange. Any such exchange shall occur not later than 60 days after the date of receipt of the first relevant notice by the Agent.

The following legend will appear on all Notes which have an original maturity of more than 365 days and on all receipts and interest coupons relating to such Notes:

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"ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE."

The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons.

Notes which are represented by a Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be.

Pursuant to the Agency Agreement (as defined under "Terms and Conditions of the Notes"), the Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of such further Tranche shall be assigned a common code and ISIN which are different from the common code and ISIN assigned to Notes of any other Tranche of the same Series until at least the expiry of the distribution compliance period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche.

Notwithstanding the provision of Condition 5.5, where any note is represented by a Global Note, "Payment Day" means:

(a) if the currency of payment is euro, any day on which the TARGET2 System is open and a day on which dealings in foreign currencies may be carried on in each (if any) additional financial centre; or

(b) if the currency of payment is not euro, any day which is a day on which dealings in foreign currencies may be carried on in the principal financial centre of the currency of payment and in each (if any) additional financial centre.

Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms or as may otherwise be approved by the Issuer, the Issuing and Paying Agent and the Trustee.

No Noteholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

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APPLICABLE FINAL TERMS

Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the Programme.

[Date]

BANCA POPOLARE DI MILANO S.C.a r.l. (incorporated with limited liability in the Republic of Italy with its registered office in ; number 00715120150 in the Register of Companies)

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]

under the €10,000,000,000 Euro Medium Term Note Programme

PART A – CONTRACTUAL TERMS

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular dated 26 July 2016 [and the Supplement to the Offering Circular dated [date]] which [together] constitute[s] a base prospectus for the purposes of Directive 2003/71/EC, as amended (the "Prospectus Directive"). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with the Offering Circular [as so supplemented]. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circular [as so supplemented].

The Offering Circular [and the supplement to the Offering Circular dated [date]] is available for viewing at, and copies of it may be obtained from, the registered office of the Issuer, Piazza Filippo Meda, 4, 20121 Milan and from Banque Internationale à Luxembourg SA at 69, route d'Esch L2953 Luxembourg and will be published on the website of the Luxembourg Stock Exchange (www.bourse.lu).

(The following alternative language applies if the first tranche of an issue which is being increased was issued under the 2015 Offering Circular or 2014 Offering Circular.)

[Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the Offering Circular dated [21 October 2014]/[20 July 2015]. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive (Directive 2003/71/EC) and amendments thereto, including the Directive 2010/73/EU, to the extent implemented in a Member State of the European Economic Area (the "Prospectus Directive") and must be read in conjunction with the Offering Circular dated 26 July 2016 which constitutes a base prospectus for the purposes of the Prospectus Directive, save in respect of the Conditions which are extracted from the Offering Circular dated [21 October 2014]/[20 July 2015]. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Offering Circulars dated 26 July 2016 and [21 October 2014]/[20 July 2015] [and the Supplement to the Offering Circular dated [date]]. Copies of such Offering Circulars [and the Supplement to the Offering Circular dated [date]] are available for viewing at, and copies of it may be obtained from, the registered office of the Issuer, Piazza Filippo Meda, 4, 20121 Milan and from Banque Internationale à Luxembourg SA at 69, route d'Esch L-2953 Luxembourg and will be published on the website of the Luxembourg Stock Exchange (www.bourse.lu).]

(Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or subparagraphs. Italics denote directions for completing the Final Terms)

(When completing the final terms consideration should be given as to whether such terms or information constitute "significant new factors" and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)

(If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination may need to be EUR 100,000 or its equivalent in any other currency.)

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1. (a) Series Number: [ ]

(b) Tranche Number: [ ]

[(c) Date on which Notes become [Not Applicable]/[The Notes shall be fungible:] consolidated, form a single series and be interchangeable for trading purposes with the [•] on [[•]/the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph 22 below [which is expected to be on or about [•].]

2. Specified Currency or Currencies: [ ]

(Condition 1)

3. Aggregate Nominal Amount:

(a) [Series: [ ]]

(b) [Tranche: [ ]]

4. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [ ] (insert date if applicable)]

5. (a) Specified Denominations: [ ]

(Condition 1) (N.B. If an issue of Notes is (i) NOT admitted to trading on an European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive the €100,000 minimum denomination is not required.)

(Note — where multiple denominations above €100,000 or equivalent are being used the following sample wording should be followed:

"€100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000. No Notes in definitive form will be issued with a denomination above €199,000 or below €100,000.")

(b) Calculation Amount: [ ]

(If only one Specified Denomination, insert the Specified Denomination. If more than one specified Denomination, insert the highest common factor. Note: there must be a common factor in the case of two or more Specified Denominations.)

6. (a) Issue Date: [ ]

(b) Interest Commencement Date: [specify/Issue Date/Not Applicable]

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(Condition 4.1 and Condition 4.2) (N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.)

7. Maturity Date: [Fixed rate – specify date/Floating rate – Interest Payment Date falling in or nearest to (Condition 6.1) [specify month and year]]

(Unless otherwise permitted by current laws, regulations, directives and/or the Bank of Italy's requirements applicable to the issue of Subordinated Notes by the Issuer, Subordinated Notes must have a minimum maturity of five years).

8. Interest Basis: [[ ] per cent. Fixed Rate] (Condition 4) [[LIBOR/] +/- [ ] per cent. Floating Rate] [Floating Rate: CMS Linked Interest] [Fixed-Floating Rate] [Floating-Fixed Rate] [Zero Coupon] (further particulars specified below)

9. Change of Interest or Redemption/Payment [Applicable/Not Applicable] Basis:

10. Put/Call Options: [Investor Put] (Condition 6.4 or 6.5) [Issuer Call] [(further particulars specified below)]

11. (i) Status of the Notes: [Senior Notes/Subordinated Notes]

(Condition 2 or 3)

(ii) (In respect of Senior Notes only):

[Waiver of set-off rights:] [Applicable/Not Applicable]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

12. Fixed Rate Note Provisions: [Applicable/Not Applicable/Applicable for the period starting from [ ] [and including] [ ] ending on [but excluding] [ ]]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Rate(s) of Interest: [ ] per cent. per annum [payable [annually/semi-annually/quarterly/specify (Condition 4.1) other] in arrear] [specify other in case of different Rates of Interest in respect of different Fixed Interest Periods]

(b) Interest Payment Date(s): [ ] in each year up to and including [the Maturity Date/[ ]] (Condition 4.1)

(N.B. This will need to be amended in the case of long or short coupons)

(c) Fixed Coupon Amount(s): [ ] per Calculation Amount

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(Applicable to Notes in definitive form)

(Specify different Fixed Coupon Amounts if different Rates of Interest are specified as being applicable in respect of different Fixed Interest Periods)

(d) Broken Amount(s): [ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ]

(Applicable to Notes in definitive form)

(e) Day Count Fraction: [30/360 or Actual/Actual (ICMA) / Bond Basis / Eurobond Basis or [specify other]] (Condition 4.1)

(f) Interest Determination Date(s): [ ] in each year

(Condition 4.1) (Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon)

(N.B. This will need to be amended in the case of regular interest payment dates which are not of equal duration)

(N.B. Only relevant where Day Count Fraction is Actual/Actual (ICMA))

13. Floating Rate Note Provisions: [Applicable/Not Applicable/Applicable for the period starting from [ ] [and including] [ ] ending on [but excluding] [ ]]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Specified Period(s)/Specified [ ] Interest Payment Dates:

(Condition 4.2)

(b) First Interest Payment Date: [ ]

(Condition 4.2)

(c) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified (Condition 4.2) Following Business Day Convention/Preceding Business Day Convention]

(d) Additional Business Centre(s): [ ]

(Condition 4.2)

(e) Manner in which the Rate of [Screen Rate Determination/ISDA Interest and Interest Amount is to Determination] be determined:

(Condition 4.2(b))

(f) Party responsible for calculating [ ] the Rate of Interest and Interest

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Amount (if not the Agent):

(g) Screen Rate Determination:

(Condition 4.2(b)(ii))

(i) Reference Rate: [[EURIBOR]/[LIBOR] /[CMS Rate]]

In the case of CMS Rate:

- Reference Currency: [ ]

- Designated Maturity: [ ]

- Calculation Agent: [ ]

(ii) Interest Determination [ ] Date(s):

(in the case of a CMS Rate where the Reference Currency is euro):[Second day on which the TARGET2 System is open prior to the start of each Interest Period]

(in the case of a CMS Rate where the Reference Currency is other than euro):[Second [specify type of day] prior to the start of each Interest Period]

(Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR

(iii) Specified Time: [ ]

(iv) Multiplier: [ ] / [Not Applicable]

(v) Reference Rate Multiplier: [ ] / [Not Applicable]

(vi) Relevant Screen Page: (In the case of a CMS Rate): [ISDAFIX2]/[ ]

(Condition 4.2(b)) (In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)

(In the case of CMS Linked Interest Note, specify relevant screen page and any applicable headings and captions)

(h) ISDA Determination:

(Condition 4.2(b)(i))

(i) Floating Rate Option: [ ]

(ii) Designated Maturity: [ ]

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(iii) Reset Date: [ ]

(In the case of a LIBOR or EURIBOR or CMS Rate based option, the first day of the Interest Period)

(i) Margin(s): [+/-] [ ] per cent. per annum

(j) Minimum Rate of Interest: [ ] per cent. per annum

(k) Maximum Rate of Interest: [ ] per cent. per annum

(l) Multiplier: [ ] / [Not Applicable]

(m) Reference Rate Multiplier: [ ] / [Not Applicable]

(n) Day Count Fraction: [Actual/Actual (ISDA) or Actual/Actual (ICMA) (Condition 4.2(e)) Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 30/360 30E/360 30E/360 (ISDA) Bond Basis Eurobond Basis] (See Condition 4 for alternatives)

(o) Linear Interpolation: [Not Applicable / Applicable – the Rate of Interest for the [long/short] [first/last] Interest (Condition 4.2(d)) Period shall be calculated using Linear Interpolation (specify for each long or short interest period)]

14. Fixed-Floating Rate Note Provisions: [Applicable/Not Applicable]

[[ ] per cent. Fixed Rate in respect of the Fixed Interest Period(s) ending on (but excluding) [ ], then calculated in accordance with paragraph 13 above.]

15. Floating-Fixed Rate Note Provisions: [Applicable/Not Applicable]

[[Floating Rate] in respect of the Interest Period(s) ending on (but excluding) [ ], then calculated in accordance with paragraph 12 above.]

16. Zero Coupon Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Accrual Yield: [ ] per cent. per annum

(Condition 6.6)

(b) Reference Price: [ ]

(Condition 6.6)

(c) Day Count Fraction in relation to [Conditions 6.6(c) and 6.9 apply] Early Redemption Amounts and

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late payment: (Consider applicable day count fraction if not U.S. dollar denominated)

PROVISIONS RELATING TO REDEMPTION

17. Issuer Call: [Applicable/Not Applicable]

(Condition 6.4) (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Optional Redemption Date(s): (If the Notes are Subordinated Notes, unless otherwise permitted by current laws, regulations, directives and/or the Bank of Italy's requirements applicable to the issue of Subordinated Notes by the Issuer, the Optional Redemption Date shall not be earlier than five years after the Issue Date)

(b) Optional Redemption Amount: [[ ] per Calculation Amount]

(c) Partial redemption: [Applicable/Not Applicable]

(If not applicable, delete the remaining items of this subparagraph)

If redeemable in part:

(i) Minimum Redemption [ ] Amount:

(ii) Maximum Redemption [ ] Amount:

(d) Notice period (if other than as set [ ] out in the Conditions):

(N.B. If setting notice periods which are different from those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent or Trustee)

18. Regulatory Call: [Condition 6.3 is applicable/Not Applicable]

(Condition 6.3) (Only applicable for Subordinated Notes)

19. Investor Put: [Applicable/Not Applicable]

(Condition 6.5) (If not applicable, delete the remaining subparagraphs of this paragraph)

(a) Optional Redemption Date(s): [ ]

(b) Optional Redemption Amount: [[ ] per Calculation Amount]

(c) Notice period (if other than as set [ ] out in the Conditions):

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(N.B. If setting notice periods which are different from those provided in the Conditions, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent or Trustee)

20. Final Redemption Amount: [[ ] per Calculation Amount]

(N.B. The Final Redemption Amount will always be equal to at least 100 per cent. of the aggregate principal amount of the Notes. In relation to any issue of Notes which are expressed at paragraph 5 above to have a minimum denomination and tradeable amounts above such minimum denomination which are smaller than it the following wording should be added: "For the avoidance of doubt, in the case of a holding of Notes in an integral multiple of [ ] in excess of [ ] as envisaged in paragraph 5 above, such holding will be redeemed at its nominal amount.")

21. Early Redemption Amount payable on [Not Applicable (if Early Redemption Amount redemption for taxation or regulatory (Tax), Early Redemption Amount (Regulatory reasons or on event of default: Event) and Early Termination Amount are the principal amount of the Notes)/ specify [•] (Condition 6.6) per Calculation Amount]

GENERAL PROVISIONS APPLICABLE TO THE NOTES

22. Form of Notes:

(a) Form: [Temporary Global Note exchangeable for a Permanent Global Note which is (Condition 1) exchangeable for Definitive Notes [on 60 days' notice given at any time/only upon an Exchange Event]]*

[Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date]*

[Permanent Global Note exchangeable for Definitive Notes [on 60 days' notice given at any time/only upon an Exchange Event]]*

(*The exchange upon notice options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 5 includes language substantially to the following effect: "€100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000." Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a

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Temporary Global Note exchangeable for Definitive Notes.)

23. New Global Note: [Yes] [No]

24. Additional Financial Centre(s) or other [Not Applicable/give details] special provisions relating to Payment Dates: (Note that this item relates to the place of payment and not Interest Period end dates to (Condition 5.5) which item 12(d) relates)

25. Talons for future Coupons to be attached to [Yes/No. If yes, insert as follows: Definitive Notes (and dates on which such Talons mature): One Talon in the event that more than 27 Coupons need to be attached to each Definitive Note. On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon comprised in the Coupon sheet may be surrendered at the specified office of the Paying Agent in exchange for a further Coupon sheet. Each Talon shall be deemed to mature in the Interest Payment Date on which the final Coupon comprised in the relevant Coupon sheet matures.]

THIRD PARTY INFORMATION

[The Issuer accepts responsibility for [(Relevant third party information)] which has been extracted from [(specify source)]. The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by [(specify source)], no facts have been omitted which would render the reproduced information inaccurate or misleading.]

Signed on behalf of Banca Popolare di Milano S.C.a r.l.:

By: ...... Duly authorised

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PART B – OTHER INFORMATION

1. LISTING AND ADMISSION TO TRADING

(i) Listing and Admission to [Application has been made by the Issuer (or on its Trading: behalf) for the Notes to be admitted to trading on [specify relevant regulated market (for example the Bourse de Luxembourg) and, if relevant, admission to an official list] with effect from [ ].] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [specify relevant regulated market (for example the Bourse de Luxembourg) and, if relevant, admission to an official list] with effect from [ ].] [Not Applicable.]

(ii) Estimate of total expenses [ ] related to admission to trading:

2. RATINGS

Ratings: The Notes to be issued have been rated:

[S & P: [ ]]

[Moody's: [ ]]

[[Other]: [ ]]

(The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.)

(Insert the following where the relevant credit rating agency is established in the EEA:)

[[Insert legal name of particular credit rating agency entity providing rating] is established in the EEA and [is included in the list of registered credit rating agencies published on the website of the European Securities and Markets Authority at http://www.esma.europa.eu/page/List-registered-an d-certified-CRAs as being registered]/[has applied for registration although notification of the corresponding registration decision has not yet been provided by the relevant competent authority]/[is neither registered nor has it applied for registration] under Regulation (EU) No. 1060/2009, as amended (the "CRA Regulation").]

(Insert the following where the relevant credit rating agency is not established in the EEA:)

[[Insert legal name of particular credit rating agency entity providing rating] is not established in the EEA [but the rating it has given to the Notes is endorsed by [insert legal name of credit rating agency], which is established in the EEA and is included in the list of registered credit rating agencies published on the website of the European Securities and Markets Authority at

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http://www.esma.europa.eu/page/List-registered-an d-certified-CRAs as being registered] / [but is certified] / [and is not certified under nor is the rating it has given to the Notes endorsed by a credit rating agency established in the EEA and registered] under Regulation (EU) No 1060/2009, as amended (the "CRA Regulation").]

In general, European regulated investors are restricted from using a rating for regulatory purposes unless such rating is (1) issued by a credit rating agency established in the EEA and registered under the CRA Regulation or (2) the rating is provided by a credit rating agency not established in the EEA but is endorsed by a credit rating agency established in the EEA and registered under the CRA Regulation or (3) the rating is provided by a credit rating agency not established in the EEA which is certified under the CRA Regulation.

(Need to include a brief explanation of the meaning of the ratings if this has previously been published by the rating provider.)

3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE

[Save for any fees payable to the [Dealers/Managers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer]. -Amend as appropriate if there are other interests

(When adding any other description, consideration should be given as to whether such matters described constitute "significant new factors" and consequently trigger the need for a supplement to the Offering Circular under Article 16 of the Prospectus Directive.)

4. YIELD (Fixed Rate Notes only)

Indication of yield: [ ]

5. [Floating Rate Notes and CMS Linked Interest Notes Only – HISTORIC INTEREST RATES

Details of historic [LIBOR/EURIBOR/CMS] rates can be obtained from [Reuters]/[●]].]

6. OPERATIONAL INFORMATION

(i) ISIN Code: [ ]

(ii) Common Code: [ ]

(iii) Any clearing system(s) other [Not Applicable/give names(s) and number(s)] than Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme and the relevant identification number(s):

(iv) Delivery: Delivery [against/free of] payment

(v) Names and addresses of [ ] additional Paying Agent(s) (if

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any):

(vi) Intended to be held in a [Yes. Note that the designation "yes" simply means manner which would allow that the Notes are intended upon issue to be Eurosystem eligibility: deposited with one of the ICSDs as common safekeeper and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intraday credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.] /

[No. Whilst the designation is specified as "no" at the date of these Final Terms, should the Eurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them the Notes may then be deposited with one of the ICSDs as common safekeeper. Note that this does not necessarily mean that the Notes will then be recognised as eligible collateral for Eurosystem monetary policy and intraday credit operations by the Eurosystem at any time during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]]

7. DISTRIBUTION

(i) Method of distribution: [Syndicated]/[Non-syndicated]

(ii) If syndicated:

(A) Names of Managers: [Not Applicable/give names and addresses]

(B) Date of Subscription [•] Agreement:

(C) Stabilising Manager(s) [Not Applicable/give name and addresses] (if any):

(iii) If non-syndicated, name and [•] address of Dealer:

(iv) U.S. Selling Restrictions: [Reg. S Compliance Category 2;

[TEFRA C]/[TEFRA D]/[TEFRA Not applicable]]

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TERMS AND CONDITIONS OF THE NOTES

The following are the Terms and Conditions of the Notes which, as completed by the relevant Final Terms, will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to "Form of the Notes" for a description of the content of Final Terms which will specify which of such terms are to apply in relation to the relevant Notes.

This Note is one of a Series (as defined below) of Notes issued by Banca Popolare di Milano S.C.a r.l. (the "Issuer") constituted by a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the "Trust Deed") dated 26 July 2016 made between the Issuer and Citicorp Trustee Company Limited (the "Trustee", which expression shall include any successor as Trustee).

References herein to the "Notes" shall be references to the Notes of this Series and shall mean:

(a) in relation to any Notes represented by a global Note (a "Global Note"), units of the lowest Specified Denomination in the Specified Currency;

(b) any Global Note; and

(c) any definitive Notes issued in exchange for a Global Note.

The Notes and the Coupons (as defined below) have the benefit of an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the "Agency Agreement") dated 26 July 2016 and made between the Issuer, the Trustee, Citibank, N.A., London Branch as issuing and paying agent and agent bank (the "Issuing and Paying Agent" or the "Agent", which expression shall include any successor issuing and paying agent) and the other paying agents named therein (together with the Issuing and Paying Agent, the "Paying Agents", which expression shall include any additional or successor paying agents).

Interest bearing definitive Notes have interest coupons ("Coupons") and, if indicated in the applicable Final Terms, talons for further Coupons ("Talons") attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Global Notes do not have Coupons or Talons attached on issue.

The Final Terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note which supplements these Terms and Conditions (the "Conditions"). References to the "applicable Final Terms" are to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note.

The Trustee acts for the benefit of the holders for the time being of the Notes (the "Noteholders", which expression shall, in relation to any Notes represented by a Global Note, be construed as provided below) and the holders of the Coupons (the "Couponholders", which expression shall, unless the context otherwise requires, include the holders of the Talons), in accordance with the provisions of the Trust Deed.

As used herein, "Tranche" means Notes which are identical in all respects (including as to listing and admission to trading) and "Series" means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (a) expressed to be consolidated and form a single series and (b) identical in all respects (including as to listing and admission to trading) except for their respective Issue Dates (as set out in the relevant Final Terms), Interest Commencement Dates and/or Issue Prices.

Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business hours at the registered office for the time being of the Trustee being at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB and at the specified office of each of the Paying Agents. Copies of the applicable Final Terms are available for viewing at, and copies can be obtained from, the registered office of the Issuer at Piazza Filippo Meda, 4, 20121 Milan, Italy and from Banque Internationale à Luxembourg SA at 69, route d'Esch L-2953 Luxembourg and will be published on the website of the Luxembourg

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Stock Exchange (www.bourse.lu) save that, if this Note is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive, the applicable Final Terms will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the Issuer and the Trustee or, as the case may be, the relevant Paying Agent as to its holding of such Notes and identity. The Noteholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency Agreement and the applicable Final Terms which are applicable to them. The statements in the Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed and the Agency Agreement.

Words and expressions defined in the Trust Deed or the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed, and the Agency Agreement, the Trust Deed will prevail and, in the event of inconsistency between the Trust Deed or the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail.

1. FORM, DENOMINATION AND TITLE

The Notes are in bearer form and, in the case of definitive Notes, serially numbered. The Notes are denominated in such currency as may be specified in the relevant Final Terms (the "Specified Currency") and in the denomination or denominations specified in the relevant Final Terms (a "Specified Denomination"). Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination.

This Note may be a Fixed Rate Note, a Floating Rate Note, a CMS Linked Interest Note, a Fixed-Floating Rate Note, a Floating-Fixed Rate Note or a Zero Coupon Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.

This Note may also be a Senior Note or a Subordinated Note, depending on the status of the Notes specified in the applicable Final Terms.

Definitive Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in the Conditions are not applicable.

Subject as set out below, title to the Notes and Coupons will pass by delivery. The Issuer, the Paying Agents and the Trustee will (except as otherwise required by law) deem and treat the bearer of any Note or Coupon as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.

For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank SA/NV ("Euroclear") and/or Clearstream Banking, société anonyme ("Clearstream, Luxembourg"), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Paying Agents and the Trustee as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Global Note shall be treated by the Issuer, any Paying Agent and the Trustee as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly. In determining whether a particular person is entitled to a particular nominal amount of notes as aforesaid, the Trustee may rely on such evidence and/or information and/or certification as it shall, in its absolute discretion, think fit and, if it does so rely, such evidence and/or information and/or certification shall, in the absence of manifest error, be conclusive and binding on all concerned.

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Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.

References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms or as may otherwise be approved by the Issuer, the Issuing and Paying Agent and the Trustee.

2. STATUS OF THE SENIOR NOTES

The senior notes (the "Senior Notes") and any relative Coupons are direct, unconditional, unsubordinated and unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding.

If waiver of set-off rights is specified as applicable in the applicable Final Terms, each holder of a Senior Note unconditionally and irrevocably waives any right of set-off, counterclaim, abatement or other similar remedy which it might otherwise have under the laws of any jurisdiction in respect of such Senior Note.

3. STATUS OF THE SUBORDINATED NOTES

This Condition 3 applies only to Notes specified in the applicable Final Terms as Subordinated Notes.

(a) The subordinated notes (intended to qualify for regulatory purposes as Tier 2 capital (strumenti di classe 2) in accordance with Part II, Chapter 1 of Circular 285 of 17 December 2013 (Disposizioni di Vigilanza Prudenziale per le Banche) (the "Bank of Italy's Regulations") or such successor regulations as may be in force from time to time and Article 63 of the Capital Requirements Regulation) (the "Subordinated Notes") and any relative Coupons constitute direct, unsecured and subordinated obligations of the Issuer and rank pari passu without any preference among themselves. In relation to each Series of Subordinated Notes, all Subordinated Notes of such Series will be treated equally and all amounts paid by the Issuer in respect of principal and interest thereon will be paid pro rata on all Subordinated Notes of such Series.

(b) In the event of the winding up, dissolution, liquidation or bankruptcy (including, inter alia, Liquidazione Coatta Amministrativa, as described in Articles 80 to 94 of Legislative Decree No. 385 of 1 September 1993, as amended from time to time (the "Italian Banking Act")) of the Issuer, the payment obligations of the Issuer under each Series of Subordinated Notes and the relative Coupons will rank in right of payment:

(A) after unsubordinated unsecured creditors (including depositors) of the Issuer and all other creditors of the Issuer holding instruments which are less subordinated than the Subordinated Notes;

(B) at least pari passu with all other subordinated obligations of the Issuer which do not rank or are not expressed by their terms to rank junior or senior to such Series of Subordinated Notes; and

(C) in priority to the claims of shareholders of the Issuer and claims of creditors of the Issuer holding instruments which are more subordinated than the Subordinated Notes (including instruments qualifying as Tier 1 capital of the Issuer as defined in Article 25 of the Capital Requirements Regulation).

(c) Each holder of a Subordinated Note unconditionally and irrevocably waives any right of set-off, counterclaim, abatement or other similar remedy which it might otherwise have, under the laws of any jurisdiction, in respect of such Subordinated Note.

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For the purposes of these Conditions:

"Capital Requirements Regulation" means Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012.

4. INTEREST

Condition 4.1 below is applicable to the Notes (a) if the Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable; and (b) if the Fixed-Floating Rate Note Provisions or the Floating-Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable, in respect of those Fixed Interest Periods for which the Fixed Rate Note Provisions are stated to apply.

4.1 Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date. The Rate of Interest may be specified in the applicable Final Terms either (i) as the same Rate of Interest for all Fixed Interest Periods or (ii) as a different Rate of Interest in respect of one or more Fixed Interest Periods.

If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.

As used in the Conditions, "Fixed Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

Except in the case of Notes in definitive form where a Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to the Calculation Amount, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.

"Day Count Fraction" means, in respect of the calculation of an amount of interest in accordance with this Condition 4.1:

(a) if "Actual/Actual (ICMA" is specified in the applicable Final Terms:

(i) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the "Accrual Period") is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (I) the number of days in such Determination Period and (II) the number of Interest Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or

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(ii) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:

(A) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Interest Determination Dates that would occur in one calendar year; and

(B) the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Interest Determination Dates that would occur in one calendar year; and

(b) if "30/360" is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.

In the Conditions:

"Broken Amount" has the meaning given in the relevant Final Terms;

"Determination Period" means each period from (and including) an Interest Determination Date to (but excluding) the next Interest Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Interest Determination Date, the period commencing on the first Interest Determination Date prior to, and ending on the first Interest Determination Date falling after, such date);

"Fixed Coupon Amount" has the meaning given in the relevant Final Terms;

"Interest Commencement Date" means the date of issue of the Notes (as specified in the relevant Final Terms) or such other date as may be specified as such in the relevant Final Terms;

"Interest Determination Date" has the meaning given in the relevant Final Terms;

"Interest Payment Date" means the first Interest Payment Date and any date or dates specified as such in, or determined in accordance with the provisions of, the relevant Final Terms; and

"sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.

Condition 4.2 below is applicable to the Notes (a) if the Floating Rate Note Provisions are specified in the relevant Final Terms as being applicable; and (b) if the Fixed-Floating Rate Note Provisions or the Floating-Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable, in respect of those Interest Periods for which the Floating Rate Note Provisions are stated to apply.

4.2 Interest on Floating Rate Notes and CMS Linked Interest Notes

(a) Interest Payment Dates

Each Floating Rate Note and CMS Linked Interest Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:

(i) the date or dates specified as a specified interest payment date in each year specified in the applicable Final Terms (a "Specified Interest Payment Date"); or

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(ii) if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each such date, together with each Specified Interest Payment Date, an "Interest Payment Date") which falls the number of months or other period specified as the specified period in the applicable Final Terms (the "Specified Period") after the preceding Interest Payment Date or, in the case of the First Interest Payment Date, after the Interest Commencement Date.

Such interest will be payable in respect of each Interest Period (which expression shall, in the Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date) (the "Interest Period").

If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:

(A) in any case where Specified Periods are specified in accordance with Condition 4.2(a)(ii) above, the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (i) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (ii) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or

(B) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or

(C) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or

(D) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

In the Conditions,

"Calculation Agent" means the Issuing and Paying Agent or such other person specified in the relevant Final Terms;

"First Interest Payment Date" means the date specified in the relevant Final Terms; and

"Business Day" means a day which is both:

(a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and each additional business centre specified in the applicable Final Terms (each an "Additional Business Centre"); and

(b) either (i) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the

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country of the relevant Specified Currency (if other than London and any Additional Business Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Melbourne and Wellington, respectively) or (ii) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System (the "TARGET2 System") is open.

(b) Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Notes and CMS Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.

In the Conditions, "Relevant Screen Page" means the page, section or other part of a particular information service (including, without limitation, Reuters) specified as the Relevant Screen Page in the relevant Final Terms, or such other page, section or other part as may replace it on that information service or such other information service, in each case, as may be nominated by the person providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Reference Rate.

(i) ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be:

(A) if "Multiplier" is specified in the relevant Final Terms as not being applicable, the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any);

(B) if "Multiplier" is specified in the relevant Final Terms as being applicable (i) the sum of the Margin and the relevant ISDA Rate multiplied by (ii) the Multiplier;

(C) if "Reference Rate Multiplier" is specified in the relevant Final Terms as being applicable, the sum of (i) the Margin, and (ii) the relevant ISDA Rate multiplied by the Reference Rate Multiplier,

where "Multiplier" and "Reference Rate Multiplier" each has the meaning given in the relevant Final Terms and where "ISDA Rate" for an Interest Period means a rate equal to the Floating Rate that would be determined by the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes (the "ISDA Definitions") and under which:

(A) the Floating Rate Option is as specified in the applicable Final Terms;

(B) the Designated Maturity is a period specified in the applicable Final Terms; and

(C) the relevant Reset Date is either (a) if the applicable Floating Rate Option is based on the London interbank offered rate ("LIBOR") or on the Euro zone interbank offered rate ("EURIBOR"), the first day of that Interest Period or (b) in any other case, as specified in the applicable Final Terms.

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For the purposes of this subparagraph (i), "Floating Rate", "Calculation Agent", "Floating Rate Option", "Designated Maturity" and "Reset Date" have the meanings given to those terms in the ISDA Definitions.

(ii) Screen Rate Determination for Floating Rate Notes (other than for Floating Rate Notes linked to the CMS Rate)

Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:

(A) the offered quotation; or

(B) the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at the Specified Time on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Calculation Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.

If the Relevant Screen Page is not available or if, in the case of (A) above, no such offered quotation appears or, in the case of (B) above, fewer than three such offered quotations appear, in each case as at the Specified Time, the Calculation Agent shall request each of the Reference Banks to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate at approximately the Specified Time on the Interest Determination Date in question. If two or more of the Reference Banks provide the Calculation Agent with offered quotations, the Rate of Interest for the Interest Period shall be the arithmetic mean (rounded if necessary to the fifth decimal place with 0.000005 being rounded upwards) of the offered quotations plus or minus (as appropriate) the Margin (if any), all as determined by the Calculation Agent.

If on any Interest Determination Date one only or none of the Reference Banks provides the Calculation Agent with an offered quotation as provided in the preceding paragraph, the Rate of Interest for the relevant Interest Period shall be:

(A) if "Multiplier" is specified in the relevant Final Terms as not being applicable, the rate per annum which the Calculation Agent determines as being the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the rates, as communicated to (and at the request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such banks were offered, at approximately the Specified Time on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in the London inter-bank market (if the Reference Rate is LIBOR) or the Euro zone inter-bank market (if the Reference Rate is EURIBOR) plus or minus (as appropriate) the Margin (if any) or, if fewer than two of the Reference Banks provide the Calculation Agent with offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean (rounded as provided above) of

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the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, at approximately the Specified Time on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Issuer suitable for the purpose) informs the Calculation Agent it is quoting to leading banks in the London inter- bank market (if the Reference Rate is LIBOR) or the Euro zone inter- bank market (if the Reference Rate is EURIBOR) plus or minus (as appropriate) the Margin (if any) (the "Determined Rate");

(B) if "Multiplier" is specified in the relevant Final Terms as being applicable (i) the sum of the Margin and (ii) the relevant Determined Rate multiplied by the Multiplier;

(C) if "Reference Rate Multiplier" is specified in the relevant Final Terms as being applicable, the sum of (i) the Margin, and (ii) the relevant Determined Rate multiplied by the Reference Rate Multiplier,

where "Multiplier" and "Reference Rate Multiplier" each has the meaning given in the relevant Final Terms provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period in place of the Margin relating to that last preceding Interest Period);

(iii) Screen Rate Determination for Floating Rate Notes which are linked to the CMS Rate

If Screen Rate Determination is specified in the relevant Final Terms as the manner in which the Rate(s) of Interest is/are to be determined and "CMS Rate" is specified as the Reference Rate in the Final Terms, the Rate of Interest applicable to the Notes for each Interest Period will be determined by the Calculation Agent by reference to the following formula:

CMS Rate plus Margin

If the Relevant Screen Page is not available, the Calculation Agent shall request each of the CMS Reference Banks to provide the Calculation Agent with its quotation for the Relevant Swap Rate at approximately 11.00 a.m. (local time in the principal financial centre of the Specified Currency) on the Interest Determination Date in question. If at least three of the CMS Reference Banks provide the Calculation Agent with such quotation, the CMS Rate for such Interest Period shall be the arithmetic mean of such quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest).

If on any Interest Determination Date less than three or none of the CMS Reference Banks provides the Calculation Agent with such quotations as provided in the preceding paragraph, the CMS Rate shall be determined by the Calculation Agent in good faith on such commercial basis as considered appropriate by the Calculation Agent in its absolute discretion, in accordance with standard market practice.

"CMS Rate" shall mean the applicable swap rate for swap transactions in the Reference Currency with a maturity of the Designated Maturity, expressed as a percentage, which appears on the Relevant Screen Page on the Interest Determination Date in question, all as determined by the Calculation Agent;

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"CMS Reference Banks" means (i) where the Reference Currency is Euro, the principal office of five major banks in the Euro-zone inter-bank market, (ii) where the Reference Currency is Sterling, the principal London office of five major banks in the London inter-bank market, (iii) where the Reference Currency is U.S. dollars, the principal New York City office of five major banks in the New York City inter-bank market, or (iv) in the case of any other Reference Currency, the principal relevant financial centre office of five major banks in the relevant financial centre inter-bank market, in each case selected by the Calculation Agent;

"Relevant Swap Rate" means:

(i) where the Reference Currency is Euro, the mid-market annual swap rate determined on the basis of the arithmetic mean of the bid and offered rates for the annual fixed leg, calculated on a 30/360 day count basis, of a fixed for floating euro interest rate swap transaction with a term equal to the Designated Maturity commencing on the first day of the relevant Interest Period and in a Representative Amount with an acknowledged dealer of good credit in the swap market, where the floating leg, in each case calculated on an Actual/360 day count basis, is equivalent to EUR EURIBOR Reuters (as defined in the ISDA Definitions) with a designated maturity determined by the Calculation Agent by reference to standard market practice and/or the ISDA Definitions;

(ii) where the Reference Currency is Sterling, the mid-market semi-annual swap rate determined on the basis of the arithmetic mean of the bid and offered rates for the semi-annual fixed leg, calculated on an Actual/365 (Fixed) day count basis, of a fixed for floating Sterling interest rate swap transaction with a term equal to the Designated Maturity commencing on the first day of the relevant Interest Period and in a Representative Amount with an acknowledged dealer of good credit in the swap market, where the floating leg, in each case calculated on an Actual/365 (Fixed) day count basis, is equivalent (A) if the Designated Maturity is greater than one year, to GBP LIBOR BBA (as defined in the ISDA Definitions) with a designated maturity of six months or (B) if the Designated Maturity is one year or less, to GBP LIBOR BBA with a designated maturity of three months;

(iii) where the Reference Currency is U.S. dollars, the mid-market semi- annual swap rate determined on the basis of the mean of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed for floating United States dollar interest rate swap transaction with a term equal to the Designated Maturity commencing on the first day of the relevant Interest Period and in a Representative Amount with an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an Actual/360 day count basis, is equivalent to USD LIBOR BBA (as defined in the ISDA Definitions) with a designated maturity of three months; and

(iv) where the Reference Currency is any other currency or if the Final Terms specify otherwise, the mid-market swap rate as determined in accordance with the applicable Final Terms; and

"Reference Currency" and "Designated Maturity" have the meanings given in the relevant Final Terms.

(c) Minimum Rate of Interest and/or Maximum Rate of Interest

If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such

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Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.

If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.

Unless otherwise stated in the applicable Final Terms the Minimum Rate of Interest shall be deemed to be zero.

(d) Linear Interpolation

Where Linear Interpolation is specified as applicable in respect of an Interest Period in the applicable Final Terms, the Rate of Interest for such Interest Period shall be calculated by the Calculation Agent by straight line interpolation by reference to two rates:

(i) (where Screen Rate Determination is specified as applicable in the applicable Final Terms) which appear on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date, where:

(A) one rate shall be determined as if the relevant Interest Period or (where "CMS Rate" is specified as the Reference Rate in the Final Terms) the Designated Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period; and

(B) the other rate shall be determined as if the relevant Interest Period or (where "CMS Rate" is specified as the Reference Rate in the Final Terms) the Designated Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period,

provided, however, that if there is no rate available for a period of time next shorter or, as the case may be, next longer the length of the relevant Interest Period, then the Calculation Agent shall determine such rate at such time and by reference to such sources as it determines appropriate; or

(ii) (where ISDA Determination is specified as applicable in the applicable Final Terms) based on the relevant Floating Rate Option, where:

(A) one rate shall be determined as if the Designated Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period; and

(B) the other rate shall be determined as if the Designated Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period,

provided, however, that if there is no rate available for a period of time next shorter or, as the case may be, next longer the length of the relevant Interest Period, then the Calculation Agent shall determine such rate at such time and by reference to such sources as it determines appropriate.

The Rate of Interest for such Interest Period shall be the sum of the Margin (if any) and the rate so determined.

(e) Determination of Rate of Interest and calculation of Interest Amounts

The Calculation Agent will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. Where the Calculation Agent is not the Issuing and Paying Agent, the

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Calculation Agent shall notify the Issuing and Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.

The Calculation Agent will calculate the amount of interest (the "Interest Amount") payable on the Floating Rate Notes or CMS Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to the Calculation Amount, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or a CMS Linked Interest Note in definitive form comprises more than one Calculation Amount, the Interest Amount payable in respect of such Note shall be the aggregate of all the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.

"Day Count Fraction" means, in respect of the calculation of an amount of interest in accordance with this Condition:

(i) if "Actual/Actual (ISDA" or "Actual/Actual" is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (I) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (II) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);

(ii) if "Actual/365 (Fixed" is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;

(iii) if "Actual/365 (Sterling" is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;

(iv) if "Actual/360" is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;

(v) if "30/360", "360/360" or "Bond Basis" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction =

360 Y  Y  30 M  M  D  D  2 1 2 1 2 1 360

Where:

Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;

Y2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

M1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

M2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

D1 is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and

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D2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;

(vi) if "30E/360" or "Eurobond Basis" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction =

360 Y  Y  30 M  M  D  D  2 1 2 1 2 1 360

Where:

Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;

Y2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

M1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

M2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

D1 is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and

D2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 in which case D2 will be 30;

(vii) if "30E/360 (ISDA" is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction =

Where:

Y1 is the year, expressed as a number, in which the first day of the Interest Period falls;

Y2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

M1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

M2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

D1 is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

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D2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31 in which case and D2 will be 30,

provided, however, that in each such case the number of days in the Interest Period is calculated from and including the first day of the Interest Period to but excluding the last day of the Interest Period.

(f) Notification of Rate of Interest and Interest Amounts

The Calculation Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer, the Trustee and any stock exchange on which the relevant Floating Rate Notes or CMS Linked Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter (or in the case of such Notes admitted to the official list and traded on the Luxembourg Stock Exchange, notification shall be given to the Luxembourg Stock Exchange on the first day of each Interest Period). Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or CMS Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.

(g) Determination or Calculation by Trustee

If for any reason at any relevant time the Calculation Agent defaults in its obligation to determine the Rate of Interest or defaults in its obligation to calculate any Interest Amount in accordance with subparagraph (b)(i) or subparagraph (b)(ii) above or as otherwise specified in the applicable Final Terms, as the case may be, and in each case in accordance with paragraph (d) above, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition, but subject always to any Minimum Rate of Interest or Maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Calculation Agent.

(h) Certificates to be final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4.2 by the Calculation Agent, shall (in the absence of wilful default, bad faith or manifest error or proven error) be binding on the Issuer, the Issuing and Paying Agent, the Calculation Agent, the other Paying Agents and all Noteholders and Couponholders and (in the absence of wilful default or bad faith) no liability to the Issuer, the Noteholders or the Couponholders shall attach to the Issuing and Paying Agent or, if applicable, the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.

4.3 Accrual of interest

Each Note will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue as provided in the Trust Deed.

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5. PAYMENTS

5.1 Method of payment

Subject as provided below:

(a) payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee with, or, at the option of the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Melbourne and Wellington, respectively); and

(b) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque.

Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 7.

5.2 Presentation of definitive Notes and Coupons

Payments of principal in respect of definitive Notes will (subject as provided below) be made in the manner provided in Condition 5.1 above against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of definitive Notes, and payments of interest in respect of definitive Notes will (subject as provided below) be made as aforesaid only against presentation and surrender of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).

Fixed Rate Notes in definitive form (other than CMS Linked Notes or Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.

Upon any Fixed Rate Note in definitive form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.

Upon the date on which any Floating Rate Note, CMS Linked Note or Long Maturity Note in definitive form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A "Long Maturity Note" is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note.

If the due date for redemption of any definitive Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Note.

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5.3 Payments in respect of Global Notes

Payments of principal and interest (if any) in respect of Notes represented by any Global Note will (subject as provided below) be made in the manner specified above in relation to definitive Notes and otherwise in the manner specified in the relevant Global Note against presentation or surrender, as the case may be, of such Global Note (if such Global Note is not intended to be issued in NGN form) at the specified office of any Paying Agent outside the United States. On the occasion of each payment, (i) in the case of any Global Note which is not issued in new global note ("NGN") form, a record of such payment made on such Global Note, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Agent, and such record shall be prima facie evidence that the payment in question has been made and (ii) in the case of any Global Note which is a NGN, the Agent shall instruct Euroclear and Clearstream, Luxembourg to make appropriate entries in their records to reflect such payment.

5.4 General provisions applicable to payments

The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer to, or to the order of, the holder of such Global Note.

Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:

(a) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due;

(b) payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and

(c) such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer.

All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7 (Taxation); and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the "Code") or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or any law implementing an intergovernmental approach thereto.

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5.5 Payment Day

If the date for payment of any amount in respect of any Note or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, "Payment Day" means any day which (subject to Condition 8) is:

(a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:

(i) the relevant place of presentation (if applicable);

(ii) London;

(iii) each Additional Financial Centre specified in the applicable Final Terms; and

(b) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than the place of presentation, London and any Additional Financial Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Melbourne and Wellington, respectively) or (B) in relation to any sum payable in euro, a day on which the TARGET2 System is open.

5.6 Interpretation of principal and interest

Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable:

(a) any additional amounts which may be payable with respect to principal under Condition 7 or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Trust Deed;

(b) the Final Redemption Amount of the Notes;

(c) the Early Redemption Amount of the Notes;

(d) the Optional Redemption Amount(s) (if any) of the Notes;

(e) in relation to Notes redeemable in instalments, the Instalment Amounts;

(f) in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 6.6); and

(g) any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.

Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 7 or under any undertaking or covenant given in addition thereto, or in substitution therefor, pursuant to the Trust Deed.

6. REDEMPTION AND PURCHASE

6.1 Redemption at maturity

Unless previously redeemed or purchased and cancelled as specified below, each Note (including each CMS Linked Note) will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the date specified as the maturity date in the relevant Final Terms (the "Maturity Date").

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Subordinated Notes shall have a minimum Maturity Period of five years, as provided under the Applicable Banking Regulations.

Notwithstanding the foregoing provisions of this Condition 6: (i) to the extent required by the Applicable Banking Regulations, the redemption of any series of Subordinated Notes at their Maturity Date shall be subject to the prior approval of the Relevant Authority; and/or (ii) the early redemption of any series of Subordinated Notes shall always be subject to the prior approval of the Relevant Authority. Failure to redeem any such Notes where such consent has not been granted shall not constitute a default of the Issuer for any purpose. Consent to redemption is at the discretion of the Relevant Authority and is subject to compliance with the procedures and satisfaction of the conditions set out in the Applicable Banking Regulations, but will not be granted at the initiative of the Noteholder or where the solvency of the Issuer would be affected. Amounts that would otherwise be payable on the Maturity Date will continue to bear interest as provided in the Trust Deed.

6.2 Redemption for tax reasons

The Notes may be redeemed at the option of the Issuer (but subject to the prior approval of the Relevant Authority in the case of Subordinated Notes) in whole, but not in part, at any time (if this Note is neither a Floating Rate Note, a CMS Linked Interest Note nor a Floating-Fixed Rate Note (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions) or Fixed-Floating Rate Note (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions)) or on any Interest Payment Date (if this Note is either a Floating Rate Note, a CMS Linked Interest Note, a Fixed-Floating Rate Note (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions) or a Floating-Fixed Rate Note (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions)), on giving not less than 30 nor more than 60 days' notice to the Trustee and the Issuing and Paying Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if the Issuer satisfies the Trustee immediately before the giving of such notice that:

(a) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 7) (including any treaty to which the Tax Jurisdiction is a party) or any change in the application or official or generally published interpretation of such laws or regulations (including a change or amendment resulting from a ruling by a court or tribunal of competent jurisdiction), which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes; and

(b) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided that in case of any redemption of Subordinated Notes proposed to be made prior to the fifth anniversary of the Issue Date, if and to the extent required under the then Applicable Banking Regulations, the Issuer demonstrates to the satisfaction of the Relevant Authority that such change or amendment is material and was not reasonably foreseeable by the Issuer as at the Issue Date; and

provided further that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Trustee a certificate signed by a duly authorised signatory of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal or tax advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment and the Trustee shall be entitled to accept the Certificate as sufficient evidence of the satisfaction of the

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conditions precedent set out above, in which event it shall be conclusive and binding on the Noteholders and the Couponholders.

Notes redeemed pursuant to this Condition 6.2 will be redeemed at their Early Redemption Amount referred to in Condition 6.6 below together (if appropriate) with interest accrued to (but excluding) the date of redemption.

6.3 Redemption for regulatory reasons

This Condition 6.3 applies only to Notes specified in the applicable Final Terms as being Subordinated Notes.

If, at any time, the Issuer determines that a Regulatory Event has occurred, the Notes may be redeemed in whole, but not in part:

(A) at any time (if neither the Floating Rate Note Provisions, the CMS Linked Interest Note Provisions, the Fixed-Floating Rate Note Provisions (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions) nor Floating-Fixed Rate Note Provisions (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions) are specified in the relevant Final Terms as being applicable); or

(B) on any Interest Payment Date (if the Floating Rate Note Provisions, the CMS Linked Interest Note Provisions the Fixed-Floating Rate Note Provisions (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions) or Floating-Fixed Rate Note Provisions (in respect of the Interest Period calculated in accordance with the Floating Rate Note Provisions) are specified in the relevant Final Terms as being applicable),

on giving not less than 15 nor more than 30 days' notice to the Paying Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable),

provided that in case of any redemption of Subordinated Notes proposed to be made prior to the fifth anniversary of the Issue Date, if and to the extent required under the then Applicable Banking Regulations, (i) the change in regulatory classification of the Subordinated Notes is sufficiently certain; and (ii) the Issuer demonstrates to the satisfaction of the Relevant Authority that such change was not reasonably foreseeable by the Issuer as at the Issue Date.

Upon the expiry of any such notice as is referred to in this Condition 6.3, the Issuer shall be bound to redeem the Notes in accordance with this Condition 6.3, at their early regulatory redemption amount (the "Early Redemption Amount (Regulatory)") which shall be their Final Redemption Amount or such other redemption amount as may be specified in, or determined in accordance with the provisions of, the relevant Final Terms, together with accrued interest (if any) thereon.

Prior to the publication of any notice of redemption pursuant to this Condition 6.3, the Issuer shall deliver or procure that there is delivered to the Trustee a certificate signed by an authorised signatory of the Issuer stating that the said circumstances prevail and describe the facts leading thereto, in which event it shall be conclusive and binding on the Noteholders and the Couponholders.

For the purposes of this Condition 6:

"Applicable Banking Regulations" means at any time the laws, regulations, requirements, guidelines and policies relating to capital adequacy then in effect in the Republic of Italy including, without limitation to the generality of the foregoing, those regulations, requirements, guidelines and policies relating to capital adequacy then in effect of the Relevant Authority (whether or not such requirements, guidelines or policies have the force of law and whether or not they are applied generally or specifically to the Issuer and including, for the avoidance of doubt, as at the Issue Date the rules contained in, or implementing CRD IV);

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"Capital Requirements Directive" means Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.

"CRD IV" means taken together (i) the Capital Requirements Directive, (ii) the Capital Requirements Regulation and (iii) the Future Capital Instruments Regulations;

"Future Capital Instruments Regulations" means any regulatory capital rules which are in the future applicable to the Issuer (on a solo or consolidated basis) and which lay down the requirements to be fulfilled by financial instruments for inclusion in the regulatory capital of the Issuer (on a solo or consolidated basis) as required by (i) the Capital Requirements Directive or (ii) the Capital Requirements Regulation, including (for the avoidance of doubt) any regulatory technical standards issued by the European Banking Authority.

"Regulatory Event" means where the Issuer determines in relation to any Subordinated Notes (after consultation with the Relevant Authority and, if so required, subject to its approval) that as a result of a change in Italian law or Applicable Banking Regulations or any change in the official application or interpretation thereof, the Notes cease to qualify either in whole or in part as Tier 2 Capital of the Issuer for the purposes of (1) the capital adequacy requirements of the Relevant Authority or (2) any regulation, directive or other binding rules, standards or decisions adopted by the institutions of the European Union; and

"Relevant Authority" means the Bank of Italy or other governmental authority in Italy (or other country in which the Issuer is then domiciled having the responsibility of making such decisions); and

"Tier 2 Capital" has the meaning given to such term (or any equivalent or successor term) by (i) the Relevant Authority from time to time or (ii) any regulation, directive or other binding rules, standards or decisions adopted by the institutions of the European Union from time to time, as applicable.

6.4 Redemption at the option of the Issuer (Issuer Call)

If Issuer Call is specified in the applicable Final Terms, the Issuer may (subject to the prior approval of the Relevant Authority in the case of Subordinated Notes), having given:

(a) not less than 15 nor more than 30 days' notice (or such other notice period stated in the Final Terms) to the Noteholders in accordance with Condition 13; and

(b) not less than 15 days before the giving of the notice referred to in (a) above, notice to the Trustee and to the Issuing and Paying Agent;

(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or, if partial redemption is stated to be applicable in the Final Terms, some only, of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Final Terms. In the case of a partial redemption of Notes, the Notes to be redeemed ("Redeemed Notes") will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes, and in accordance with the rules of Euroclear and/or Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount at their discretion), in the case of Redeemed Notes represented by a Global Note, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the "Selection Date"). In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 15 days prior to the date fixed for redemption (or such other notice period stated in the Final Terms). The aggregate nominal amount of Redeemed Notes represented by definitive Notes shall bear the

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same proportion to the aggregate nominal amount of all Redeemed Notes as the aggregate nominal amount of definitive Notes outstanding bears to the aggregate nominal amount of the Notes outstanding, in each case on the Selection Date, provided that such first mentioned nominal amount shall, if necessary, be rounded downwards to the nearest integral multiple of the Specified Denomination, and the aggregate nominal amount of Redeemed Notes represented by a Global Note shall be equal to the balance of the Redeemed Notes. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this Condition 6.4 and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least five days prior to the Selection Date.

6.5 Redemption at the option of the Noteholders (Investor Put)

This Condition 6.5 applies only to Notes specified in the applicable Final Terms as Senior Notes.

If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 13 not less than 15 nor more than 30 days' notice (or such other notice period stated in the Final Terms) the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date.

To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the notice period, a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent (a "Put Notice") and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control. If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Issuing and Paying Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on his instruction by Euroclear or Clearstream, Luxembourg or any common depositary or, as the case may be, common safekeeper for them to the Issuing and Paying Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time and, if this Note is represented by a Global Note which has not been issued in NGN form, at the same time present or procure the presentation of the relevant Global Note to the Issuing and Paying Agent for notation accordingly.

Any Put Notice given by a holder of any Note pursuant to this Condition 6.5 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and the Trustee has declared the Notes to be due and payable pursuant to Condition 9, in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 6.5.

6.6 Early Redemption Amounts

For the purpose of Conditions 6.2 and 6.3 above and Condition 9, each Note will be redeemed at its Early Redemption Amount calculated as follows:

(a) in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;

(b) in the case of a Note (other than a Zero Coupon Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its nominal amount; or

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(c) in the case of a Zero Coupon Note, at an amount (the "Amortised Face Amount") calculated in accordance with the following formula:

Early Redemption Amount = RP x (1 +AY)y

where:

RP means the reference price as defined in the relevant Final Terms (the "Reference Price");

AY means the accrual yield, as specified in the relevant Final Terms (the "Accrual Yield"), expressed as a decimal; and

y is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator of which is 360,

or on such other calculation basis as may be specified in the applicable Final Terms.

6.7 Purchases

The Issuer or any Subsidiary of the Issuer may at any time purchase Notes (provided that, in the case of definitive Notes, all unmatured Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the option of the Issuer, surrendered to any Paying Agent for cancellation. Any purchase of Subordinated Notes by the Issuer or its Subsidiaries is subject to prior approval of the Relevant Authority (if so required under applicable legislation at the relevant time) and compliance with Applicable Banking Regulations.

6.8 Cancellation

All Notes which are redeemed will forthwith be cancelled (together with all unmatured Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and any Notes purchased and cancelled pursuant to Condition 6.7 above (together with all unmatured Coupons and Talons cancelled therewith) shall be forwarded to the Issuing and Paying Agent and cannot be reissued or resold.

6.9 Late payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Condition 6.1, 6.2, 6.3, 6.4 or 6.5 above or upon its becoming due and repayable as provided in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 6.6(c) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:

(a) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and

(b) five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Issuing and Paying Agent or the Trustee and notice to that effect has been given to the Noteholders in accordance with Condition 13.

7. TAXATION

All payments of principal and interest in respect of the Notes and Coupons by the Issuer will be made without withholding or deduction for or on account of any present or future taxes or duties

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of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is required by law. In such event, the Issuer will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes or Coupons, as the case may be, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note or Coupon:

(a) presented for payment in the Republic of Italy; or

(b) presented for payment by, or on behalf of, a holder of a Note or Coupon being a resident in the Republic of Italy; or

(c) to the extent that interest or any other amount payable is paid to a non-Italian resident entity or a non-Italian resident individual which is resident for tax purposes in a country which does not allow the Italian tax authorities to obtain an adequate exchange of information in respect of the beneficiary of the payments made from Italy; or

(d) in all circumstances in which the requirements and procedures set forth in Legislative Decree No. 239 (as amended or supplemented from time to time) have not been met or complied with except where such requirements and procedures have not been met or complied with due to the actions or omissions of the Issuer or its agents; or

(e) presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in Condition 5.5); or

(f) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on taxation of savings income or any law implementing or comply with, or introduced in order to conform, to, such Directive; or

(g) presented for payment by or on behalf of a holder who would be able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the European Union; or

(h) where it will be required to withhold or deduct any FATCA withholding in connection with any payments.

As used herein:

(i) "Tax Jurisdiction" means the Republic of Italy or in either case, any political subdivision or any authority thereof or therein having power to tax; and

(ii) the "Relevant Date" means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Trustee or the Issuing and Paying Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 13.

8. PRESCRIPTION

The Notes and Coupons will become void unless presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 7) therefor.

There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5.2 or any Talon which would be void pursuant to Condition 5.2.

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9. EVENTS OF DEFAULT AND ENFORCEMENT

9.1 Events of Default relating to Senior Notes

The Trustee at its discretion may, and if so requested by the holders of at least one-quarter in nominal amount of the Senior Notes then outstanding or if so directed by an Extraordinary Resolution of the holders of the Senior Notes shall (subject in each case to being indemnified to its satisfaction), give notice to the Issuer that the Senior Notes are, and they shall accordingly thereupon immediately become, due and repayable at the Early Redemption Amount (as described in Condition 6.6), together with accrued interest (if any) as provided in the Trust Deed if any one or more of the following events (each an "Event of Default") shall occur and is continuing:

(a) default for a period of more than 10 Business Days (as defined in Condition 4.2 (a)) in the payment of any principal or interest due in respect of any Note; or

(b) default in the performance by the Issuer of any of its obligations (other than the obligations to pay principal or interest in respect of the Notes) under the Trust Deed or the Notes (i) which is, in the opinion of the Trustee, incapable of remedy or in respect of which, in the opinion of the Trustee, remedial action satisfactory to the Trustee cannot be taken or (ii) which, being a default which is, in the opinion of the Trustee, capable of remedy or in respect of which, in the opinion of the Trustee, such remedial action can be taken, continues for 30 days (or such longer period as the Trustee may permit) after the Trustee has given written notice to the Issuer requiring such default to be remedied; or

(c) default by the Issuer in the payment of the principal of, or premium or repayment charge (if any) or interest on, any External Debt of or assumed by the Issuer, as the case may be, when and as the same becomes due and payable, if such default continues for more than the period of grace, if any, originally applicable thereto or in the event that any External Debt of or assumed by the Issuer becomes repayable before the due date thereof as a result of acceleration of maturity caused by the occurrence of an event of default thereunder, or any default in payment in respect of any guarantee or indemnity given by the Issuer in respect of any External Debt provided that no event described in this Condition 9.1(c) shall constitute an Event of Default unless the External Debt either alone or when aggregated with other External Debt and/or other liabilities relative to all (if any) other events referred to in this Condition 9.1(c) which shall have occurred and be continuing shall amount to at least €30,000,000 (or its equivalent in any other currency). For this purpose "External Debt" means any indebtedness owed to or, as the case may be, for the benefit of a person who is not a resident in the Republic of Italy; or

(d) the Issuer stops or suspends or threatens to stop or suspend payment of all or a material part of its debts or ceases to carry on its business or a material part thereof; or

(e) an order is made or a resolution is passed for the dissolution or winding-up of the Issuer; or

(f) the Issuer makes a conveyance or assignment for the benefit of, or enters into a composition or other arrangement with, its creditors generally, files a petition for a suspension of payments, admits in writing that it cannot pay its debts generally as they become due, initiates a proceeding in bankruptcy, insolvency or other similar laws, is adjudicated bankrupt or insolvent, a receiver or similar official is appointed in relation to, or over the whole or any part of the assets or undertaking of, the Issuer, proceedings are initiated against the Issuer under any applicable liquidation, insolvency, composition, reorganisation or other similar laws, an encumbrancer takes possession of the whole or any part of the assets or undertaking of the Issuer or a distress or execution or other process is levied or enforced upon or sued out against the whole or any material part of the assets of the Issuer.

Provided that, in the case of any Event of Default other than those described in paragraphs (a) and (e) above, the Trustee shall have certified to the Issuer that, in its opinion, such Event of Default is materially prejudicial to the interest of the Noteholders.

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9.2 Events of Default relating to Subordinated Notes

In the event of the winding-up or liquidation of the Issuer other than for the purposes of an Approved Reorganisation, the Trustee at its discretion may, and if so requested by the holders of at least one-quarter in nominal amount of the Subordinated Notes then outstanding or if so directed by an Extraordinary Resolution of the holders of the Subordinated Notes shall (subject in each case to being indemnified to its satisfaction), give notice to the Issuer that the Subordinated Notes are, and they shall accordingly thereupon immediately become, due and repayable at the Early Redemption Amount (as described in Condition 6.6), together with accrued interest (if any) as provided in the Trust Deed.

For the purpose of this Condition 9.2, "Approved Reorganisation" means an amalgamation, merger or reconstruction on terms previously approved in writing by the Trustee or by an Extraordinary Resolution of the holders of the Subordinated Notes.

No remedy against the Issuer other than as specifically provided by this Condition 9.2, Condition 9.3 or the Trust Deed shall be available to the Trustee or to the holders of the Subordinated Notes and the relative Coupons, whether for the recovery of amounts owing under the Trust Deed, in respect of the Subordinated Notes and the relative Coupons or in respect of any breach by the Issuer of any of its obligations under the Trust Deed, the Subordinated Notes and the relative Coupons or otherwise.

9.3 Enforcement

The Trustee may at any time, at its discretion and without notice, take such proceedings against the Issuer as it may think fit to enforce the provisions of the Trust Deed, the Notes and the Coupons, but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed, the Notes or the Coupons unless (i) it shall have been so directed by an Extraordinary Resolution or so requested in writing by the holders of at least one-fifth in nominal amount of the Notes then outstanding and (ii) it shall have been indemnified to its satisfaction.

No Noteholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

10. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS

Should any Note, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Issuing and Paying Agent or the Paying Agent in Luxembourg upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Coupons or Talons must be surrendered before replacements will be issued.

11. PAYING AGENTS

The names of the initial Paying Agents and their initial specified offices are set out below.

The Issuer is entitled, with the prior written approval of the Trustee, to vary or terminate the appointment of any Paying Agent and/or appoint additional or other Paying Agents and/or approve any change in the specified office through which any Paying Agent acts, provided that:

(a) there will at all times be an Issuing and Paying Agent and a Paying Agent with its specified office in a country outside the relevant Tax Jurisdiction; and

(b) so long as the Notes are listed on any Stock Exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent with a specified office in the place required by the rules and regulations of the relevant Stock Exchange or any other relevant authority.

In addition, the Issuer shall forthwith appoint a Paying Agent approved by the Trustee having a specified office in New York City in the circumstances described in Condition 5.4. Any

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variation, termination, appointment or change shall only take effect with the prior written approval of the Trustee (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days' prior notice thereof shall have been given to the Noteholders in accordance with Condition 13.

Notification of any change in the Paying Agents or the Calculation Agent or their specified offices will be made in accordance with Condition 13.

In acting under the Agency Agreement, the Paying Agents act solely as agents of the Issuer and, in certain circumstances specified therein, of the Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Paying Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent.

12. EXCHANGE OF TALONS

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8.

13. NOTICES

All notices regarding the Notes will be deemed to be validly given if published (a) in a leading English language daily newspaper of general circulation in London, and (b) if and for so long as the Notes are admitted to trading on, and listed on the Official List of the Luxembourg Stock Exchange and the rules of that exchange so require, a daily newspaper of general circulation in Luxembourg and/or the Luxembourg Stock Exchange's website (www.bourse.lu). It is expected that any such publication in a newspaper will be made in the Financial Times in London and the Luxemburger Wort in Luxembourg. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers. If publication as provided above is not practicable, a notice will be given in such other manner, and will be deemed to have been given on such date, as the Trustee shall approve. Couponholders will be deemed for all purposes to have notice of the contents of any notice given to the Noteholders in accordance with this Condition.

Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules or on the website of such stock exchange. Any such notice shall be deemed to have been given to the holders of the Notes on the seventh day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Issuing and Paying Agent or the Paying Agent in Luxembourg. Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Issuing and Paying Agent through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Issuing and Paying Agent, the Trustee and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.

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14. MEETINGS OF NOTEHOLDERS, MODIFICATION, WAIVER AND SUBSTITUTION

The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Coupons or any of the provisions of the Trust Deed. Such a meeting may be convened by the Issuer or the Trustee and shall be convened by the Issuer if required in writing by Noteholders holding not less than five per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes or the Coupons or the Trust Deed (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes or the Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons holding or representing not less than one-third in nominal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Couponholders.

The Trustee may agree, without the consent of the Noteholders or Couponholders, to any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Notes or the Trust Deed, or determine, without any such consent as aforesaid, that any Event of Default or potential Event of Default shall not be treated as such, where, in any such case, it is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders so to do or may agree, without any such consent as aforesaid, to any modification which is of a formal, minor or technical nature or to correct a manifest error or an error which, in the opinion of the Trustee, is proven. Any such modification shall be binding on the Noteholders and the Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.

In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of the Noteholders as a class (but shall not have regard to any interests arising from circumstances particular to individual Noteholders or Couponholders whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Noteholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking or covenant given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.

The Trustee may, without the consent of the Noteholders or Couponholders, agree with the Issuer to the substitution in place of the Issuer (or of any previous substitute) as the principal debtor under the Notes, the Coupons and the Trust Deed, of the Issuer or its Successor in Business (as defined in the Trust Deed) or any Subsidiary of the Issuer or of its Successor in Business subject, in the case of the substitution of a Subsidiary of the Issuer, to the unconditional and irrevocable guarantee of the Issuer being given in respect of the Notes, to the Trustee being satisfied that the interests of the Noteholders will not be materially prejudiced thereby and to certain other conditions set out in the Trust Deed being complied with.

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15. INDEMNIFICATION OF THE TRUSTEE AND TRUSTEE CONTRACTING WITH THE ISSUER

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified to its satisfaction.

The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter into business transactions with the Issuer and/or any of its Subsidiaries and/or its Successor in Business and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or any of its Subsidiaries and/or its Successor in Business, (b) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders or Couponholders and (c) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.

16. FURTHER ISSUES

The Issuer shall be at liberty from time to time without the consent of the Noteholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes.

17. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

18. GOVERNING LAW AND SUBMISSION TO JURISDICTION

18.1 Governing law

The Trust Deed, the Agency Agreement, the Notes (except for Condition 3 (Status of the Subordinated Notes)) and the Coupons and any non-contractual obligations arising out of or in connection with the Trust Deed, the Agency Agreement, the Notes and the Coupons are governed by, and shall be construed in accordance with, English law. Condition 3 (Status of the Subordinated Notes) is governed by, and shall be construed in accordance with, Italian law.

18.2 Submission to jurisdiction

The Issuer irrevocably agrees, for the benefit of the Trustee, the Noteholders and the Couponholders, that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Trust Deed, the Notes and/or the Coupons (including a dispute relating to any non-contractual obligations arising out of or in connection with the Trust Deed, the Notes and/or the Coupons) and accordingly submits to the exclusive jurisdiction of the English courts.

The Issuer waives any objection to the courts of England on the grounds that they are an inconvenient or inappropriate forum.

18.3 Appointment of process agent

The Issuer has, in the Trust Deed, appointed TMF Corporate Services Limited at its registered office for the time being at 6 St. Andrew Street, 5th Floor, London EC4A 3AE, United Kingdom as its agent for service of process, and undertakes that, in the event of TMF Corporate Services Limited ceasing so to act or ceasing to be registered in England, it will appoint another person as its agent for service of process in England in respect of any suit, action or proceedings (together referred to as "Proceedings") arising out of or in connection with the Trust Deed, the Notes and the Coupons (including any Proceedings relating to any non-contractual obligations arising out of

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or in connection with the Trust Deed, the Notes and the Coupons). Nothing herein shall affect the right to serve Proceedings in any other manner permitted by law.

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USE OF PROCEEDS

The net proceeds from each issue of Notes will be applied by the Issuer for its general corporate purposes, which include making a profit.

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SELECTED CONSOLIDATED FINANCIAL DATA

Selected Consolidated Financial Data

The information set out in this Offering Circular on the Group has been derived from, and should be read in conjunction with, and is qualified by reference to:

 the consolidated annual financial statements of the Group as at and for the years ended 31 December 2015 and 2014, which were audited by EY S.p.A.; and

 the consolidated interim report of the Group as at and for the three months ended 31 March 2016, which was neither audited nor reviewed by PricewaterhouseCoopers S.p.A. and the consolidated interim report of the Group as at and for the three months ended 31 March 2015, which was neither audited nor reviewed by EY S.p.A. that are incorporated by reference into this Offering Circular.

The consolidated annual and interim financial statements have been prepared in accordance with the international financial reporting and accounting standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and with the related interpretations by the International Financial Reporting Interpretations Committee ("IFRIC"), as adopted by the European Commission pursuant to EC Regulation 1606 of 19 July 2002. This regulation requires international accounting and financial reporting standards to be used for preparing the consolidated financial statements of listed companies starting from 2005.

So long as any of the Notes remain outstanding copies of the above-mentioned consolidated financial statements will be made available at the office of the Principal Paying Agent and the Paying Agent in Luxembourg and at the registered office of the Bank, in each case free of charge.

The statistical information presented herein may differ from information included in the historical consolidated financial statements and interim financial reports. In certain cases, the financial and statistical information is derived from financial and statistical information reported to the Bank of Italy or from internal management reporting.

Most of the statistical information on BPM in this Offering Circular is presented on a consolidated basis; the Bank's total assets accounted for 90.17 per cent. of the Group's total assets on a consolidated basis at 31 December 2015 (90.27 per cent. at 31 March 2016).

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Annual Financial Statements

The following tables present information derived from the consolidated balance sheet and profit and loss accounts and other selected financial and statistical information on the Group as at and for the periods ended 31 December 2015 and 2014 (5).

For the years ended 31 December,

2015 2014

(unaudited) (unaudited)

(millions of Euro)

Income Statement Data:

Interest margin 807 800 Non-interest margin: 860 822 Net fee and commission income 606 557 Other income: 254 265 Profit (losses) on investments carried at equity 32 23 Net income from banking activities 182 189 Other operating charges/income 40 53 Operating income 1,667 1,622 Administrative expenses: (945) (899) a) personnel expenses (612) (613) b) other administrative expenses (333) (286) Net adjustments to property and equipment and intangibles (75) (75) assets Operating expenses (1,020) (974) Operating profit 647 648 Net adjustments for impairment of loans and other (342) (424) activities Net provisions for risks and charges 11 (4)

Profits (losses) from equity and other investments and 37 105 adjustments to goodwill and intangible assets

Income (loss) before tax from continuing operations 353 325

Taxes on income from continuing operations (63) (92)

Income (loss) after tax from continuing operations 290 233 Net Income (loss) for the period 290 233 Net Income (loss) for the period attributable to minority (1) (1) interests Net Income (loss) for the period attributable to the 289 232 Parent Company

5 Amounts from the unaudited reclassified financial information as included in Bipiemme Group's 31 December 2015 and 31 December 2014 annual report. The reclassified financial information is derived from the audited financial statements at 31 December 2015 and 31 December 2014 and have been subject to reclassification by aggregating and/or changing certain line items from the financial statements and, in certain cases, by creating new line items or moving amounts to different line items, as set forth in the reconciliations presented in the 31 December 2015 and 31 December 2014 annual reports.

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As at 31 December,

Balance Sheet Data: 2015 2014 (unaudited) (unaudited)

(millions of Euro)

Assets

Cash and cash equivalent 301 323

Financial assets carried at fair value and hedging derivatives: 11,416 11,888

Financial assets held for trading 1,798 1,922

Financial assets designated at fair value through profit and loss 75 97

Financial assets available for sale 9,491 9,670 Hedging derivatives 41 179

Fair value change of financial assets in hedged portfolios 11 20

Due from banks 1,225 985 Loans to customers 34,187 32,079 Fixed assets 1,199 1,118 Non-current assets and disposal groups held for sale 0 0 Other assets 1,875 1,879 Total assets 50,203 48,272

Liabilities and Shareholders' Equity

Due to banks 4,839 3,319 Due to customers 28,623 27,703 Securities issued 8,849 8,982 Financial liabilities and hedging derivatives: 1,380 1,690 Financial liabilities held for trading 1,183 1,463 Financial liabilities designated at fair value through profit and 130 152 loss Hedging derivatives 49 59

Fair value change of financial liabilities in hedged portfolios 18 16

Other liabilities 1,430 1,502 Provisions for specific use 434 520 Capital and reserves 4,339 4,305 Minority Interests 20 19 Net Income (loss) for the period 289 232 Total liabilities and Shareholders' Equity 50,203 48,272

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As at 31 December, 2015 2014

(millions of Euro, save for percentages)

Financial Ratios:

Net income (loss)/Shareholders' equity (excluding net 6.7% 5.4% income (loss) for the period) (ROE) (1)

Net income (loss)/total assets (ROA) 0.6% 0.5% Loans to customers/total assets 68.1% 66.5% Fixed assets/total assets 2.4% 2.3% Direct deposits/total assets 74.9% 76.3% Cost/income ratio (2) 61.2% 60.0% Asset Quality:

Bad loans, gross 3,276 3,046 Allowances for bad loans 1,785 1,702 Bad loans, net 1,491 1,344

Coverage of gross bad loans 54.5% 55.9%

Ratio of bad loans, gross to total loans to customers 8.9% 8.8%

Total non-performing exposures, gross 5,997 5,853

Total provisions for non-performing exposures 2,373 2,255

Capital Adequacy:

Own funds 5,021 5,170 Common Equity Tier 1 4,037 3,900 Additional Tier 1 187 213 Capital adequacy ratios :

Common Equity Tier 1 Ratio 11.53% 11.58% Tier 1 ratio 12.06% 12.21% Total capital ratio 14.33% 15.35% Risk Weighted Assets/Total assets 69.78% 69.76% Selected Off-Balance Sheet Data:

Assets under management(3) 20,901 17,872 Assets under administration(4) 13,159 14,738

______

(1) Shareholders’ equity (Capital and reserves) at the end of the period. (2) Operating expenses/Operating income. (3) At market value, excluding duplications; data for retail customers. (4)At market value, data for retail customers.

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Interim Report

The following tables present information derived from the consolidated balance sheet and profit and loss accounts and other selected financial and statistical information on the Group as at and for the periods ended 31 March 2016 and 2015.

For the periods ended 31 March,

2016 2015

(unaudited) (unaudited)

(millions of Euro)

Income Statement Data:

Interest margin 207 196 Non-interest margin: 182 230 Net fee and commission income 151 148 Other income: 31 82 Profit (losses) on investments carried at equity 9 12 Net income from banking activities 13 58 Other operating charges/income 9 12 Operating income 389 426 Administrative expenses: (234) (228) a) personnel expenses (155) (155) b) other administrative expenses (79) (73) Net adjustments to property and equipment and intangibles (19) (17) assets Operating expenses (253) (245) Operating profit 136 181 Net adjustments for impairment of loans and other (66) (74) activities Net provisions for risks and charges 0 (1) Profits (losses) from equity and other investments and 2 0 adjustments to goodwill and intangible assets

Income (loss) before tax from continuing operations 72 106

Taxes on income from continuing operations (24) (38)

Income (loss) after tax from continuing operations 48 68

Net Income (loss) for the period 48 68 Net Income (loss) for the period attributable to minority 0 0 interests Net Income (loss) for the period attributable to the 48 68 Parent Company

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As at 31 March,

Balance Sheet Data: 2016 2015 (unaudited) (unaudited)

(millions of Euro)

Assets

Cash and cash equivalent 250 209

Financial assets carried at fair value and hedging derivatives: 12,479 12,780

Financial assets held for trading 1,877 2,284

Financial assets designated at fair value through profit and loss 33 105

Financial assets available for sale 10,469 10,208 Hedging derivatives 87 161 Fair value change of financial assets in hedged portfolios 13 22 Due from banks 1,831 1,051 Loans to customers 34,182 32,600 Fixed assets 1,216 1,128

Non-current assets and disposal groups held for sale 0 0

Other assets 1,583 1,542 Total assets 51,541 49,310

Liabilities and Shareholders' Equity

Due to banks 6,099 4,172 Due to customers 30,896 27,590 Securities issued 6,280 8,677 Financial liabilities and hedging derivatives: 1,619 1,981 Financial liabilities held for trading 1,376 1,747

Financial liabilities designated at fair value through profit and loss 132 162

Hedging derivatives 86 58

Fair value change of financial liabilities in hedged portfolios 25 14

Other liabilities 1,539 1,687 Provisions for specific use 414 503 Capital and reserves 4,626 4,613 Minority Interests 20 19 Net Income (loss) for the period 48 68 Total liabilities and Shareholders' Equity 51,541 49,310

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As at 31 March,

2016 2015

(millions of Euro, save for percentages) Financial Ratios:

Net income (loss)/Shareholders' equity (excluding net income 4.2% 5.9% (loss) for the period) (ROE) (1) Net income (loss)/total assets (ROA) 0.4% 0.5% Loans to customers/total assets 66.3% 66.1% Fixed assets/total assets 2.4% 2.3% Direct deposits/total assets 72.4% 73.9% Cost/income ratio (2) 64.9% 57.4% Asset Quality:

Bad loans, gross 3,380 3,078 Allowances for bad loans 1,836 1,717 Bad loans, net 1,544 1,361 Coverage of gross bad loans 54.3% 55.8% Ratio of bad loans, gross to total loans to customers 4.5% 4.2% Total non-performing exposures, gross 6,043 5,999 Total provisions for non-performing exposures 2,426 2,300 Capital Adequacy:

Own funds 4,941 5,037 Common Equity Tier 1 4,028 3,920 Additional Tier 1 161 187 Capital adequacy ratios:

Common Equity Tier 1 Ratio 11.64% 11.57% Tier 1 ratio 12.11% 12.12% Total capital ratio 14.29% 14.86%

Selected Off-Balance Sheet Data:

Asset under management(3) 20,856 19,633 Asset under administration(4) 12,162 15,252 ______(1) Shareholders’ equity (Capital and reserves) at the end of the period. (2) Operating expenses/Operating income. (3) At market value, excluding duplications; data for retail customers. (4)At market value, data for retail customers

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DESCRIPTION OF THE ISSUER

General

Banca Popolare di Milano S.C.a r.l. (the "Bank" or "BPM") is the parent company of the group "Bipiemme – Banca Popolare di Milano" (the "Group" or the "Bipiemme Group"), a leading northern Italian banking group. The Group operates mainly in the region of Lombardy (where 63 per cent. of its branches are located as at 31 March 2016), and also has an important presence in the regions of Emilia Romagna, Piedmont, Lazio and Puglia, in which it limits its activities to specific provinces where it maintains important market shares. The Group provides predominantly commercial banking services to both retail and small and medium-sized companies (SMEs) as well as to corporates, through a dedicated internal structure. In addition, the Bank offers its customers capital markets services, brokerage services, debt and equity underwriting, asset management, insurance underwriting and sales, leasing, factoring services and consumer credit.

As at 31 March 2016, the Group's distribution network had 714 branches, consisting of 655 retail branches (including the online bank virtual branches), of which 105 are hubs, 9 corporate centres, 14 private centres, of which 12 relate to Banca Popolare di Milano and 2 to Banca Akros, and 36 direct branches and financial shops belonging to ProFamily S.p.A. ("ProFamily"), the Group's consumer credit company. The traditional network is integrated by internet banking and call centre services.

The headquarters is located in Piazza Filippo Meda 4, Milan, Italy. The telephone number of the Bank's registered office and principal place of business is +39 02 77001.

The Bank was incorporated on 12 December 1865, and its current duration is until 23 December 2100. It operates under Italian law as a Società Cooperativa a responsabilità limitata (S.C.a r.l.), a limited liability co-operative company. The Bank is registered with the Commercial Registry of Milan under the number 00715120150 and with the "Albo delle Banche" under the number 5584.8.

The Bank's corporate purposes, as provided by Articles 5 and 6 of its by-laws, are the granting of credit to its members by taking deposits on a co-operative basis, together with carrying out, on its own account or for third parties, including non-members of the Bank, any kind of banking transaction and services, although strictly excluding operations of a purely speculative nature. Provided it complies with current regulations and obtains suitable authorisation when needed, the Bank can carry out all permitted types of banking, financial and brokerage/dealing transactions and services, as well as any other transaction that is banking-related or otherwise involved in achieving its corporate purpose.

The following diagram illustrates the structure of the Bipiemme Group as at the date of this Offering Circular.

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BPM is the parent company of the Bipiemme Group and performs, in addition to banking activities, the role of strategic guidance, governance and supervision of its financial and instrumental subsidiaries.

As a bank that exercises management and coordination of the Bipiemme Group, pursuant to art. 61, paragraph 4, of the Italian Banking Act, the Issuer issues, in performing its management and coordination function, instructions to other members of the Group, including the execution of the instructions issued by the Supervisory Authority and in the interests of the stability of the Bipiemme Group.

Strategic Plan

In order to pursue the merger between BPM and Banco Popolare Società Cooperativa into a new company established in the form of a joint stock company, on 16 May 2016 the management boards of BPM and Banco Popolare approved a strategic plan for the New Group for the period of 2016-2019 (“Strategic Plan”). The Strategic Plan aims to leverage the distinctive features of the New Group, including its unique positioning in the banking sector, and to unlock profitability through an optimized business model in order to offer a better service to the customers by providing a complete range of high value products (for further information, please see paragraph “Merger between BPM and Banco Popolare - Strategic Plan”).

Activities

The Group carries out activities related to fundraising and granting of credit as well as investment services, commercialising products of affiliated companies or non-affiliated companies (for example in asset management and bancassurance) as detailed below.

As at the date of the Offering Circular, the Group's activities are divided into the following business segments:

: this segment comprises banking and investment services offered to private, small and medium business customers through the retail branches of BPM and Banca Popolare di Mantova, including households and businesses with turnover below €15 million. In addition, it comprises the

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Group's private banking business (carried out by both BPM and Banca Akros), the online banking activities and the consumer credit activities (carried out by both BPM and ProFamily);

 Corporate Banking: the Group provides, through BPM, a wide range of corporate banking products and services to its corporate customers falling within one the following three categories: (i) large corporates (companies with a turnover over €250 million), (ii) upper corporates (companies with a turnover between €50 and €250 million) and (iii) middle corporates (companies with a turnover between €15 and €50 million). This business segment also comprises services relating to investment and extraordinary financial transactions;

 Treasury and Investment Banking: the operations of the treasury and investment banking business segment include managing the Group's own securities portfolio, trading on its own account in securities and foreign exchange and treasury activities. This segment not only reports the financial activities typifying the Group's commercial banks, but also the results of Banca Akros, the Group’s investment bank;

 Corporate Center: this business segment covers residual services and other operational services instrumental to the functioning of the Group's operations that are not included in the other business segments. This segment includes the investments portfolio, the subordinated liabilities and other assets and liabilities not allocated to the preceding business segments. The following companies are classified in this segment: BPM Capital I LLC, BPM Luxembourg S.A., the three special purpose vehicles set up for the securitisation of mortgages (BPM Securitisation 2 S.r.l., BPM Securitisation 3 S.r.l., ProFamily Securitisation), the two special purpose vehicles created for the covered bond issue programme (BPM Covered Bonds and BPM Covered Bond 2), and the results of Ge.Se.So.,(a canteen services company).

The table below sets forth the operating income for each business segment for the years ended 31 December 2015 and 2014.

Corporate centre, Treasury and eliminations and Corporate Investment rectifications for Operating income Retail Banking Banking consolidation (*) Total (€ thousands) Year ended 31 December 2015 ...... 946,765 411,732 366,187 (57,467) 1,667,217 Year ended 31 December 2014 ...... 968,366 385,266 465,492 (197,518) 1,621,566 ______For further information on the business segments of the Group, please see BPM's audited consolidated financial statements as at and for the years ended 31 December 2015 and 2014, incorporated by reference in this Offering Circular.

Products

The Group's product offering is broad and diversified and includes the following:

 current accounts and other types of deposit accounts designed to meet the needs of retail and corporate customers, including products sold through direct channels such as automatic teller machines (ATMs) and internet banking;

 other banking services (including, but not limited to, wire transfers, payment and collection services);

 debit, credit and prepaid cards. Since 2007 BPM has been issuing its own credit cards;

 mortgage and other loan services (other than for a first-time home purchase), as well as the refinancing of loans granted by other credit institutions;

 personal loans and salary assignment (in accordance with Inps/Inpdap), offered through the Group's commercial banks and ProFamily; consumer credit and guaranteed loans offered by ProFamily, and loans for employees paid through salary assignment;

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 certificates of deposits and debt securities, traditional or structured, issued by the Group's banks and by third party banks;

 life and non-life insurance policies issued, respectively, by Bipiemme Vita S.p.A. ("Bipiemme Vita", in which BPM holds a 19% stake) and Bipiemme Assicurazioni S.p.A. ("Bipiemme Assicurazioni", wholly controlled by Bipiemme Vita, part of the Covéa group, with which the Group has a partnership);

 asset management products (mutual funds, individual managed portfolios and other products) under the brand of Anima SGR6 controlled by A.M. Holding S.p.A. ("Anima Holding"), listed on the Italian Stock Exchange and in which BPM holds – at 31 December 2015 – a 16.85% stake. After the sale of the participation exceeding the defined legal thresholds, at the date of this Offering Circular, the BPM participation amounts to 14.67% ; and

 products tailored to corporates, including: deposits, leasing, factoring, special loans, subsidised finance, building loans, agricultural loans, products for foreign operations, products for financial risk management, extraordinary financing services and services to facilitate market access.

The table below sets forth the detailed volumes of direct deposits of the Group as at 31 December 2015 and 2014 and as at 31 March 2016 and 2015.

Direct deposit by products 31/12/2015 31/12/2014 31/3/2016 31/3/2015 (€ thousands) Current and savings accounts ...... 24,333,403 22,306,372 25,004,527 22,470,787 Repurchase agreements ...... 4,161,292 5,267,799 5,762,224 5,006,301 Other types of deposits...... 128,157 128,771 129,641 112,807 Due to customers ...... 28,622,852 27,702,942 30,896,392 27,589,895 Bonds and structured securities ...... 6,053,696 6,554,710 4,660,718 6,343,367 Subordinated liabilities ...... 1,463,042 2,095,802 1,444,517 2,078,299 Repos on own securities repurchased…………………………….. 1,194,440 0 35,180 0 Other types of securities ...... 138,112 331,322 139,985 255,552 Securities issued ...... 8,849,290 8,981,834 6,280,400 8,677,218 Financial liabilities designated at fair value through profit and loss ...... 129,627 152,116 132,454 161,759 Total Direct Deposit ...... 37,601,769 36,836,892 37,309,246 36,428,872

The table below sets forth the detailed volumes of indirect deposits of the Group as at 31 December 2015 and 2014 and as at 31 March 2016 and 2015.

Indirect Deposit from ordinary customers at market value 31/12/2015 31/12/2014 31/3/2016 31/3/2015 (€ thousands) Mutual funds ...... 12,593,870 10,279,397 12,485,693 11,550,302 Individual portfolio management (1) ...... 2,291,262 2,344,018 2,179,655 2,403,532 Insurance sector reserves ...... 6,016,313 5,248,939 6,190,986 5,678,926 Total assets under management ...... 20,901,445 17,872,354 20,856,334 19,632,760 Assets under administration...... 13,158,758 14,737,869 12,162,103 15,251,969 Total indirect customer deposits ...... 34,060,203 32,610,223 33,018,437 34,884,729 ______(1) Includes management of portfolios, management in funds' units and liquidity accounts

The table below sets forth the composition of loans to customers of the Group as at 31 December 2015 and 2014 and as at 31 March 2016 and 2015.

Loans to customers by products 31/12/2015 31/12/2014 31/3/2016 31/3/2015 (€ thousands) Mortgage loans ...... 16,505,014 15,773,904 16,737,438 15,822,444

6 In 2009 Anima SGR integrated Bipiemme Gestioni (Bipiemme Group) and Prima SGR (Monte Paschi Group).

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Loans to customers by products 31/12/2015 31/12/2014 31/3/2016 31/3/2015 (€ thousands) Other types of loans: ...... 17,660,797 16,189,974 17,422,106 16,661,461 Current accounts ...... 3,160,116 3,468,453 3,080,461 3,548,034 Repurchase agreements ...... 232,956 64,875 212,711 97,413 Credit cards, personal loans and salary assignments ...... 1,510,931 1,566,559 1,483,229 1,512,380 Financial leases ...... 196,463 218,713 181,319 212,878 Other loans ...... 8,936,107 7,273,473 8,847,429 7,591,965 Non-performing exposures ...... 3,624,224 3,597,901 3,616,957 3,698,791 Total loans to customers ...... 34,165,811 31,963,878 34,159,544 32,483,905 Debt securities ...... 21,026 114,965 22,104 116,472 Loans to customers ...... 34,186,837 32,078,843 34,181,648 32,600,377

Distribution Network

As at 31 March 2016, the Group's distribution network had 714 branches, consisting of 655 retail branches (of which 105 are Hubs and 3 virtual branches), 9 corporate centres (catering for large corporates, upper corporates and middle corporates), 14 private centres (of which 12 BPM centres and 2 Banca Akros centres), as well as a distribution network of 36 branches s of ProFamily, the Group's consumer credit company.

During 2015, in line with the Group’s objectives to strengthen its territorial presence and to optimise and improve the efficiency of its distribution network, making it more flexible and sales-oriented, the Group closed 1 BPM branch, 6 corporate banking centres and opened 2 private banking centres, adding 2 point of sale to the ProFamily network and 1 retail branch.

The table below sets forth the distribution of the retail branches among the Group's banks as at 31 December 2015 and 2014 and 31 March 2016 and 2015.

Branches 31/12/2015 31/12/2014 31/3/2016 31/3/2015 BPM ...... 637 636 637 636 Banca Popolare di Mantova ...... 17 17 17 17 Banca Akros ...... 1 1 1 1 Total ...... 655 654 655 654 ______

The Group operates predominantly in the Lombardy region, where approximately 63% of its bank branches are situated as at 31 March 2016. The remaining bank branches are situated in Piedmont (13%), Lazio (10%), Puglia (6%), Emilia Romagna (4%) and other regions (4%).

As at 31 March 2016, the Group also has a network of financial promoters to complement its traditional distribution network, primarily involved in the placement of asset management products, comprised of 57 agents (of whom 42 refer to BPM and 15 refer to Banca Akros).

The traditional distribution network is increasingly being complemented by channels of the internet banking and of call centre services.

With reference to internet banking, as at 31 March 2016, the Group had 760,944 customers using its internet banking services, of which 650,201 were private customers and 110, 743 were enterprises. The number of online customers as at 31 March 2016 has increased by 6.9% compared to March 2015, representing an increase in the customer base of over 46,000 private customers and approximately 3,000 enterprises.

The call centre service, offered by the commercial banks of the Group, had, as at 31 March 2016, over 615,000 customers and it provides a multilingual service to meet the needs of foreign customers.

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Employees

As at 31 March 2016, the Bank had 7,730 employees (7,743 as at 31 December 2015), including project workers and other staff members that are temporary workers and non-employees engaged on other types of contract.

BPM entered into a framework agreement with the trade union representatives in December 2012 to provide for early retirement incentives for employees who have satisfied, or will satisfy, the requisite pension requirements and/or the conditions for participating in the Solidarity Fund of the banking sector.. 2015 has been the last year of voluntary redundancy with 132 employees retired. In three years the entire Solidarity Fund has seen 715 retired of which 706 related to BPM.

The following table sets forth the number of employees of the Group, as well as the breakdown by employee category as at 31 December 2015 and 2014 and 31 March 2016 and 2015.

Temporary workers and Executives other Top & Middle Other contractual Total Managers Managers Staff forms 31 December 2015 ...... 7,743 146 2,798 4,792 7 31 December 2014 ...... 7,759 150 2,798 4,792 19 31 March 2016...... 7,730 145 2,799 4,779 7 31 March 2015...... 7,761 149 2,771 4,835 6

Merger between BPM and Banco Popolare

Overview

On 23 March 2016, BPM and Banco Popolare Società Cooperativa (“Banco Popolare”) signed a memorandum of understanding (“MoU”) for merger by incorporation of the two banks into a new company established in the form of a joint stock company (“Merger”). The newly incorporated company will operate both as a bank and a holding company, and will have operating functions as well as responsibilities of coordination and management of all companies forming part of a new banking group (“New Parent Company” and “New Group”).

On 24 May 2016, following favourable opinion of the BPM’s Supervisory Board, the Merger was approved by the Management Board of BPM, and by the board of directors of Banco Popolare. It is expected that the name of the New Parent Company will be Banco BPM S.p.A., that its shares will be listed on the Mercato Telematico Azionario of the Italian Stock Exchange and that it will have a traditional corporate governance system consisting of the board of director and the board of statutory auditors.

Pursuant to the MoU, in the context of the Merger it is envisaged as follows:

(a) Banco Popolare approves and implements a capital increase for a total amount of Euro 1,000,000,000 (“Capital Increase”), the Capital Increase was fully subscribed on 1 July 2016, and

(b) spin-off of certain assets, including branches of BPM, in favour of a banking subsidiary which will be controlled by the New Parent Company.

Transaction structure

The transaction will be structured as a so-called “true” merger through incorporation of a new bank, the shares of which, upon the effective completion of the Merger, will be immediately listed on the Mercato Telematico Azionario. The New Parent Company will be stablished in the form of a joint stock company and will operate as a bank and a holding company. The New Parent Company will have operating functions, and will be responsible for coordination and management of all companies that will form part of the New Group. BPM and Banco Popolare will each transform, through the Merger, from the popular bank into a joint stock company in line with the provisions envisaged in the reform of popular banks (for

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further information, see paragraph “Legislative reforms on popular banks”). The name of the New Parent Company will be Banco BPM S.p.A.

It is expected that the Merger will be implemented with the following exchange ratios calculated on the basis of the percentage holdings disclosed to the market on 24 May 2016:

 1 (one) share of the New Parent Company for each share of Banco Popolare outstanding at the time when the Merger becomes effective; and

 1 (one) share of the New Parent Company for every 6.386 shares of BPM outstanding at the time when the Merger becomes effective.

The percentage holdings and exchange ratios were calculated taking into account (i) the completion of the Capital Increase, and (ii) distribution to the shareholders of Banco Popolare (approximately €54,326,940.90) and shareholders of BPM (€118,537,025.62) of ordinary dividends for the year ended 31 December 2015.

Implementation of the Merger will transform each of BPM and Banco Popolare from a popular bank into a joint stock company, and will give dissenting shareholders of BPM and Banco Popolare who did not approve the Merger the right to withdraw from the bank of which they are shareholders, pursuant to Article 2437, paragraph 1, of the Italian Civil Code.

Conditions precedent to the Merger

The completion of the Merger is subject to (i) full implementation of the Capital Increase by Banco Popolare by no later than 31 October 2016 (such condition has been satisfied on 1 July 2016 with the full subscription of the Capital Increase), (ii) approval of transaction by the Extraordinary Shareholders Meeting of BPM on 1 November 2016, (iii) approval of transaction by the extraordinary shareholders meeting of Banco Popolare on 1 November 2016, and (iv) BPM and Banco Popolare receiving all necessary approvals and authorisations from the competent supervisory and regulatory authorities.

In the event that, inter alia, the Merger is not approved on or before 1 November 2016 by the extraordinary shareholders meetings of BPM and Banco Popolare respectively, the MoU will cease to have effect.

Pursuant to Article 2503 of the Italian Civil Code the Merger will become fully effective following the expiration of a fifteen day period after the extraordinary shareholders meeting resolution approving the Merger and other relevant documents are deposited for registration with the companies register, or on such later date indicated in the act of Merger (the accounting and tax effect of the Merger will run as of such date). During such fifteen day period, the creditors of BPM and Banco Popolare can bring a claim opposing the Merger.

Corporate governance

Corporate governance of the New Parent Company will be based on a traditional system of management and control and will include the board of directors and the board of supervisory auditors. The first board of directors of the New Parent Company will consist of 19 directors, of which at least 9 directors will be independent. The board of directors appointed subsequently will consist of 15 directors, of which at least 7 directors will be independent directors.

The first board of directors of the New Parent Company will have the following composition: (i) chief executive officer (current CEO of BPM, Mr. Giuseppe Castagna); (ii) 9 directors appointed by Banco Popolare, including the chairman of the board of directors (current chairman of Banco Popolare, Mr. Carlo Fratta Pasini) and 2 vice-chairmen; (iii) 7 directors appointed by BPM, including the deputy vice- chairman; (iv) 2 independent directors jointly appointed by BPM and Banco Popolare.

The New Parent Company will appoint an executive committee. Mr. Pier Francesco Saviotti, current chief executive officer of Banco Popolare, will serve as the chairman of the committee, which will be composed of 6 members. The executive committee will further include the chief executive officer of the

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New Parent Company, the deputy vice-chairman and 2 vice-chairmen of the board of directors. The sixth member of the executive committee will be appointed by BPM.

The general manager of the New Parent Company will be Mr. Maurizio Faroni, who is the current manager of Banco Popolare, and two deputy general managers, of which one proposed by Banco Popolare (current deputy general manager of Banco Popolare, Mr. Domenico De Angelis), and one proposed by BPM (current Chief Organisational and Human Resources Officer of BPM, Mr. Salvatore Poloni).

Articles of association of the New Parent Company will contain a provision limiting individual shareholder’s voting rights to 5 per cent. of the entire share capital of the bank. The limitation provision will expire on 26 March 2017 in accordance with the term envisaged in the reform of popular banks. The articles will provide for a mechanism aimed at ensuring representation of the employees on the company’s board of directors.

As disclosed to the market by Banco Popolare on 24 May 2016 (i) Mr. Mauro Paoloni will serve as a vice-chairman of the board of directors of the New Parent Company, (ii) Messrs. Guido Castelloni and Maurizio Comoli will serve as vice-chairmen of the board of directors of the New Parent Company, (iii) other members of the board of directors will be Mr. Mario Anolli, Mr. Massimo Catizone, Ms. Rita Laura D’Ecclesia, Mr. Carlo Frascarolo, Ms. Paola Galbiati, Ms. Cristina Galeotti, Ms. Marisa Golo, Mr. Piero Lonardi, Mr. Giulio Pedrollo, Mr. Fabio Ravanelli, Mr. Pier Francesco Saviotti, Ms. Manuela Soffientini, Ms. Costanza Torricelli and Ms. Cristina Zucchetti;

The board of directors will have the following four committees: audit and risk committee, nominating committee, remuneration committee and related parties committee. Each committee will consists of four members.

The board of statutory auditors will be appointed for a three-year term and will consist of 5 regular auditors and 3 alternate auditors. Mr. Marcello Priori, will serve as the chairman of the board of statutory auditors and Mr. Gabriele Camillo Erba, Ms. Maria Luisa Mosconi, Ms. Claudia Rossi, Mr. Alfonso Sonato will serves as regular auditors. Ms. Chiara Benciolini, Mr. Marco Bronzato and Ms. Paola Simonelli will serve as alternate auditors

PricewaterhouseCoopers S.p.A. will act as independent auditors of the New Patent Company.

Capital Increase

The completion of the Merger is conditional upon satisfaction of a number of conditions precedent, all of which need to be satisfied within the agreed period of time. One of the conditions precedent to the Merger is the Capital Increase by Banco Popolare which has to be fully implemented prior to the approval of the Merger by the extraordinary shareholders meetings of BPM and Banco Popolare. The Capital Increase is aimed at providing the New Group with the adequate capital in light of its future role in the Italian and European banking sector.

On 7 May 2016, the extraordinary shareholders meeting of Banco Popolare approved the proposal to carry out the Capital Increase and granted its board of directors delegated powers to carry out a divisible capital increase, for a total maximum amount of Euro 1,000,000,000, inclusive of share premium. On 10 May 2016, following approval by the shareholders, Banco Popolare’s board of directors resolved to implement the Capital Increase by issuing ordinary shares with no par value and with regular dividend rights to be offered pre-emptively to those who, at the commencement of the subscription period, were the shareholders of Banco Popolare, in proportion to the number of shares held.

On 1 July 2016, Banco Popolare announced that as a result of (i) the rights offering, during which 99.377 per cent. of ordinary shares of Banco Popolare were subscribed, (ii) the offer on the Italia Stock Exchange of the option rights not exercised during the offer period, upon the completion of which and taking into account the shares subscribed during the offer period, the total of 99.571 per cent. of ordinary shares of Banco Popolare offered were subscribed, and (iii) the subscription by certain banks pursuant to the guarantee agreement of ordinary shares in the amount equal to 0.429 per cent. of the total number of shares offered, the Capital Increased was completed with the subscription of 465,581,304 new ordinary shares of Banco Popolare for an overall amount of €996,343,990.56 to be recorded as the share capital of the bank.

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Spin-off of the new BPM S.p.A.

Subject to completion of, and with effect from immediately prior to, the Merger, BPM will carry out a spin-off in favour of an existing subsidiary to be controlled by the New Parent Company of certain assets, including the branches of BPM (“Spin-off”).

The subsidiary company which will be a beneficiary of the transferred assets will have its headquarters in Milan and will be a network bank under coordination and direction of the New Parent Company (where main functions will be centralised) and will have a lean organisation structure coherent with the nature of the network bank and aimed at preventing overlaps with the New Parent Company.

Within a reasonable period of time starting from the completion of the Spin-off and, in any event, with the effect from the third year following the Merger, the beneficiary company of the Spin-off will be merged into the New Parent Company.

Strategic Plan

On 16 May 2016, the management boards of BPM and Banco Popolare approved a strategic plan for the New Group for the period of 2016-2019 (“Strategic Plan”). The Strategic Plan aims to leverage the distinctive features of the New Group, including its unique positioning in the banking sector, and to unlock profitability through an optimized business model in order to offer a better service to the customers by providing a complete range of high value products.

Material Agreements

Disposal of a stake held in Istituto Centrale delle Banche Popolari Italiane S.p.A. (ICBPI)

On 19 June 2015, BPM, together with S.c., Banco Popolare S.c., Banca Popolare di Vicenza S.c.p.A., Veneto Banca S.c.p.A., Banca Popolare dell’Emilia Romagna S.c., Iccrea Holding S.p.A., Banca Popolare di Cividale S.c.p.A., UBI Banca S.c.p.A., Banca Sella Holding S.p.A., and S.p.A. entered into a share sale and purchase agreement with Mercury Italy S.r.l (an investment vehicle owned indirectly by funds advised by Bain Capital, Advent International and Clessidra SGR) for the sale of 85.29% of the share capital held in ICBPI. Pursuant to the agreement BPM agreed to sell to Mercury Italy S.r.l. its 4.00% shareholding in ICBPI.

On 18 December 2015, following the authorization received from the competent supervisory authority, the share sale and purchase agreement with Mercury Italy S.r.l was concluded based on the valuation of 100% of the share capital of ICBPI at approximately €2,150 million. As a part of the transaction, BPM sold its 4% stake in ICBPI with a cash-in of €86.5 million and retained the remaining 1% holding.

The transaction resulted in an overall net capital gain of €70 million and had a positive impact on the Bank’s Common Equity Tier 1 of approximately 25 basis points.

Legal Proceedings

The Bank is subject to certain claims, and is party to a number of legal proceedings, that have arisen in the ordinary course of its business.

As at 31 December 2015, the Bank had set aside in its consolidated financial statements: (i) provisions for legal proceedings of approximately €43,550 thousand; (ii) provisions in relation to disputes with employees of €1,654 thousand; (iii) provisions in relation to fiscal/tax disputes of €5,216 thousand; (iv) €12,010 thousand to cover pending claw back actions against the Bank and Group companies, and (v) provisions for the coverage of operational and counterparty risk of €5,724 thousand. There are no significant differences between the amounts of the provisions as at 31 March 2016 and the aforementioned figures.

During the 12 month-period before the date of this Offering Circular there are no administrative, judicial or arbitral proceedings pending against or affecting the Bank or any of its subsidiaries, nor is the Bank aware of any such threatened proceedings, in each case, that may have or have had in the recent past, a significant effect on the Group's financial condition or results of operations.

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Set out below is a summary of information relating to the principal legal and administrative proceedings currently, or recently, involving the Group.

Dispute pertaining to compound interest (Anatocismo)

According to Article 1283 of the Italian Civil Code, in respect of a monetary claim or a receivable, accrued interest can be capitalised after at least six months under an agreement subsequent to such accrual or from the date when the relevant legal proceedings are commenced in respect of that monetary claim or receivable; according to Article 1283 of the Italian civil code the aforesaid provisions only can be derogated through recognised customary practices ("usi"). Banks in the Republic of Italy have traditionally capitalised accrued interest on a three-month basis on the grounds that such practice should be characterised as a customary rule ("uso normativo"). Pursuant to judgments no. 2374/1999 and 3096/1999, the Supreme Court (Corte di Cassazione), overturning its previous decision, declared the practice of compounding interest charges on current accounts on a quarterly basis unlawful, re- characterising such practice as a customary clause ("uso negoziale") and as such not to enable banks to derogate from the aforesaid provisions of the Italian civil code. This interpretation has been confirmed by recent rulings by the Supreme Court (Corte di Cassazione) (the ruling no. 24418/2010 and order no. 20172/2013).

Subsequently, Italian Legislative Decree No. 342/99 affirmed the lawfulness of infra-annual compounding of interest in bank current accounts, provided payable interest is compounded with the same periodicity as receivable interest. The dispute arising from this jurisprudence thus involves agreements entered into before the date of entry into force of Italian Legislative Decree No. 342/99.

Article 2, paragraph 61, of Law Decree 225 of 29 December 2010 (the so called "One thousand extensions" decree), converted, with amendments, by Italian Law No. 10/2011, on the matter of compound interest, introduced a rule for the authentic interpretation of Article 2935 of the Italian Civil Code which, with respect to the statute of limitations of legal actions for the reimbursement of interest unduly paid, set the initial date of the 10-year term from the time the transaction was recorded on the account, rather than from the date of closure of the current account. This article was declared unconstitutional by the Constitutional Court, with its judgment no. 78 of 5 April 2012.

The above decision gave new impetus to the compound interest dispute. However, as at the date of this Offering Circular, the total number of pending cases has not reached unusual levels, and is subject to ongoing monitoring. The related risks are managed through timely and precautionary allocations to the related provision.

Article 1, paragraph 629 of Law No. 147 of 27 December 2013 (the so-called “2014 Stability Law”) amended Article 120(2) of the Italian Banking Act as follows: “The CICR (Comitato interministeriale per il credito e il risparmio) lays down the rules and criteria for the accrual of interest in the context of banking transactions, providing in each case that: a) in the current account transactions the same frequency of calculation of interest is ensured for both credit interest and debit interest; b) periodically capitalised interest cannot produce further interest; in subsequent capitalisation transactions, interest is calculated solely on the principal”.

Article 31 of Law Decree No. 91 of 24 June 2014 introduced an amendment to Article 120, paragraph 2 of the Italian Banking Act, by delegating to CICR the authority to set the terms and criteria pursuant to which interest may accrue on interest, with a frequency not exceeding once a year, in transactions implemented in the exercise of normal banking and financial activities. Furthermore, it required that bank account contracts ensure the same frequency of calculation of interest for both credit and debit interest, which must be calculated on 31 December of each year. The Law Decree was never converted into law.

On 23 December 2014 the Consumer Group Association filed a claim against BPM with the Court of Milan with the aim of obtaining injunction against all forms of capitalisation of interest, including against the application of compound interest, with all the consequent appropriate measures to eliminate the effects of such application. Similar proceedings have been brought before the Court of Milan by the same Consumer Group Association against two other banks. Two of the proceedings pending before the Court of Milan, including the one against BPM, have been subsequently joined. On 12 January 2015 the claim was declared inadmissible by the Court of First Instance.

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The decision of the Court of First Instance was subsequently appealed by the Consumer Group Association. The Court of Milan allowed the appeal brought by the Consumer Group Association against BPM and on 3 April 2015, issued an order pursuant to which, in accordance with the provisions of the 2014 Stability Law which amended Article 120(2) of the Italian Banking Act, the Court ordered the bank to refrain from proceeding with the application of any form of compounding of interest with reference to the contracts related to the current accounts that have been executed already or will be entered into in the future with the consumers.

BPM has complied with the provisions of the order and acted in due course to challenge the order and obtain the correct interpretation of Article 120 of the Italian Banking Act.

In August 2015, the Bank of Italy submitted for public consultation a proposed resolution of CICR pursuant to Article 120, paragraph 2 of the Italian Banking Act as provided by the 2014 Stability Law to implement Article 120, second paragraph of the Italian Banking Act, as amended by Law No. 147/2013. The resolution was not adopted.

Article 17-bis of Law Decree No. 18 of 14 February 2016 as converted into Law No. 49 of 8 April 2016 amended Article 120, paragraph 2 of the Italian Banking Act as follows: “the CICR lays down rules and criteria for the accrual of interests in transactions carried out in the exercise of banking activity, providing, however, that: a) in the current account or payment account transactions the same frequency of calculation is ensured for both credit interest and debit interest, and in any event at least once a year; the interest is calculated on 31 December of each year and, in any case, upon termination of relationship for which such interest is due; b) accrued debit interest, including interest on credit card payments, cannot produce further interest, save for interest on arrears, and is calculated solely on the principal; in case of current account credit facilities and overdraft facilities without a credit line or in excess of the overdraft limit: (1) interest must be calculated on 31 December, and will become due and payable on 1 March of the following year; in case of termination of relationship, accrued interest will become immediately due and payable; (2) client can authorise, also in advance, the debiting of accrued interest on its current account as soon as such interest becomes due and payable; in such event, the relevant interest amount is considered as principal; authorisation can be revoked at any time before the interest is debited.”

As at the date of this Offering Circular, given the novelty of the amendment and the absence of a CICR resolution, the impact of the new amendment cannot be predicted.

Dispute pertaining to financial instruments

The Bank's internal policies require the evaluation of complaints and lawsuits pertaining to financial instruments, such as bonds in default, on a case by case basis. Particular consideration is given to the appropriateness with respect to the position of each individual investor, to the disclosure provided and to the completeness of the contractual documentation. Provisions are determined analytically, taking into consideration the specific circumstances of individual cases.

In particular, complaints and lawsuits pertaining to financial instruments issued by the Argentine Government are managed in accordance with the ordinary procedure for any other type of financial product, by means of a case by case assessment of the individual position. Equally, as for the assessment of other legal risks, provisions are determined analytically, taking into consideration the specific circumstances of individual cases.

The Convertible Notes

On 24 January 2012, BPM received a writ of summons for a class action brought by nine holders of the "6.75% Convertible Notes 2009/2013" (the "Convertible Notes") and the National Federation of Consumers and Users (Federconsumatori), concerning the placement of the Convertible Notes.

The class action is based on the claim that on the placement of the Convertible Notes with retail investors, BPM failed to comply with legal provisions in respect of disclosure to customers and, more generally, in respect of applicable laws on financial intermediation (namely, the MiFID Directive).

The Bank signed a protocol of understanding with three consumer associations on 3 August 2012, to which eight further consumer associations have subsequently subscribed. The protocol provides for a

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mediation procedure to be commenced to settle the disputes on the Convertible Notes, to be presided over by a commission comprised of a representative from BPM and a representative of the consumer associations. The commission will evaluate the case submitted by each retail investor who complies with the mediation procedure and, subject to verification of certain conditions, will make a settlement proposal to such investor based on defined parameters. On 30 June 2014, BPM signed an amendment to the protocol which extends the deadline for the filing of the admission requests by retail customers and allows the admission of shareholders of BPM to the mediation procedure in certain circumstances. As a result of such amendment, requests for admission to the mediation procedure may be submitted from 15 September 2014 to 30 September 2015.

The Bank set aside a provision of €40 million in its 2011 financial statements in relation to potential liabilities relating to disputes arising from the Convertible Notes. This provision was increased to €47 million (on a consolidated level) in 2012 in view of results from the collected documents and the undertakings set out in the protocol of understanding. As at 31 December 2014, taking into consideration payments already made to the relevant parties, the provision amounted to €26.1 million.

The period for submission of applications to be admitted to the conciliation procedure ended on 30 September 2015. The conciliation procedure closed on 31 December 2015. After recognising the total costs of €27.5 million, €17.4 million were released from the provision for risks and charges. The amount of €2.5 million was retained to cover the liabilities that may arise from the cases not subject to the conciliation procedure.

Tax litigation

Bipiemme Immobili (incorporated in BPM) - 2005

Following initial assessment notices (processi verbali di constatazione) in respect of tax verification of Bipiemme Immobili S.p.A. (incorporated in BPM in 2007) in relation to 2005, the related summonses for assessment (avvisi di accertamento) were issued on 9 December 2010 contesting the increased IRES of €230 thousand, IRAP of €29 thousand and VAT of €93 thousand plus fines. Appeals were filed against these summonses for assessment.

On 24 May 2012, the provincial tax commission of Milan upheld the appeal submitted by BPM in relation to VAT. The tax authority has not appealed the decision of the provincial tax commission of Milan and therefore this decision has become final.

The appeals submitted in relation to IRES and IRAP were rejected and BPM has appealed against this decision. These appeals have been accepted in most parts by the regional tax commission of Milan which, by the sentence n. 2911/28/14 deposited on 29 May 2014, reformulated the first degree decision. This decision has been appealed by the tax authorities before the Supreme Court (Cassazione).

BPM – registration tax on the purchase of branches

During 2010, the Bank received three payment requests (avvisi di liquidazione) for registration tax on the purchase of branches from in 2008. The payment requests (avvisi di liquidazione) dispute the Bank's application of different rates in calculating registration tax. Tax amounting to a total of €4,091 thousand is being claimed. Appeals have been duly filed.

Two disputes were concluded with the final judgments handed down in favour of the Bank. As at the date of this Offering Circular, there is only one dispute that remains pending for a total amount of €422 thousand as a result of an appeal filed by the tax authorities with the supreme court. The Bank appeared before the court.

BPM – registration tax on the sale of business

On 25 June 2012, BPM received a notice for the rectification and payment of registration tax relating to the sale to BNP Paribas on 29 June 2010 of its depository bank business. BNP Paribas received a similar notice as purchaser – principal obligor. The notice, re-determining the presumed value of the business concern, quantified increased registration tax of €381 thousand, plus interests amounting to €26 thousand as of June 2012.

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BPM submitted an application for agreed assessment (istanza di accertamento con adesione) in conjunction with BNP Paribas. No agreement has been reached with the tax authorities and consequently BPM has submitted an appeal to contest the claims made. The appeal was upheld by the provincial tax commission of Milan with the ruling no. 1255/47/2015 registered on 11 February 2015.

The tax authorities have filed an appeal against the decision of the provincial tax commission’s ruling and BPM appeared before the court.

Former Banca di Legnano (incorporated in BPM) – inspection by tax authorities

On 2 February 2015 the tax authorities commenced a general inspection in relation to the 2012 tax year of the former Banca di Legnano.

The inspection by the tax authorities has been extended to the 2011 tax year in relation to the VAT treatment on servicing fees payable on the covered bond transactions.

On 3 December 2015, two tax assessment notices, related to the 2010 tax year, were given to BPM. The two notices are related to the VAT exemption of servicing fees paid in the context of the covered bonds transactions. The first notice given to BPM assesses the additional tax payable in the amount of €134,272 plus €167,840 by way of penalties. Under the second notice, the tax authorities claim additional tax payment of €7,684 plus penalties of €9,557.

The Bank appealed against both notices on 29 January 2016.

In July 2016, the tax authorities requested from BPM (by way of a questionnaire) clarification on the tax treatment of the servicing fees paid to the Bank (as servicer) under the Covered Bond Programme for the services provided in 2011. Tax authorities further requested from BPM clarifications on the servicing fees paid to the Bank in the year 2013.

The general inspection by the tax authorities of Banca di Legnano was concluded on 20 July 2016 with a positive outcome, save for the challenge to the VAT payable for the servicing fees (covered bonds) for the year 2012 in the amount of €16,000.

Inspection by Supervisory Authority

On 24 August 2015, BPM received a notice from the Bank of Italy on the outcome of transparency investigation conducted by the Bank of Italy at a number of the Issuer’s branches in the fourth quarter of 2014. The investigation has revealed certain limited critical shortcomings related to credit contracts, fees, overdraft facilities and notices to the customers. Upon request of the Bank of Italy, BPM provided the Bank of Italy with a plan of actions taken to address the emerged failings. In May and July 2016, in compliance with the requirement of the Bank of Italy to provide updates on the measures aimed at resolving the failings that arose during the inspection, BPM provided to the authority an update on the status of ongoing activities aimed at resolving detected failings, some of which relate to areas under ongoing investigation by the Bank of Italy.

As part of ongoing supervision of the major European banking groups, the ECB announced, on 17 September 2015, its intention to start routine inspection of BPM (so-called, on-site inspection) related to the Group and market risk, liquidity and interest rate risk in its banking book (IRRBB). This inspection was concluded in January 2016. On 19 July 2016, the ECB communicated to BPM the result of inspection and recommendations on the areas of improvement, and in particular: (i) strengthening of coordination mechanisms at a Group level; (ii) adoption of pricing models validation plan; (iii) adoption of a formal IRRBB policy; (iv) strengthening of the current fair value policy; (v) improvement of methods and tools of monitoring and measuring risks; and (vi) strengthening of dedicated resources (human and information technology). The ECB further specified that certain measures can be temporally calibrated taking into account the business plan related to the Merger.

On 18 January 2016, the ECB commenced an assessment of the Non-Performing Loans strategy, governance, processes and methodology of BPM as a part of the ongoing supervision process which involves, among other Italian and European banks, also BPM. As at the date of this Offering Circular, the results of the assessment have not be published.

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On 30 May 2016, the ECB started an inspection related to the credit risks of the Group, and in particular the inspection focused on the management of credit and counterparty risk and the risk control system of BPM. As at the date of this Base Prospectus, the inspection is ongoing.

Simultaneously, the Bank of Italy commenced inspection aimed at evaluating the procedures and processes of fee charging for credit lines and overdrafts. The inspection was concluded, however, as at the date of this Offering Circular the results of the inspection have not been disclosed to BPM.

Finally, on 4 July 2016, the ECB started an inspection on the accuracy of calculation of the Group's financial position. As at the date of this Offering Circular, the inspection is still ongoing. For more information, see “Risk Factors - Risk Related to the inspection of the Supervisory Authority”.

Labour disputes

As at 31 December 2015, there are 14 labour disputes pending against the Bank, most of which are for alleged downgrading of duties or appeals by former employees challenging their dismissal for disciplinary reasons.

For the labour disputes the Bank makes the appropriate provisions in accordance with its guidance.

Licenses and Trademarks

The only licenses or trademarks registered for the Group are the trademarks and logos relating to the Bank and other companies of the Group and to the Group's products, including WeBank.

Risk Management

The Management Board of BPM has responsibility for making strategic decisions concerning risk management and control at Group level, with the view of achieving an integrated and coherent risk management policy, taking into account the type of operations and associated risk profile of each Group company, with the aim of preserving Group’s sound and prudent management. The monitoring and control of risk is delegated to the Chief Risk Officer of the Bank, which has recourse to the corresponding operating function in Banca Akros.

Moreover, the Issuer:

 ensures that the same methods, measurement criteria and control tools are used throughout the Group and that they are suitable for the type and size of the risks being assumed;

 decides on the adoption of internal risk measurement systems (which are also used for the purpose of regulatory capital absorption) and is responsible for their implementation and for monitoring their proper functioning;

 ensures the corporate bodies of the subsidiary companies are involved in the decisions made concerning risk management procedures and policies; and

 performs periodic assessment of the Group’s risk profile, i.e. the actual risk assumed by the Group, measured at a given point in time, as part of the Risk Management reporting, and compares it with the threshold values laid down by the Risk Appetite Framework.

The adequacy, efficacy and effective functioning of the System of Internal Control (to be considered as the set of rules, procedures and organisational structures aimed to ensure: (i) the verification of the implementation of the Bank's strategies and policies; (ii) the control of risk within the limits indicated in the Risk Appetite Framework; (iii) the safeguarding of the value of activities and the prevention of losses; (iv) the effectiveness and the efficiency of the Bank's processes; (v) the reliability and safety of the Bank's information and IT procedures; (vi) the prevention of the possibility that the Bank is involved, unintentionally, in illegal activities; and (vii) the compliance of the operations with the laws and the Supervisory Regulations as well as with the internal policies, rules and procedures) are assessed, according to their respective areas of competence, by:

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 the Management Board of BPM, which is responsible for risk management and internal controls in accordance with art. 39, paragraph 2.d of the by-laws, without prejudice to the powers and duties of the Supervisory Board;

 the Managing Director and CEO of BPM, who has been assigned the power to promote integrated risk management (art. 45, paragraph 2, of the by-laws);

 the Supervisory Board of BPM, which is responsible for the assessment of the level of efficiency and adequacy of the System of Internal Control (with particular regard to risk control, the internal audit function and the accounting and reporting system) and also checks that the Bank properly performs its strategic and management control activities over the other Group companies (art. 51.e of the by-laws);

 the Internal Control and Audit Committee of the Bank, through which the Supervisory Board carries out its control functions, being an ongoing point of reference for the Bank's organisational structures that perform control functions and from which it receives periodic reports on specific situations or business trends; and

 the Bank's Internal Auditing function (which carries out the internal audit), the Bank's Compliance function (which has the purpose of guaranteeing the assessment of compliance within the rules by the Bank) and the Chief Risk Officer function (which is responsible, at Group level, for the monitoring of risk and implementation of the processes of risk management).

Structure of the Single Supervisory Mechanism

The new regulatory framework on the Single Supervisory Mechanism became effective in 2015. To respond to new complex challenges posed by the new regulatory framework and to maintain a high degree of reliability and overall effectiveness of its internal control system, the Group launched an organisational restructuring plan which, in July 2015, led to creation of the Chief Risk Officer function. The Chief Risk Officer co-ordinates the following units: Risk Management and Capital Adequacy, Validation, both of which are set up in line with the functions that existed as at 31 December 2014, Regulatory Relationship and Risk Control, which are instead newly established functions.

Chief Risk Officer

The role of the Chief Risk Officer is to oversee, by means of various organisational units over which he presides, risk management at the Group level, assuring the development and continuous improvement of risk measurement methods and models. The Chief Risk Officer also observes the Risk Appetite Framework (RAF) and the related risk governance policies and implements them through an adequate risk management process.

The main areas of responsibility of the Chief Risk Officer are:

(a) the Risk Appetite Framework. In particular, the Risk Management Function shall perform the following duties: (i) contribute to the definitions of the RAF, risk governance policies and of the various steps that constitute the risk management process as well as setting operating limits to the various types of risk under its competence; (ii) propose quantitative and qualitative parameters for the definition of the RAF, with reference also to stress scenarios, and update parameters as necessary in case of changes in the internal and/or external operating environment; (iii) continuously verify the adequacy of the RAF; (iv) provide preventive opinions on the consistency of transactions of major relevance, possibly obtaining the opinions of other functions involved in the risk management process; and (v) contribute, in collaboration with the Compliance and Audit functions and with the Heads of the main Units of the Bank and of the Group, to the widespread adoption of the risk guidelines; and

(b) the risk management process (under its competence). In this area, the Chief Risk Officer shall:

 identify the actual and potential risks to which the Group is or may be exposed to, and in particular it shall: (i) verify that monitoring is properly carried out on individual credit exposures, assess the consistency of the classifications and the adequacy of provisions

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and of the recovery process; and (ii) analyse the risks of new products and services and those deriving from the entry into new operating and market segments;

 measure or assess risks, and in particular it shall: (i) oversee the development, validation and maintenance of the systems for measuring and controlling the risks under its competence (inter alia, the internal rating system), delegating, when appropriate, the risk management functions that operate within the Group's companies; (ii) provide support to the competent Functions with respect to the correct utilisation of risk parameters; (iii) define common metrics to assess the operational risks, consistent with the RAF, coordinating with the regulatory compliance, IT and operating continuity functions; (iv) define the procedures for assessing and controlling reputational risks; (v) assist the corporate bodies in the assessment of the strategic risk and the monitoring of significant variables; and (vi) assure the consistency of the models and of the risk measurement and control systems with the processes and methods for assessing corporate activities;

 monitor risk exposure, and in particular it shall: (i) oversee the definition of the policies and the limits on risks under its competence; (ii) constantly monitor the actual risk assumed by the Group and its consistency with risk objectives, as well as compliance with the operating limits assigned to the organisations; (iii) develop and apply indicators capable of pointing out anomalies and inefficiencies of the risk measurement and control systems; and (iv) assure timely notifications in case of non-compliance with policies and/or limits;

 contribute to risk prevention and mitigation; in particular, it shall: (i) identify and propose risk mitigation actions, agreeing any specific initiatives with the involved functions; and (ii) supervise the strategic management of the insurance coverage of the Group;

 provide a group – wide deep and regular reporting about the Group's risk profile;

 continuously verify the adequacy of the risk management processes and of the operating limits;

 verify the adequacy and effectiveness of the measures taken to remedy the deficiencies arisen in the risk management processes;

 assess the adequacy of liquidity and collaborate in assessing the adequacy of capital in relation to risk appetite, the Group's risk profile and to macroeconomic and market conditions; and

 participate in the definition of the contents of the Internal Capital Adequacy Assessment Process ("ICAAP") report and in its validation for matters under its competence.

The following units report directly to the Chief Risk Officer:

 “Risk Management and Capital Adequacy”, which collaborates on the definition and implementation of the RAF, ICAAP and ILAAP Reports, Recovery Plan, and on related risk management policies by means of an adequate risk management process, through identification, assessment and evaluation, monitoring, prevention or mitigation and reporting of the risks to which the Group is or might be exposed, guarantees adequate capital resources of the First and Second Pillar and an adequate liquidity profile. With reference to the market risk, the Risk Management and Capital Adequacy Function co-operates with the analogous function at Banca Akros. The Risk Management and Capital Adequacy Function supervises Operational Risk activities and coordinates the Operational Risk Management of the Group companies. It further ensures the measurement, monitoring and management of capital requirements for each type of risk, ensuring supervision and quantification of the Group’s capital resources to cover exposures to risks in order to comply with the regulatory obligations;

 “Regulatory Relationship”, which supports the Chief Risk Officer in relations with the Supervisory Authority, in monitoring and consulting the Chief Risk Officer on the regulatory

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provisions, in proactive management of SREP Monitoring and development and dissemination of risk culture;

 "Validation", which assures, for matters under its competence, the analysis and internal validation of the models developed within the Group and used to quantify risks. In particular, the validation is carried out prior to the use of such models and through a continuous monitoring process. In agreement with the other organisational units of the Risk Management function, it shall assess the model risk. The organisational unit shall also validate the calculation of the capital requirements, relying, for any more detailed analyses, on the other organisational units belonging to the Risk Management and Accounting functions. For the internal model for market risk quantification, validated by the Bank of Italy, it shall carry out the validation activities prescribed by supervisory regulations. Validation activities are planned annually in a dedicated document and the criteria applied are regulated in periodically updated Manuals. Any critical issues shall be reported and brought to the attention of senior management and they shall be individually identified through a dedicated process, in order to assure their resolution;

 "Risk Control", contributes to integrated risk management at a Group level by conducting second-level management checks and controls on the credit and financial risks inherent in the main balance sheet items in line with rules contained in the current supervisory provisions, focusing on the accuracy and presentation of the information used for such purpose, and in particular, for evaluating adequacy of the instruments used and of the actions proposed by the first-level structures, specifying steps that may be needed for reorganisation and/or improvement.

In the matters of financial risks (market risk, counterparty risk, liquidity risk, interest rate risk on the trading book), BPM’s Management Board identifies and authorises the Group’s companies that can assume and manage their own financial risks in compliance with the limits established the Bank. With reference to market risk, the limit system for the various types of portfolio is organised as follows: (i) company macro-limits, i.e. the maximum exposure that can be assumed by the companies authorised to take on financial risks; and (ii) directional limits, i.e. the allocation of company limits to individual portfolios, to be defined in specific regulations for financial operations for each Group company.

The Group’s Finance Committee ensures the co-ordination of the Group’s policies for investing in financial assets, the implementation of liquidity policy and related annual ILAAP Report and the monitoring and management of exposure to interest rate risk on the trading book.

The Finance Committee performs the following tasks: (i) monitoring the Group’s operational and structural liquidity by controlling exposure to short-term liquidity gaps, exposure on the interbank market, cash flow and pricing of intragroup liquidity – and the definition of guidelines for managing liquidity; (ii) approving new banking book investments, within the limits established by the Management Board of BPM on the proposal of the Risk Committee; and (iii) monitoring the activity of the Asset & Liability Management (ALM) function and defining corrective policies to balance the exposure of the banking book to interest rate risk for the Group as a whole and for the individual companies.

Strategies and processes for risk management

(a) Credit Risk

The policies for managing and controlling the quality of the loan book and the associated risks are established in accordance with the Group's prudent management guidelines. The policies are implemented through the processes of disbursing, managing and monitoring credit for which specific activities are required and special instruments are made available for controlling the risk that varies according to the circumstances of the market, business sector and type of individual borrower.

The lending activity of each company in the Group is supervised by a specific department dedicated to credit disbursement and control by means of well identified and suitably empowered structures.

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The credit "chain" for the commercial banks offers the possibility that in the presence of low risk (in terms of internal rating) and for amounts that form part of the duties foreseen in the current Credit Line Regulations, proposals can be decided locally by the Commercial Network. If the risk is considered "medium" or "high" – and in any case in accordance with the parameters laid down in the Credit Line Regulations – the "Credit and Loans Function", which is the structure that is able to make a more detailed analysis of the customer's credit-worthiness, takes over.

Internal ratings can only be changed by "raters" specifically appointed for this purpose, who do not have any power of approval for loans. Any change that upgrades or downgrades the rating developed by the model has to be motivated and usually has to be attributable to particular circumstances.

For the assessment of the credit-worthiness, the Group uses an Internal Rating System developed during the last 10 years. From a quantitative perspective, statistical models for the calculation of the rating have been implemented.

The internal rating system is used in the following processes:

 the assessment of credit-worthiness carried out when granting, controlling and renewing a line of credit;

 the definition of lending policies;

 the measurement and control of existing risk;

 customer stratification and in general credit risk analytical reporting to management;

 collective write-down of loans in the balance sheet;

 risk-adjusted pricing and economic value added measurement (EVA); and

 control over capital adequacy (ICAAP).

All of the credit processes use the counterparty rating as a decision-making "driver" and are considered in function of the specific nature of the various customer segments in order to optimise use of the resources involved in managing and monitoring credit, as well as to achieve a reasonable balance between commercial aggressiveness and effective credit management.

During the credit granting stage, whether as a first-time credit facility or for the renewal/review of a revocable line of credit, the rating is one of the key elements in defining which body has decision-making power.

Usually, subject to changes in the lending rules, the assignment to a particular decision-making body takes place as follows:

 with a rating in the "low risk" area, the decision can be taken at a local level, providing the amounts are below the assigned limits; otherwise, the decision is passed to a higher level, in accordance with the Bank's current Credit Line Regulations;

 with a rating classified as "medium or high risk", even for amounts that fall within approved local limits, the decision is taken by the Lending Department/Committees for amounts that are below their approved limits and at the conditions laid down in the Credit Line Regulations; and

 in the case of an override request, after the assignment of a definitive rating by the responsible function, which has no decision-making powers, the system updates the results of the applicant's assessment and then determines which function should be responsible for the approval thereof.

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(b) Market Risk

In the Group, financial assets are split between the trading portfolio and the banking book, these two portfolios being broken down as follows:

1. the "trading book" includes financial instruments held with a view to benefiting the Group in the short term from positive changes between buy and sell prices through directional (depending on market expectations) and absolute yield strategies (in order to produce a performance not related to the market) and managing position books as market maker;

2. the "banking book" consists of:

 positions traded for cash management purposes, by investing in government securities and/or securities of primary banking issuers, in order to have "easily negotiable assets" or those that are considered "eligible assets" for refinancing transactions with the Central Bank;

 securities traded in order to be used for the purposes of guarantee transactions and/or repurchase agreements with customers;

 positions that are invested long-term with a view to obtaining stable returns over time with a low level of volatility;

 derivatives traded on behalf of customers (so-called "balanced trades") without keeping position books open; and

 treasury and forex portfolio and financial instruments traded with a view to covering the interest rate mismatch caused by the commercial banks' funding and lending activities (Asset & Liability Management – ALM).

The limits' system for the different types of portfolio is organised as follows:

 company limits, meaning the maximum exposure that a group company may assume for market risks; these macro-limits are established for each company by the Management Board of the Bank; and

 directional limits, meaning the allocation of company limits to individual portfolios, to be defined in specific Regulations for Financial Operations for each group company.

The new system of operating limits established that Banca Akros, the Group's investment bank, is the only company in the Group authorised to manage the trading book.

The banking book, on the other hand, has been assigned to BPM and Banca Popolare di Mantova. In particular, the securities portfolio is largely made up of debt securities to be used as collateral for repo transactions with their customers or for the purpose of long-term investment, or equity securities held mainly for strategic or institutional/business purposes.

Banca Akros has divided these by specific sub-areas and individual risk factors in accordance with overall company limits established by BPM. On 17 May 2007, the Bank of Italy authorised Banca Akros to use an internal model to calculate its capital requirements for market risk (with the sole exception of the specific risk on debt securities).

(c) Liquidity Risk

Liquidity risk is the risk that the Bank may not have the cash resources to be able to meet its payment obligations, scheduled or unscheduled, when due. “Funding Liquidity Risk” refers to the risk that the Bank is not able to meet its scheduled or unscheduled payment obligations in an efficient manner due to its inability to access funding sources, without prejudicing its banking activities and/or financial condition. “Market Liquidity Risk” refers to the risk that the Bank can dispose of its assets only at a loss as a result of the market conditions and/or timing requirements.

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According to the Group Liquidity Risk Policy, liquidity governance is centralised at the level of the parent company. Operative management of liquidity is coordinated by the parent company on a centralised basis, subject to appropriate exemptions, with part of liquidity management being carried out by Banca Akros on a decentralised basis but in any case within specific thresholds set in the Group Liquidity Risk Policy and in the Risk Appetite Framework.

Group liquidity risk is managed according to its Internal Liquidity Adequacy Assessment Process (ILAAP) which is the is the process for the identification, measurement, monitoring, mitigation and reporting of the Group’s liquidity profile. This process is divided into the following stages and regulated by Bipiemme Group liquidity risk policy:

- Identification of risks to liquidity;

- Evaluation and measurement of the Group liquidity risk profile, both short term (operative) and long term (structural) and including stress scenarios. Liquidity risk measurement includes the evaluation of the forward looking evolution of the liquidity risk profile;

- Monitoring, reporting and adequacy assessment: reporting activities carried out by the Risk Management of the parent company and Banca Akros which enable the various Bodies and Functions to be informed on the adequacy of the liquidity risk profile and to adopt corrective measures when necessary.

Under the ILAAP process the Group performs an annual internal self-assessment on the adequacy of the whole liquidity risk measurement framework including but not limited to liquidity risk governance, methodologies and IT systems used for liquidity risk measurement and reporting. Should the self-assessment identify any improvement area, specific interventions (action plans) are planned in order to further improve the Group ILAAP process. The results of the internal self-assessment are also reported to the Supervisory Authority.

(d) Operational Risk

In line with the New Regulations for the Prudential Supervision (as a reference CRR and CRD IV), operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. This type includes losses due to fraud, human resources, breakdown of operations, non-availability of systems, breach of contract, natural disasters and legal risks, whereas strategic risk and reputational risk are excluded.

The supervisory regulations also say that banks have to equip themselves with operational risk management systems that are suitable for their size and risk profile and able to guarantee the identification, measurement, monitoring and control of such risk over time.

For the management of the Group's operational risk, it was decided to adopt a centralised model of governance.

The model assigns to BPM, as the holding company, the task of coordinating and supervising all of the operating activities carried on by the individual banks in the Group through:

 a strategic level involving the Management Board, the Supervisory Board, the Internal Control and Audit Committee and the Chief Risk Officer with the support of the Risk Management Department; and

 a more operational level involving the Operational Risk Sector and the Operational Risk Owners identified within each of the banks.

BPM has implemented, at Group level, a system for managing operational risks through:

 a loss data collection process concerning operating losses and insurance recoveries;

 the activation of the Risk Self-Assessment, an annual process for identifying, assessing and quantifying the operational risks, carried out by the Operational Risk function through questionnaires and interviews with the process owners;

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 the definition of criteria and processes to calculate the individual and consolidated capital ratio;

 the implementation of a periodic reporting system, to be directed to the strategic and operating functions;

 the preparation of training instruments and events to promote the involvement and wide adoption of a culture; and

 the annual check of the entire operational risk management system through an internal self-assessment.

(e) Other types of risk

In the ICAAP, the Group prepared the "Risk Map", which includes the other risks identified internally, to which the Group is or could be exposed, in addition to the risks indicated in the First Pillar of Basel II. The mapping is coherent with the risks considered in the Risk Appetite Framework.

For additional information on the risks of the Group's activity, please refer to “Part E – Information on risks and the related hedging policies” of BPM's audited consolidated financial statements as at and for the year ended 31 December 2014, incorporated by reference in this Offering Circular.

Loans classification and asset quality

Pursuant to the Bank of Italy classifications, the Group divides its loans into separate categories: performing loans, bad loans, unlikely to pay and impaired past due. Specialist units within the Group have the task of monitoring and managing non-performing exposures.

The following tables illustrate the composition of the Group's non-performing exposures, gross and net of provisions, as at 31 December 2015 and 2014, 31 March 2016 and 2015, according to the revised definitions of non-performing exposures adopted by the Bank of Italy as of 1 January 2015 further to Commission Implementing Regulation (EU) No. 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to the CRR I Regulation.

The exposure as at 31 December 2014 has been restated in accordance to the new regulations.

Audited 31.12.2015 Audited 31.12.2014 Euro thousands % Euro thousands % Gross exposure Non-performing exposures ...... 5,997,174 16.3 5,852,919 16.9 (a) Bad loans ...... 3,276,069 8.9 3,046,339 8.8 (b) Unlikely to pay ...... 2,621,568 7.1 2,658,033 7.7 (c) Past due ...... 99,537 0.3 148,547 0.4 Other assets ...... 30,747,953 83.7 28,690,833 83.1 Total gross loans to customers ...... 36,745,127 100.0 34,543,725 100.0 Provisions Non-performing exposures ...... 2,372,950 39.6 2,255,018 38.5 (a) Bad loans ...... 1,785,478 54.5 1,701,935 55.9 (b) Unlikely to pay ...... 578,252 22.1 540,854 20.3 (c) Past due ...... 9,220 9.3 12,499 8.4 Other assets ...... 185,340 0.60 209,891 0.73 Total provisions ...... 2,558,290 7.0 2,464,909 7.1 Net exposure Non-performing exposures ...... 3,624,224 10.6 3,597,901 11.2 (a) Bad loans ...... 1,490,591 4.4 1,344,404 4.2 (b) Unlikely to pay ...... 2,043,316 6.0 2,117,449 6.6 (c) Past due ...... 90,317 0.3 136,048 0.4

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Audited 31.12.2015 Audited 31.12.2014 Euro thousands % Euro thousands % Gross exposure Other assets ...... 30,562,613 89.4 28,480,942 88.8 Total net loans to customers ...... 34,186,837 100.0 32,078,843 100.0

Unaudited 31.3.2016 Unaudited 31.3.2015 Euro thousands % Euro thousands % Gross exposure Non-performing exposures ...... 6,043,062 16.4 5,998,625 17.1 (a) Bad loans ...... 3,380,068 9.2 3,077,768 8.8 (b) Unlikely to pay ...... 2,574,693 7.0 2,793,218 8.0 (c) Past due ...... 88,301 0.2 127,639 0.4 Other assets ...... 30,735,624 83.6 29,102,592 82.9 Total gross loans to customers ...... 36,778,686 100.0 35,101,217 100.0 Provisions Non-performing exposures ...... 2,426,105 40.1 2,299,834 38.3 (a) Bad loans ...... 1,835,548 54.3 1,716,712 55.8 (b) Unlikely to pay ...... 582,823 22.6 572,371 20.5 (c) Past due ...... 7,734 8.8 10,751 8.4 Other assets ...... 170,933 0.56 201,006 0.69 Total provisions ...... 2,597,038 7.1 2,500,840 7.1 Net exposure Non-performing exposures ...... 3,616,957 10.6 3,698,791 11.3 (a) Bad loans ...... 1,544,520 4.5 1,361,056 4.2 (b) Unlikely to pay ...... 1,991,870 5.8 2,220,847 6.8 (c) Past due ...... 80,567 0.2 116,888 0.4 Other assets ...... 30,564,691 89.4 28,901,586 88.7 Total net loans to customers ...... 34,181,648 100.0 32,600,377 100.0

Recent Developments

Apart from the developments described below, there are no other recent events which are to a material extent relevant to the evaluation of the Issuer's solvency.

Legislative reforms on popular banks

Legislative Decree 3/2015 “Urgent measures for the banking system and investments” (the “Decree”) published in the Official Gazzette on 24 January 2015, converted into Law no. 33 of 24 March 2015, came into force on 27 June 2015. The Decree introduces a number of important changes for popular banks. In particular, popular banks with assets in excess of €8 billion (including BPM) have a period of 18 months from 27 June 2015 to either reduce their assets to below such threshold or convert into a joint stock company. The Decree also introduces restriction on shareholders’ right to redemption in case of withdrawal following the bank’s conversion into a joint stock company. See further “Risk Factors – Risks related to legislative reforms on popular banks”.

Supervisory Review and Evaluation Process (“SREP”)

On 27 November 2015 the Issuer received the European Central Bank’s (“ECB”) final decision containing the SREP carried out by ECB on the banks under the Single European Supervision, pursuant to Article 97 of Directive 2013/36/EU.

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Based on the analysis and the evaluations conducted by the ECB during the SREP – which highlighted that the Issuer has implemented strategies, processes and mechanisms to comply with Directive 2013/36/EU and European Regulation 575/2013 and also to ensure a sound and prudent management and to cover the bank’s risk exposure – the ECB has confirmed the prudential capital requirements communicated on 25 February 2015. The consolidated minimum Common Equity Tier 1 ratio is set at 9%.

Within the prudential evaluation process, with specific reference to corporate governance, the ECB has indicated further room for improvement, emphasising on certain actions to strengthen the Issuer’s internal corporate governance also in terms of a more balanced composition of the boards, which could be implemented following the transformation of the Issuer into a joint stock company as provided for by the legislative reforms on popular banks (see paragraph “Legislative reforms on popular banks” above, for further details).

The current level of Common Equity Tier 1 ratio, which includes, upon authorization by the ECB, the net income not distributed, as at 31 December 2015, was 11.53%.

Participation of BPM in the “Atlante” Project

On 15 April 2016, the Management Board of BPM gave mandate to the CEO to formulate a binding commitment, for a maximum contribution of up to €100 million, to the alternative closed-end investment fund called “Atlante”, created and managed by Quaestio Capital Management SGR S.p.A. for providing support to banks with a critical management of non-performing loans and a back stop facility in the context of capital increases.

Sale of Anima Holding S.p.A.

In the context of the acquisition by S.p.A. from Banca Monte dei Paschi di Siena S.p.A its 10.3% participation in Anima Holding S.p.A., which acquisition was completed on 25 June 2015, BPM has undertaken: (i) to sell, within 12 months from completion of the acquisition, to third parties that are not connected with BPM and/or Poste Italiane S.p.A. shares held in Anima Holding S.p.A. that are in excess of the threshold established by Article 106 of the Financial Services Act for the launch of compulsory takeover bids; and (ii) not to exercise the voting rights in relation to such shares, unless CONSOB confirms the absence of an obligation to launch a compulsory takeover bid on all shares of Anima Holding S,p.A., in which case the aforementioned undertaking shall become automatically void. The parties have submitted a request for clarification from CONSOB in this connection.

On 16 June 2016, CONSOB communicated to BPM that, pursuant to Article 106, paragraph 1-bis of the Financial Services Act, the threshold applicable to the takeover bid of Anima Holding S.p.A. (“Anima”) shares was 25% of its entire share capital. On 27 June 2016, BPM complied with the commitment to sell its shareholding in Anima in excess (considering the shareholding of Poste Italiane S.p.A.) of the threshold set forth in Article 106 of the Financial Services Act. The transaction has a positive impact on the Bank’s Common Equity Tier 1 phase-in and fully phased ratio of 7 basis points and 3 basis points, respectively. As at the date of this Offering Circular, BPM’s total interests in Anima amounts to 14.67%.

Recent trends and uncertainty

The Group’s operations are exposed to the risk of a macroeconomic trend that differ from expectations, with particular reference to domestic economy and economies of the territories in which the Group is more present. Further potential risk could arise from a higher than expected slowdown of the Chinese economy and the economies of other emerging countries like Brazil and Russia, which may have adverse impact on the world trade. The drop in oil prices, geopolitical tensions in the Middle East and possible worsening of the Greek crisis, together with the withdrawal of the UK from the European Union, could lead to more unstable growth and/or deterioration of general economic conditions. The uncertainties arising from low inflation in the Eurozone are currently being addressed by a highly expansionary monetary policy of the ECB.

With reference to the Merger, the investor should consider that this type of transaction, by its very nature, is exposed to certain risks including, but not limited to, loss of customers, legal risks and operational risks.

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See further the paragraphs headed "Outlook" and "Risks and uncertainties" in the Interim Report on Operations of the Bipiemme Group contained in BPM's unaudited consolidated interim report as at and for the three months ended 31 March 2015, incorporated by reference in the Offering Circular.

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MANAGEMENT

On 22 October 2011, the Bank's extraordinary general meeting resolved upon the adoption by the Bank of the dualistic corporate governance model pursuant to Article 2409-octies of Italian Civil Code, which provides that the Bank is governed by its management board and supervisory board. The supervisory board, appointed by the ordinary general meeting, exercises the control functions typical of the board of statutory auditors in the traditional Italian governance model, as well as duties traditionally reserved to the ordinary general meetings such as the appointment and revocation of the members of the management board and the approval of annual financial statements. The management board, appointed by the supervisory board, is empowered to set the Bank's strategy, objectives and overall direction, oversee and monitor management decision-making and is in charge of the management of the company, being authorised to take all required actions which it deems useful or appropriate to achieve the Bank's corporate purpose, relating to ordinary and extraordinary administration. The managing director, appointed by the management board, exercises executive functions and is responsible for, and accountable to, the management board for the day-to-day management of the Bank.

The Management Board

According to article 32 of the Bank's by-laws, the management board is composed of five members, including the chairman, appointed by the supervisory board. The current management board, which was appointed by the supervisory board in its meeting of 17 January 2014, remains in office for three financial years and the term of office will expire on the date of the meeting of the supervisory board called to approve the financial statements as of and for the year ending 31 December 2016.

The business address of each member of the management board is Banca Popolare di Milano S.c.a r.l., Piazza Meda, 4, 20121 Milan, Italy.

Pursuant to the Bank's by-laws:

(i) all the members of the management board must have at least five years' experience in professional and/or management activities in financial and/or securities and/or banking and/or insurance companies in Italy or abroad or in listed companies in Italy or abroad;

(ii) at least four of the five members of the management board must not be employees of the Group and must have experience in professional and management activities – as per (i) above – in a company of comparable size to the Bank, and that is not a bank or company forming part of the Group;

(iii) at least one of the members of the management board must fulfil the independence requirements set forth in Article 148, paragraph 3, of the Financial Services Act; and

(iv) the gender of members in the management board who are underrepresented shall obtain the number of members of the management board provided by current legislation regarding the equality for access to the corporate bodies of listed companies.

At least two members of the management board, including the Chairman, must be non-executive. Pursuant to article 32 of the Bank's by-laws, members of the boards or employees of other banks or of companies controlled by other banks (other than centralised structures for the co-operative banking movement or banks or companies forming part of the Group) cannot be elected as members of the management board.

The members of the management board must fulfil the requirements of integrity, professionalism and independence imposed by applicable Italian law.

The following table shows the offices held by the members of the management board of BPM. The table also reflects the professional skills and experience in the field of business management of the members of the management board.

Name Office Current other main positions Mario Anolli Chairman None Giuseppe Castagna Managing Director None and General Manager

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Name Office Current other main positions Davide Croff Member Chairman of the Board of Directors of Permasteelisa S.p.A;- Chairman of the Board of Directors of Ergo Italia S.p.A; Chairman of the Board of Directors of Ergo Assicurazioni S.p.A; Chairman of the Board of Directors of Ergo Previdenza S.p.A; Chairman of the Board of Directors of Phlavia Investimenti S.r.l.; Director of Istituto Europeo di Oncologia S.r.l.; Director of Genextra S.p.A.; Director of Gala S.p.A; Director of Elica S.p.A. Paola De Martini Member Vice President and Global head of Tax STMicroelectronics International.; Director of Tiscali S.p.A.

Giorgio Angelo Girelli Member None

Powers of the Management Board

The management board (Consiglio di Gestione) is solely responsible for the management of the Bank, including Bank’s general planning and strategic supervision. The management board performs all transactions necessary, useful or in any case deemed to be appropriate for the achievement of the corporate purpose, relating to both the ordinary and extraordinary administration.

Pursuant to the "Regulations concerning the organisation and corporate governance of banks" issued by the Bank of Italy, the Bank's by-laws set forth the powers of the management board and the managing director, respectively.

In particular, in addition to the powers which cannot be delegated under Italian law, the management board has the powers listed in article 39 of the Bank's by-laws, which includes, inter alia, the formulation of general planning and strategy and the preparation of business plans and/or financial budgets.

The management board, where it deems useful or appropriate, may request the supervisory board to provide a prior non-binding opinion to the supervisory board in connection with certain matters.

The management board provides to the supervisory board, promptly upon request, and in any case at least every quarter, with information regarding, among other things, the general performance of management and the most significant transactions, pursuant to Article 150 of the Financial Services Act and, at least monthly, with a report on the operations management of the Bank's result for the period and comparative data against the banking system.

The management board is also responsible, in line with the guidelines set forth by the supervisory board, for the definition of the procedures to register the members in the members' ledger or to reject the request for registration.

Meetings of the management board are duly formed if more than 50 per cent. of its members are present. Decisions are validly taken with the affirmative vote of a majority of the members attending the meeting.

Powers of the Chairman of the Management Board

Pursuant to article 41 of the Bank's by-laws, the Chairman of the management board is the legal representative of the Bank and is responsible for relationship with the regulatory authorities and the supervisory board. The Chairman also has certain additional powers in case of urgency.

Managing Director

In accordance with law and the Articles of Association, the Management Board delegates its powers to one of its members, who takes on the title of Managing Director (Consigliere Delegato) and who can also be the General Manager.

When nominating the managing director, the management board takes into consideration indications from the Nomination Committee in accordance with article 53 of the Bank's by-laws.

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The managing director is the Bank's chief executive officer, who oversees the Bank's management within the powers granted to him by the management board and in accordance with the management board's policies and strategies. At the date of this Offering Circular, the Bank's managing director and general manager is Giuseppe Castagna. He was appointed by the management board on 21 January 2014.

The managing director reports at least quarterly to the management board on the performance, outlook and more significant transactions carried out by the Bank and its subsidiaries. The managing director also reports monthly to the management board on the financial results of the Bank, the main subsidiaries and the Group as a whole.

Supervisory Board

The supervisory board (Consiglio di Sorveglianza) is appointed by the ordinary general meeting from among the members of the Bank.

The members appointed remain in office for three financial years. On 30 April 2016, the Ordinary Shareholders Meeting of the Bank appointed new Supervisory Board which will remain in office for three financial years from 2016 to 2018. The current supervisory board is composed of 18 members.

The following table shows the offices held by the members of supervisory board of BPM. The table also reflects the professional skills and experience in the field of business management of the members of the supervisory board.

Name Office Current other main positions

Nicola Rossi Chairman Member of Fondazione Istituto Bruno Leoni; Chairman of the Board of Directors of Sistan SGR; Sole Director of Azienda Agricola Cefalicchio S.a r.l.; Shareholder of Aspen Institute;

Mauro Paoloni Vice-chairman Director of S.p.A.; Chairman of the Board of Directors of Bipiemme Vita S.p.A.; Chairman of the Board of Statutory Auditors Grottini S.r.l.; Chairman of the Board of Statutory Auditors of Next-era Prime S.p.A.;

Marcello Priori Vice-chairman Chairman of the Board of Statutory Auditors of Carrefour Italia Finance S.r.l.; Chairman of the Board of Statutory Auditors of DAF Veicoli Industriali S.p.A.; Chairman of the Board of Directors of Bipiemme Assicurazioni S.p.A.; Chairman of the Board of Directors of RGI S.p.A.; Chairman of the Board of Directors of F2A S.p.A.; Chairman of the Board of Directors of Solidea S.p.A; Statutary Auditor of Carrefour Italia S.p.A.; Statutory Auditor of Carrefour Property Italia S.r.l.; Statutory Auditor of Bracco Imaging Italia S.r.l.; Statutary Auditor of Galleria Commerciale Nichelino S.r.l.; Director of Vivigas S.p.A.; Director of Aemme Linea Energie S.p.A..;

Alberto Balestreri Member Chairman of the Board of Statutory Auditors of Premuda S.p.A.;

Carlo Bellavite Member Director of ISP CB Pubblico S.r.l.; Director of INTESA SEC3 Pellegrini S.r.l.; Director of INTESA SEC NPL S.r.l.; Statutory Auditor (in charge of the financial auditing) of G. Pozzoli 1875 S.r.l.; Statutory Auditor (in charge of the financial auditing) of Sudtirolerspeck S.r.l;

Mara Member Limited shareholder (socio accomandante) of Piemme 27 S.a.s. Bergamaschi di Alberto Cefis;

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Name Office Current other main positions

Angelo Busani Member Chairman of the Board of Directors of Lineapelle S.p.A.; Chairman of the Board of Directors of Servizi Fiduciari S.p.A.; Director of Team VD S.r.l.; Director of Beni Stabili S.i.i.q. S.p.A.;

Massimo Member Chairman of the Board of Directors with management powers Catizone of WRM Capital Assett Management S.a.r.l.; Director with management powers of Time&Life S.A.; Director with management powers of Ploutos International Ltd.; Director with management powers of Downshire Enterprises S.A.; Director with management powers of ItalProperty Limited S.a r l.;

Emanuele Cusa Member None

Carlo Frascarolo Member Sole Director of Dotto S.r.l.; Chairman of the Board of Statutory Auditors of La Centrale del Latte di Alessandria e Asti S.p.A.; Chairman of the Board of Statutory Auditors of Pharma-Novara S.p.A.; Chairman of the Board of Statutory Auditors of Entsorgafin S.p.A.; Statutory Auditor of Alias S.r.l.; Statutory Auditor of Grassano S.p.A.; Statutory Auditor of Giorgio Visconti S.p.A.; Director of Consorzio Alessandrino per l’Energia-Energal; Director of Axion S.r.l.;

Roberto Fusilli Member None

Paola Elisabetta Member Statutory Auditor of Tamburi Investments Partners; Director of Maria Galbiati Servizi Italia S.p.A. Director of Silver Fir Capital SgR SpA

Piero Lonardi Member Chairman of the Board of Statutory Auditors of AMSA S.p.A.; Chairman of the Board of Statutory Auditors of A. De Pedrini S.p.A.; Sole Director of Immobiliare Emanuela S.r.l; Sole Director of Finarco S.r.l.; Sole Director of Vismaf S.r.l.; Director of MEAL S.r.l.; Director of Otto S.r.l.; Director of Karla Otto S.r.l.;

Maria Luisa Member Independent Director of Biancamano S.p.A.; Statutory Auditor Mosconi of Azienda Trasporti Milanesi-ATM S.p.A.; Statutory Auditor of Metalwork S.p.A.; Statutory Auditor of The Walt Disney Company S.r.l.; Statutory Auditor of S.p.A.; Director of Nova Re S.p.A.; Director of Conceria Gaiera Giovanni S.p.A.;

Mariella Piantoni Member None

Ezio Simonelli Member Chairman of the Board of Statutory Auditors of Alba Leasing S.p.A.; Chairman of the Board of Statutory Auditors of Branchini Associati S.p.A.; Chairman of the Board of Statutory Auditors of MARR S.p.A; Chairman of the Board of Statutory Auditors of Lega Calcio Service S.p.A; Chairman of the Board of Statutory Auditors of Alisarda S.p.A; Statutary Auditor of Immobiliare Bofac S.p.A.; Statutory Auditor of Gruppo Vè Gè Società Cooperativa; Statutory Auditor of Cerved Information Solutions S.p.A.; Statutory Auditor of S.p.A.; Statutary Auditor of Kering Eyewear S.p.A.; Chairman of the Board of Directors of Immobiliare Leonardo S.p.A.; Chairman

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Name Office Current other main positions

of the Board of Directors of Tamid Sport Marketing S.r.l.; Sole Director of Gosen S.r.l.; Sole Director of Gosen Immobiliare S.r.l.; Statutory Auditor of Vortice Elettrosociali S.p.A

Manuela Member Director with management powers of Electrolux Appliance Soffientini S.p.A.; Independent Director of Geox S.p.A;

Daniela Venanzi Member Chairman of the Board of Statutory Auditors of Sarnese Vesuviano S.r.l.

The business address of the each member of the supervisory board is Banca Popolare di Milano S.c.a r.l., Piazza Meda, 4, 20121 Milan, Italy.

The members of the supervisory board must fulfil the requirements of integrity, professionalism and independence imposed by current legislation. In particular, pursuant to Article 47 of the Bank’s by-laws, all the members of the supervisory board must have at least three years' experience, in Italy or abroad, in administration, management or control activities in banking, asset management or insurance companies, or in management activities in other kind of companies provided that such companies have a turnover of more than 1 billion Euro in the year prior to their election or shares traded on an Italian or foreign regulated market. Full-time professors in law or economics are eligible for election including where they do not meet the foregoing requirements.

At least three members of the supervisory board must be chosen from among individuals enrolled with the Italian Register of Auditors, who have been serving as statutory auditors for at least three years. At least five members of the supervisory board must meet the independence requirements provided for by the Italian Corporate Governance Code.

To the less represented gender must be reserved at least the share of Board Members established by current legislation on equal access to administrative and control bodies of companies with shares listed on regulated markets.

Members of the supervisory board cannot be appointed as members of the Management Board until at least three years have expired since leaving office. In accordance with Article 17(6) of Legislative Decree No. 39/2010, members of the Supervisory Board may not act as auditors of the Bank or its subsidiaries until at least two years have expired since they left office.

Powers of the Supervisory Board

The supervisory board performs control duties and can be entrusted with tasks that in the traditional corporate governance model are reserved to the general meeting, such as the appointment, revocation and remuneration of members of the management board and the approval of the non-consolidated and consolidated financial statements of the Bank and the Group. The supervisory board does not decide upon general planning and the strategic decisions of the Bank and the Group.

The supervisory board has the powers listed in article 51 of the Bank's by laws, which provides, inter alia (i) the appointment and removal of the members of the management board and its Chairman, (ii) the determination of the remuneration of the members of the management board, of its Chairman, of the managing director, of the members of the management board that are part of any committees or that have been granted with special powers or offices, (iii) the approval of the Bank's non-consolidated and consolidated financial statements, and (iv) the exercise of the supervisory functions, pursuant to Article 149, paragraph 1 and 3, of the Financial Services Act.

Requests for information from members of the management board pursuant to Article 151-bis of the Italian Banking Act, as a rule, are addressed to the Chairman of the management board and to the managing director through the Chairman of the supervisory board.

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At least once every three months, the supervisory board receives reports regarding the general development of operations and material transactions and, on a monthly basis, reports on the key performance data for the period.

Meetings of the supervisory board are duly formed with the presence of a majority of the members then in office. The supervisory board decides with the affirmative vote of a majority of its members attending the meeting. In case of a tie, the person chairing the meeting has the casting vote. Certain supermajority requirements apply in connection with the appointment of members of the management board.

Powers of the Chairman of the Supervisory Board

Pursuant to article 54 of the Bank's by-laws, the Chairman of the supervisory board, inter alia coordinates the works and the activities of the supervisory board, is responsible for the relationships with the management board and manages the flow of information and data regarding specific activities of the Bank and the Group and regarding the current and prospective results of operations.

Conflicts of Interest

Members of the supervisory board, management board and general management hold offices also in other companies of the Bipiemme Group as well as companies outside the Group, in compliance with relevant limitations set out in Article 36 of Legislative Decree No. 201 of 6 December 2011 governing interlocking directorships. As such, they may have interests that conflict with the duties arising from the position held within the Bank.

Article 32 of the Bank's by-laws provides that: "Without prejudice to any other reasons for incompatibility envisaged in current regulations, those who are or become directors, employees or statutory auditors of other banks or their subsidiaries cannot act as a member of the Management Board, unless the entities concerned are centralised structures for the co-operative banking movement or banks or companies belonging to the Group."

Article 47 of the Bank's by-laws provides that: "A specific regulation approved by the Supervisory Board sets limits on the accumulation of offices that can be held simultaneously by its members, taking account of the nature of the office and the characteristics and size of the companies concerned. However, if the limits on the accumulation of offices laid down by current rules and regulations are stricter, then these apply."

Members of the administrative, managerial and supervisory bodies of BPM must comply with the following rules aimed at regulating instances where there exists a specific interest concerning the completion of an operation:

 Article 136 of the Italian Banking Act imposes an authorization procedure (a unanimous decision by the administrative body and the favourable vote of all members of the control body, without prejudice of the provisions of Italian Civil Code concerning the conflicts of interest of the members of the administrative body and transactions entered into with related parties) to be followed should a bank contract obligations of any kind or enter, directly or indirectly, into purchase or sale agreements with relevant company officers;

 Article 2391 of the Italian Civil Code obliges directors to notify fellow directors and the board of statutory auditors of any interest that they may have, on their own behalf or on behalf of a third party, in a specific company transaction. If the interested director is the managing director of the company, such director is prevented from carrying out the transactions in question;

 Article 2391-bis of the Italian Civil Code and CONSOB implementing regulations No. 17221 of 12 March 2010 and No. 17389 of 23 June 2010 require companies whose shares are listed or broadly disseminated to adopt particular procedures to ensure the transparency and substantial and procedural fairness of transactions entered into with related parties. Also, on 12 December 2011 the Bank of Italy, in its role as bank supervisor, issued special rules on risk assets and conflicts of interest with related entities, implementing Resolution No. 277 dated 29 July 2008 of the CICR (the Interministerial Banking Commission) In respect of these rules and in compliance with international accounting standards, the Bank has adopted specific “Rules for related parties” which, in particular, these rules:

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 set out the criteria for the identification of the Bipiemme Group’s related parties (hereinafter "Related Parties");

 define the quantitative limits for the assumption by the Banking Group of risk-weighted assets of Related Parties, determining the relevant means for their computation;

 establish the manner in which transactions with Related Parties are approved, differentiating between lesser and more significant transactions and defining in this context the role and the duties of an independent Member of the Management Board, assisted by a competent independent expert;

 set out cases for exemptions and exceptions for certain types of transactions with Related Parties; and

 lay down the disclosure (and accounting) requirements as a result of entering into related parties transactions.

 Article 150 of the Financial Services Act, requires the directors to report to the supervisory board promptly, and at least quarterly, on their activity and on any significant transaction carried out with such bank or its subsidiaries; in particular, the directors are required to report on any transactions in which they have an interest, for their own or on behalf of third parties, or that are influenced by the person who performs the activity of direction and coordination;

 According to Article 148, paragraph 3 and paragraph 4-bis of the Financial Services Act directors and auditors of a listed company cannot be (i) a person who is in the conditions referred to in Article 2382 of the Italian Civil Code; (ii) spouses, relatives and similar up to the fourth degree of kinship of the directors of the relevant company or of the companies controlled by the relevant company, the company(ies) that control(s) the relevant company and those subject to common control; and (iii) person who are linked to the company, the companies controlled by the relevant company, the company(ies) that control(s) the relevant company and those subject to common control or linked to the directors of any company or person referred to at (ii) by self-employment or employee relationship or by other relationships of an economic or professional nature that might compromise their independence.

For further information on related party transactions, please refer to Part H "Related Party Transactions" of the explanatory notes to the 2015 Consolidated Financial Statements, incorporated by reference into this Offering Circular.

External Auditors

The opinions of the external auditor on the Bank’s annual non-consolidated and consolidated financial statements are made available to the supervisory board, prior to the approval of the Bank's non- consolidated and consolidated financial statements, and to the members prior to the annual general meeting.

The annual general meeting of members held on 11 April 2015, appointed PricewaterhouseCoopers S.p.A. to act as external auditor for the nine year period 2016-2024. PricewaterhouseCoopers S.p.A. is authorized and regulated by the Italian Ministry of Economy and Finance ("MEF") and registered on the special register of auditing firms held by MEF. The registered office of PricewaterhouseCoopers S.p.A. is at via Monte Rosa 91, Milan, Italy.

The 2014 and 2015 Consolidated Financial Statements have been audited by EY S.p.A. The 2015 Consolidated Interim Report has not been audited or reviewed by EY S.p.A.; the 2016 Consolidated Interim Report has not been audited or reviewed by PricewaterhouseCoopers S.p.A..

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TAXATION

ITALIAN TAXATION

The following is a general summary of certain Italian tax consequences of the purchase, the ownership and the disposition of the Notes. It does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and does not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or commodities) may be subject to special rules. This summary is based upon Italian tax laws and/or practice in force as at the date of this Offering Circular, which are subject to any changes in law and/or practice occurring after such date, which could be made on a retroactive basis.

Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences of their ownership of the Notes.

Tax treatment of the Notes

Tax Treatment of Notes that qualify as "obbligazioni", "titoli similari alle obbligazioni" or "capital adequacy financial instruments", irrespective of their maturity

Italian Legislative Decree No. 239 of 1 April 1996 ("Decree No. 239"), as subsequently amended, regulates the tax treatment of interest, premium and other income from notes issued, inter alia, by Italian resident banks. The provisions of Decree No. 239 only apply to interest, premiums and other income (including the difference between the redemption amount and the issue price) (hereinafter collectively referred to as "Interest") paid under Notes issued by the Issuer which qualify as obbligazioni ("banking bonds") pursuant to Article 12 of Legislative Decree No. 385 of 1 September 1993 (Decree No. 385), or as obbligazioni or titoli similari alle obbligazioni (obbligazioni) pursuant to Article 44 of Presidential Decree No. 917 of 22 December 1986, as amended and supplemented (Decree No. 917).

The same rules apply to Interest paid under financial instruments relevant for capital adequacy purposes under EU legislation and domestic prudential legislation, issued by intermediaries supervised by the Bank of Italy, other than shares and securities similar to shares ("capital adequacy financial instruments").

Italian Resident Noteholders

Pursuant to Decree No. 239, where an Italian resident Noteholder is:

(i) an individual holding Notes not in connection with entrepreneurial activity (unless he has entrusted the management of his financial assets, including the Notes, to an authorised intermediary and has opted for the so-called risparmio gestito regime according to Article 7 of Italian Legislative Decree No. 461 of 21 November 1997, as amended (Decree No. 461) – the "Asset Management Option"); or

(ii) a partnership (other than a società in nome collettivo or a società in accomandita semplice or similar partnership), de facto partnership not carrying out commercial activities or professional association; or

(iii) a private or public institution not carrying out commercial activities; or

(iv) an investor exempt from Italian corporate income taxation,

Interest payments relating to the Notes are subject to a substitute tax (imposta sostitutiva), levied at the rate of 26 per cent. (either when Interest is paid or obtained upon disposal of the Notes). All the above categories are qualified as "net recipients".

Where the resident holders of the Notes described above under (i) and (iii) are engaged in an entrepreneurial activity to which the Notes are connected, imposta sostitutiva applies as a provisional income tax and may be deducted from the taxation on income due or be claimed for refund in the relevant tax return.

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Pursuant to Decree No. 239, the 26 per cent. imposta sostitutiva is applied by banks, società di intermediazione mobiliare (so called "SIMs"), fiduciary companies, società di gestione del risparmio ("SGRs"), stock brokers and other qualified entities resident in Italy or by permanent establishments in Italy of banks or intermediaries resident outside Italy ("Intermediaries" and each an "Intermediary").

Pursuant to Decree No. 239, Intermediaries or permanent establishments in Italy of foreign intermediaries must intervene in any way in the collection of Interest or, also as transferees, in transfers or disposals of the Notes.

Payments of Interest in respect of Notes issued by the Issuer that qualify as banking bonds, obbligazioni or capital adequacy financial instruments, irrespective of their maturity, are not subject to the 26 per cent. imposta sostitutiva if made to Noteholders who are: (a) Italian resident corporations or a similar commercial entities or permanent establishments in Italy of foreign corporations to which the Notes are effectively connected; (b) Italian resident collective investment funds, SICAVs, non real estate SICAFs; Italian resident pension funds subject to the tax regime provided for by Article 17 of Legislative Decree No. 252 of 5 December 2005, Italian resident real estate investment funds and real estate SICAFs; and (c) Italian resident individuals holding Notes not in connection with entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised financial intermediary and have opted for the Asset Management Option. Such categories are qualified as "gross recipients".

To ensure payment of Interest in respect of the Notes without the application of 26 per cent. imposta sostitutiva, Noteholders indicated above under (a) to (c) must timely deposit the Notes together with the coupons relating to such Notes directly or indirectly with an Italian authorised financial Intermediary.

Where the Notes and the relevant coupons are not deposited with an authorised Intermediary, the imposta sostitutiva is withheld:

 by any Italian bank or any Italian intermediary paying Interest to the Noteholder; or

 by the Issuer, and gross recipients that are Italian resident corporations or permanent establishments in Italy of foreign corporations to which the Notes are effectively connected are entitled to deduct imposta sostitutiva suffered from income taxes due.

Interest accrued on the Notes would be included in the corporate taxable income of the Noteholders who are Italian resident corporations or similar commercial entities or permanent establishments in Italy of foreign corporations to which the Notes are effectively connected, subject to corporate tax income purposes (IRES) at the ordinary rate of 27.5% (it should be noted that, as of the fiscal year starting 1 January 2017, the ordinary IRES rate will be reduced to 24 per cent. according to Law No. 208 of 28 December 2015; moreover, such rule provides for an additional rate of 3.5 per cent. for banks and other credit/financial institutions). In certain circumstances, depending on the "status" of the Noteholder, interest accrued on the Notes would be included also in the “net value of production” for purposes of regional tax on productive activities – IRAP.

Italian resident individuals holding Notes not in connection with entrepreneurial activity who have opted for the Asset Management Option are subject to a 26 per cent. annual substitute tax (the "Asset Management Tax") on the increase in value of the managed assets accrued at the end of each tax year (which increase would include Interest accrued on the Notes). The Asset Management Tax is applied on behalf of the taxpayer by the managing authorised intermediary.

Where an Italian resident Noteholder is a non real estate open ended or closed ended investment fund (a "Fund"), a SICAV or a non real estate SICAF and the Notes are deposited with an authorised intermediary, Interest relating to the Notes and accrued during the holding period will be included in the calculation of the net result accrued at the end of each tax year, but will not be subject to imposta sostitutiva nor to any other substitute tax at the fund level. Moreover, a withholding tax of 26 per cent. is levied on proceeds distributed by the Fund, the SICAV or the non real estate SICAF or received by certain categories of unitholders upon redemption or disposal of the units.

Italian resident pension funds subject to the regime provided by article 17 of the Legislative Decree No. 252 of 5 December 2005 are subject, as of 1 January 2015, to a 20 per cent. annual substitute tax (the

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"Pension Fund Tax") on the increase in value of the managed assets accrued at the end of each tax year (which increase would include Interest accrued on the Notes). As of 1 January 2015, Italian pension fund benefits from a tax credit equal to 9% of the result of the relevant portfolio accrued at the end of the tax period, provided that the pension fund invests in certain medium long term financial assets identified with the Ministerial Decree issued on 19 June 2015.

The 26 per cent. imposta sostitutiva provided for by Decree No. 239 in general should not apply with respect to Interest on Notes derived by all Italian resident real estate investment funds and real estate SICAFs, established pursuant to Legislative Decree No. 58 of 24 February 1998, as amended and supplemented, and Article 14-bis of Law No. 86 of 25 January 1994 including any real estate investment funds and real estate SICAFs not subject to the tax treatment provided for by Law Decree No. 351 of 25 September 2001, provided that the Notes, together with the coupons relating thereto, are timely deposited directly or indirectly with an Italian authorised financial intermediary (or permanent establishment in Italy of a foreign intermediary).

Non-Italian resident Noteholders

According to Decree No. 239, payments of Interest in respect of Notes issued by the Issuer that qualify as banking bonds, obbligazioni or capital adequacy financial instruments, irrespective of their maturity, will not be subject to the imposta sostitutiva at the rate of 26 per cent. provided that:

(a) the payments are made to non-Italian resident beneficial owners of the Notes with no permanent establishment in Italy to which the Notes are effectively connected; and

(b) such beneficial owners are resident, for tax purposes, in a country which recognises the Italian fiscal authorities' right to an adequate exchange of information and listed in a Ministerial Decree to be issued under Article 11, par. 4, let. c) of Decree No. 239 (the “White List”). The White List will be updated every six months period. In absence of the issuance of the White List, reference has to be made to the Italian Ministerial Decree dated 4 September 1996; and

(c) all the requirements and procedures set forth in Decree No. 239 and in the relevant implementation rules, as subsequently amended, in order to benefit from the exemption from imposta sostitutiva are timely met and complied with.

The 26 per cent. imposta sostitutiva may be reduced (generally to 10 per cent.) under certain double tax treaties entered into by Italy, if more favourable, subject to timely filing of required documentation provided by Measure of the Director of Italian Revenue Agency No. 2013/84404 of 10 July 2013.

Decree No. 239 also provides for additional exemptions from the imposta sostitutiva for payments of Interest in respect of the Notes made to (i) international entities and organisations established in accordance with international agreements ratified in Italy; (ii) certain foreign institutional investors even though not subject to income tax or to the other similar taxes, which are established in countries which allow for an adequate exchange of information with Italy and provided that they timely file with the relevant depositary the appropriate self declaration; and (iii) central banks or entities managing official State reserves.

In order to ensure gross payment of Interest in respect of the Notes, non-Italian resident investors indicated above must:

(a) be the beneficial owners of the payments of Interest on the Notes; and

(b) timely deposit the Notes with the coupons relating to such Notes directly or indirectly with (i) an Italian bank or "societá di intermediazione mobiliare" (so-called SIMs) or with (ii) a permanent establishment in Italy of a non-resident bank or brokerage company which is electronically connected with the Italian Ministry of Economy and Finance, or with (iii) a non-Italian resident entity or company participating in a centralised securities management system which is in contact, via computer, with the Ministry of Economy and Finance; and

(c) timely file with the relevant depository, prior to or concurrently with the deposit of the Notes, a self-declaration (autocertificazione) stating, inter alia, that the investor is resident, for tax purposes, in a country which recognises the Italian fiscal authorities' right to an adequate exchange of information. Such self-declaration, which must comply with the requirements set

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forth by a Decree of the Ministry of Economy and Finance of 12 December 2001 (as amended and supplemented), is valid until withdrawn or revoked and need not be submitted where a certificate, declaration or other similar document meant for equivalent uses was previously submitted to the same depository. Such certificate is not requested for non-Italian investors that are international entities and organisations set up in accordance with international agreements ratified in Italy and Central Banks or entities managing also the official State reserves.

Failure of a non-resident Noteholder to timely comply with the procedures set forth in Decree No. 239 and in the relevant implementation rules will result in the application of imposta sostitutiva on Interest payments to a non-resident Noteholder.

Early redemption

Early redemption of Notes issued by the Issuer that qualify as banking bonds, obbligazioni or capital adequacy financial instruments, irrespective of their maturity, will not change the above-described tax regime.

Tax treatment of Notes that qualify as atypical securities

Interest payments relating to Notes that do not qualify as banking bonds, obbligazioni, or capital adequacy financial instruments ("atypical securities") shall be subject to a withholding tax levied at the rate of 26 per cent. (final or provisional depending on the "status" and the tax residence of the Noteholder).

Where the Noteholder is not resident in Italy for tax purposes, the 26 per cent. withholding tax rate may be reduced (generally to 10 per cent.) under certain applicable double tax treaties entered into by Italy, if more favourable, subject to timely filing of required documentation provided by Measure of the Director of Italian Revenue Agency No. 2013/84404 of 10 July 2013.

In the case of Notes issued by an Italian resident issuer, where the Noteholder is (i) an Italian individual engaged in an entrepreneurial activity to which the Notes are connected, (ii) an Italian company or a similar Italian commercial entity, (iii) a permanent establishment in Italy of a foreign entity to which the Notes are effectively connected, (iv) an Italian commercial partnership or (v) an Italian commercial private or public institution, such withholding tax is a provisional withholding tax. In all other cases the withholding tax is a final withholding tax.

Non-commercial pension entities incorporated under Law No. 509 of 30 June 1994 or Law No. 103 of 10 February 1996, as of 1 January 2015, are entitled to a tax credit equal to the positive difference between withholding taxes and substitutive taxes levied at a rate of 26 per cent. on financial proceeds deriving from their investments (including the Notes), as certified by the relevant withholding agent, and a notional 20 per cent. taxation, provided that such credit is disclosed by such entities in the annual corporation tax return and the proceeds are invested in certain medium long term financial assets identified with the Ministerial Decree issued on 19 June 2015.

Capital gains tax

Italian resident Noteholders

Pursuant to Decree No. 461, a 26 per cent. capital gains tax (referred to as imposta sostitutiva) is applicable to capital gains realised by Italian resident individuals not engaged in entrepreneurial activities to which the Notes issued by the Issuer are connected, on any sale or transfer for consideration of the Notes or redemption thereof.

Under the "tax declaration regime" (regime della dichiarazione), which is the default regime for taxation of capital gains realised by Italian resident individuals not engaged in an entrepreneurial activity, the 26 per cent. imposta sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains, net of any incurred capital loss of the same kind, realised by the Italian resident individual Noteholder holding the Notes not in connection with an entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss of the same kind, in the annual tax return and pay imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses

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in excess of capital gains may be carried forward against capital gains of the same kind realised in any of the four succeeding tax years.

As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes (the risparmio amministrato regime provided for by Article 6 of Decree No. 461). Such separate taxation of capital gains is allowed subject to (i) the Notes being deposited with any authorised intermediary and (ii) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The authorised intermediary is responsible for accounting for imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes net of any incurred capital loss of the same kind, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Where a sale or redemption of the Notes results in a capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities management relationship in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return and the Noteholder remains anonymous.

Special rules apply if the Notes are part of (i) a portfolio managed in a regime of Asset Management Option (risparmio gestito regime) by an Italian asset management company or an authorised intermediary or (ii) an Italian Organismo di Investimento Collettivo del Risparmio or OICR (which includes a Fondo Comune di Investimento, a SICAV or a SICAF). In both cases, capital gains on the Notes will not be subject to 26 per cent. imposta sostitutiva on capital gains but will respectively contribute to determine the taxable base of the Asset Management Tax (26 per cent.) and to increase in value of the managed asset of the funds, SICAVs or SICAFs accrued at the end of each tax year.

In particular, under the Asset Management Option, any appreciation of the Notes, even if not realised, will contribute to determine the annual accrued appreciation of the managed portfolio, subject to the Asset Management Tax. Any depreciation of the managed portfolio accrued at year-end may be carried forward against appreciation accrued in each of the following years up to the fourth. Also under the Asset Management Option the realised capital gain is not requested to be included in the annual income tax return of the Noteholder and the Noteholder remains anonymous.

In the case of Notes held by non real estate investment funds, SICAVs and non real estate SICAFs, capital gains on Notes will not be subject to 26 per cent. imposta sostitutiva but will contribute to determine the increase in value of the managed assets of the funds, SICAVs or non real estate SICAFs, accrued at the end of each tax year. Therefore, any capital gains on Notes will not be subject to any substitute tax at the fund level. Moreover, a withholding tax of 26 per cent. will be levied on proceeds distributed by the Fund, the SICAV or the SICAF or received by certain categories of unitholders upon redemption or disposal of the units.

Any capital gains realised by Italian resident corporations or similar commercial entities or permanent establishments in Italy of non-Italian resident corporations to which the Notes are connected will be included in their business income subject to corporate tax income purposes (IRES) at the ordinary rate of 27.5% (it should be noted that, as of the fiscal year starting 1 January 2017, the ordinary IRES rate will be reduced to 24 per cent. according to Law No. 208 of 28 December 2015; moreover, such rule provides for an additional rate of 3.5 per cent. for banks and other credit/financial institutions). In certain circumstances, depending on the "status" of the Noteholder, interest accrued on the Notes would be included also in the “net value of production” for purposes of regional tax on productive activities – IRAP.

In the case of Notes held by Italian Pension Funds, capital gains on Notes will not be subject to 26 per cent. imposta sostitutiva but will contribute to determine the increase in value of the managed assets of the funds, which is subject to a 20 per cent. annual substitute tax.

Any capital gains on Notes realised by Italian resident real estate investment funds, and real estate SICAFs, established pursuant to Legislative Decree No. 58 of 24 February 1998, as amended and supplemented, and Article 14-bis of Law No. 86 of 25 January 1994 will not be subject to 26 per cent. imposta sostitutiva on capital gains.

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Non-Italian Resident Noteholders

The 26 per cent. imposta sostitutiva on capital gains may in certain circumstances be payable on any capital gains realised upon sale, transfer or redemption of the Notes by non-Italian resident individuals and corporations without a permanent establishment in Italy to which the Notes are effectively connected, if the Notes are held in Italy.

However, pursuant to Article 23, first paragraph, letter F, of Decree No. 917, any capital gains realised by non-Italian residents without a permanent establishment in Italy to which the Notes are effectively connected through the sale for consideration or redemption of the Notes are not subject to taxation in Italy to the extent that the Notes are traded on a regulated market in Italy or abroad, and in certain cases subject to timely filing of required documentation (in the form of a self-declaration not to be resident in Italy for tax purposes) with Italian qualified intermediaries (or permanent establishments in Italy of foreign intermediaries) with which the Notes are deposited, even if the Notes are held in Italy and regardless of the provisions set forth by any applicable double tax treaty.

Where the Notes are not traded on a regulated market in Italy or abroad and are held in Italy:

(a) Pursuant to the provisions of Decree No. 461 and Decree No. 239, non-Italian resident Noteholders with no permanent establishment in Italy to which the Notes are effectively connected are exempt from imposta sostitutiva in the Republic of Italy on any capital gains realised upon sale for consideration or redemption of the Notes if they are resident, for tax purposes, in a country which recognises the Italian fiscal authorities' right to an adequate exchange of information and listed in the White List. The White List will be updated every six months period. In absence of the issuance of the White List, reference has to be made to the Italian Ministerial Decree dated 4 September 1996.

Under these circumstances, if non-Italian residents without a permanent establishment in Italy to which the Notes are effectively connected hold Notes with an Italian authorised financial intermediary and are subject to the risparmio amministrato regime or elect for the Asset Management Option, exemption from Italian taxation on capital gains will apply upon condition that they file in time with the authorised financial intermediary an appropriate self-declaration stating that they are resident, for tax purposes, in a country which recognises the Italian fiscal authorities' right to an adequate exchange of information.

Exemption from Italian imposta sostitutiva on capital gains realised upon disposal of Notes not traded on a regulated market also applies to non-Italian residents who are (a) international bodies and organisations established in accordance with international agreements ratified in Italy; (b) certain foreign institutional investors, even though not subject to income tax or to other similar taxes, established in countries which allow an adequate exchange of information with Italy i.e.: (i) in a State or territory listed in the Italian Ministerial Decree dated 4 September 1996, as amended from time to time or (ii) as from the tax year in which the White List is effective, in a State or territory therein included; and (c) Central Banks or other entities, managing also official State reserves.

(b) In any event, non-Italian resident individuals or entities without a permanent establishment in Italy to which the Notes are effectively connected that may benefit from a double taxation treaty with Italy, providing that capital gains realised upon sale or redemption of Notes are to be taxed only in the country of tax residence of the recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon sale for consideration or redemption of Notes.

Under these circumstances, if non-Italian residents without a permanent establishment in Italy to which the Notes are effectively connected hold Notes with an Italian authorised financial intermediary and are subject to the risparmio amministrato regime or elect for the Asset Management Option, exemption from Italian taxation on capital gains will apply upon condition that the non-Italian residents file in time with the authorised financial intermediary appropriate documents which include, inter alia, a certificate of residence from the competent tax authorities of their country of residence.

The Risparmio Amministrato regime is the ordinary regime automatically applicable to non-resident persons and entities in relation to Notes deposited for safekeeping or administration

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at Italian banks, SIMs and other eligible entities, but non-resident Noteholders retain the right to waive this regime. Such waiver may also be exercised by non-resident intermediaries in respect of safekeeping, administration and deposit accounts held in their names in which third parties' financial assets are held.

Inheritance and gift taxes

Pursuant to Law Decree No. 262 of 3 October 2006 (Decree No. 262), converted into Law No. 286 of 24 November 2006, the transfers of any valuable asset (including bonds or other securities) as a result of death or donation are subject to "Inheritance and Gift Tax" (imposta sulle successioni e donazioni) under the Legislative Decree No. 346 of 31 October 1990 as follows:

(i) transfers in favour of spouses and direct descendents or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4 per cent. on the value of the inheritance or the gift exceeding €1,000,000 for each beneficiary;

(ii) transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the value of the inheritance or the gift exceeding €100,000 for each beneficiary;

(iii) transfers in favour of relatives to the fourth degree or relatives-in-law to the third degree, are subject to an inheritance and gift tax applied at a rate of 6 per cent. on the entire value of the inheritance or the gift; and

(iv) any other transfer is subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or the gift.

In cases where the beneficiary has a serious disability, inheritance and gift taxes will apply on its portion of the net asset value exceeding €1,500,000.

Transfer Tax

Contracts relating to the transfer of securities are subject to the registration tax as follows: (i) public deeds and notarized deeds are subject to fixed registration tax at a rate of €200; (ii) private deeds are subject to registration tax at a rate of €200 only in the case of use (i.e. when a document is filed with an Italian administrative authority or with a judicial authority acting in the course of its administrative activities with the purpose of obtaining by the receiving authority the issue of an administrative act) or voluntary registration.

Stamp Duty on the Notes

Pursuant to Article 13(2-ter) of the Tariff attached to Italian Presidential Decree No. 642 of 26 October 1972, as subsequently amended, regulating Italian stamp duty, a proportional stamp duty applies on the periodic communications sent by financial intermediaries to their clients (with the exception of pension funds and health funds) with respect to any financial instruments (including banking bonds, obbligazioni and capital adequacy financial instruments) deposited therewith.

Such stump duty is generally levied by the relevant financial intermediary and computed on the fair market value of the financial instruments or, in case the fair market value cannot be determined, on the their face or redemption values, or, in the case the face or redemption values cannot be determined, on the purchase value at the rate of 0.2 per cent, with a cap of Euro 14,000 if the Noteholder is different from an individual. The stamp duty is levied on an annual basis. In case of reporting periods of less than 12 months, the stamp duty is pro-rated.

Moreover, pursuant to Article 19(18-23) of Law Decree No. 201 of 6 December 2011 (Decree No. 201), converted into law with Italian Law No. 214 of 22 December 2011, a similar duty applies on the fair market value or, in the case the fair market value cannot be determined, on their face or redemption values, or in the case the face or redemption values cannot be determined, on the purchase value of any financial asset (including banking bonds, obbligazioni and capital adequacy financial instruments) held abroad by Italian resident individuals. Such duty applies at the rate of 0.2 per cent. and a tax credit is granted for any foreign property tax levied abroad on such financial assets.

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Tax Monitoring

Pursuant to Italian Law Decree No. 167 of 28 June 1990, converted by Law No. 227 of 4 August 1990 ("Decree 167/1990"), as amended by Law No. 97 of 6 August 2013 ("Law No. 97/2013"), individuals, non commercial institutions and non-commercial partnerships resident in Italy who, during the fiscal year, hold investments abroad or have foreign financial assets or are the beneficial owners, under the Italian money-laundering law, provided by Italian Legislative Decree No. 231 of 21 November 2007, of investments abroad or foreign financial assets (including Notes held abroad and/or Notes issued by a non-Italian resident issuer) must, in certain circumstances, disclose the aforesaid investments and financial assets to the Italian Tax Authorities in their income tax return (or, in case the income tax return is not due, in a proper form that must be filed within the same time prescribed for the income tax return).

This obligation does not exist in cases where the financial assets are given in administration or management to Italian banks, SIMs, fiduciary companies or other professional intermediaries, indicated in Article 1 of Decree 167/1990, or if one of such intermediaries intervenes, also as a counterpart, in their transfer, provided that income deriving from such financial assets has been subject to the applicable withholding tax or substitute tax.

The implementing provisions of Law No. 97/2013 have been adopted by Measure of the Director of Italian Revenue Agency No. 2013/151663 of 18 December 2013 and the explanations of the Italian Tax Authorities are mainly contained in Circular No. 38/E of 23 December 2013.

EU Savings Tax Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income ("EU Savings Directive"), Member States were required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to, or collected by such a person for, an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period Austria was instead required (unless during that period it would have elected otherwise) to operate a withholding system in relation to such payments. A number of non EU countries and territories, including Switzerland, adopted similar measures (a withholding system in the case of Switzerland). Italy implemented the EU Savings Directive through Legislative Decree No. 84 of 18 April 2005 (“Decree No. 84”).

On 10 November 2015, the Council of the European Union adopted Council Directive 2015/2060/EU repealing the EU Savings Directive with effect from 1 January 2017 in the case of Austria and from 1 January 2016 in the case of all other Member States (subject to on-going requirements to fulfil administrative obligations such as the reporting and exchange of information relating to, and accounting for withholding taxes on, payments made before those dates). This is to prevent overlap between the EU Savings Directive and the new automatic exchange of information regime implemented under Council Directive 2011/16/EU on Administrative Cooperation in the field of Taxation (as amended by Council Directive 2014/107/EU). The new regime under Council Directive 2011/16/EU (as amended) is in accordance with the Global Standard released by the Organisation for Economic Cooperation and Development in July 2014. Council Directive 2011/16/EU (as amended) is generally broader in scope than the EU Saving Directive, although it does not impose withholding taxes. Directive 2014/107/EU on automatic exchange of information on tax matters has been enacted in Italy by Decree 28 December 2015, starting from 1 January 2016. Directive 2015/2060/EU has been enacted in Italy by Law 7 July 2016 No. 122 in force from 1 January 2016. Accordingly, Decree No. 84 has been repealed effective from 1 January 2016. A transitional period applies until 30 April 2016.

If a payment were to be made or collected through a person within the jurisdiction of Austria and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a Member State other than Austria, i.e. that is not obliged to withhold or deduct tax pursuant to the EU Savings Directive.

The Proposed Financial Transactions Tax ("FFT")

On 14 February 2013, the European Commission published a proposal (the "Commission's Proposal") for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria,

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Portugal, Slovenia and Slovakia (the "participating Member States").

The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings in Notes (including secondary market transactions) in certain circumstances. The issuance and subscription of Notes should, however, be exempt.

Under the Commission’s Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, "established" in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

Joint statements issued on 8 December 2015 by participating Member States, except Estonia, indicate an intention to implement the FTT by the end of June 2016. On 16 March 2016, Estonia has completed the formalities required to leave the enhanced co-operation on FTT. On 17 June 2016, the Council of the European Union announced that the work on FTT will continue during the second half of 2016.

However, the FTT proposal remains subject to negotiation between the participating Member States and the scope of any such tax is uncertain. It may therefore be altered prior to any implementation. Additional EU Member States may decide to participate.

Prospective holders of Notes are advised to seek their own professional advice in relation to the FTT.

The Italian Financial Transaction Tax ("IFTT")

Transactions in Notes issued by the Issuer which qualify as banking bonds, obbligazioni and capital adequacy financial instruments are excluded from Italian Financial Transaction Tax ("IFTT"), pursuant to Law No. 228/2012 ("Law 228"), implemented by Ministry Decree 21 February 2013, as subsequently amended by Ministry Decree 16 September 2013. IFTT should not apply to Notes which qualify as atypical securities. However, an official position of the Italian Tax Authority in this regards is not available.

Foreign Account Tax Compliance Act ("FATCA")

Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a “foreign financial institution” (“FFI”) may be required to withhold on certain payments it makes (“foreign passthru payments”) to persons that fail to meet certain certification, reporting, or related requirements. The Issuer is a foreign financial institution for these purposes.

A number of jurisdictions, including the Republic of Italy, have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA (“IGAs”), which modify the way in which FATCA applies in their jurisdictions. With regard to the Republic of Italy, please see Law 18 July 2015 No. 95 that ratified and enacted the IGA between the Republic of Italy and the Unites State of America signed on 10 January 2014. Under the provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, such withholding would not apply prior to 1 January 2019.

Whilst the Notes are in global form and held within Euroclear Bank S.A./N.V. and Clearstream Banking société anonyme (together, the “ICSDs”) in all but the most remote circumstances it is expected that FATCA will not affect the amount of any payments made under, or in respect of, the Notes by the Issuer, any paying agent, the depositary, common depositary or common safekeeper, given that each of the entities in the payment chain between the Issuer and the participants in the ICSDs is a major financial institution whose business is dependent on compliance with FATCA and that any alternative approach introduced under an "IGA" will be unlikely to affect the Notes. However, FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain leading to the ultimate investor if

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any such custodian or intermediary generally is unable to receive payments free of FATCA withholding. It also may affect payment to any ultimate investor that is a financial institution that is not entitled to receive payments free of withholding under FATCA, or an ultimate investor that fails to provide its broker (or other custodian or intermediary from which it receives payment) with any information, forms, other documentation or consents that may be necessary for the payments to be made free of FATCA withholding. Investors should choose the custodians or intermediaries with care (to ensure each is compliant with FATCA or other laws or agreements related to FATCA), provide each custodian or intermediary with any information, forms, other documentation or consents that may be necessary for such custodian or intermediary to make a payment free of FATCA withholding. In addition, the Programme documentation expressly contemplates the possibility that the Notes may be exchanged into definitive form and therefore that they may be taken out of the ICSDs. If this were to happen, then a non- FATCA compliant holder could be subject to FATCA withholding. However, definitive notes will only be issued in remote circumstances. Holders should consult their own tax advisors regarding how these rules may apply to their investment in the Notes. The Issuer's obligations under the Notes are discharged once it has paid to the order of the common depositary or common safekeeper for the ICSDs (as bearer of the Notes) and the Issuer has therefore no responsibility for any amount thereafter transmitted through hands of the ICSDs and custodians or intermediaries. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments on the Notes, no person will be required to pay additional amounts as a result of the withholding.

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SUBSCRIPTION AND SALE

The Dealers have, in an amended and restated programme agreement dated 26 July 2016 (the "Programme Agreement"), agreed with the Issuer a basis upon which they or any of them may from time to time agree to purchase Notes. Any such agreement will extend to those matters stated under "Form of the Notes" and "Terms and Conditions of the Notes". In the Programme Agreement, the Issuer has agreed to reimburse the relevant Dealers for certain of their expenses in connection with the establishment and any future update of the Programme and the issue of Notes under the Programme and to indemnify the relevant Dealers against certain liabilities incurred by them in connection therewith. The Programme Agreement makes provision for the resignation or termination of appointment of existing Dealers and for the appointment of additional or other Dealers either generally in respect of the Programme or in relation to a particular Tranche of Notes. For the purposes of this section, references in this section to "Dealer" and "Dealers" also refers to any Dealer or Dealers appointed subsequently.

United States

The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and regulations thereunder.

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it will not offer, sell or deliver Notes (a) as part of their distribution at any time or (b) otherwise until 40 days after the completion of the distribution, as determined and certified by the relevant Dealer or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of which such Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and each further Dealer appointed under the Programme will be required to agree, that it will send to each dealer to which it sells any Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

Until 40 days after the commencement of the offering of any Series of Notes, an offer or sale of such Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration under the Securities Act.

Public Offer Selling Restriction under the Prospectus Directive

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date") it has not made and will not make an offer of Notes which are the subject of the offering contemplated by this Offering Circular as completed by the Final Terms in relation thereto (or are the subject of the offering contemplated by a Drawdown Offering Circular, as the case may be) to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State:

(a) Qualified investors: at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) Fewer than 150 offerees: at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or

(c) Other exempt offers: at any time in any other circumstances falling within Article 3(2) of the

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Prospectus Directive, provided that no such offer of Notes referred to in (a) to (c) above shall require the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an "offer of Notes to the public" in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, and the expression "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.

United Kingdom

Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:

(a) in relation to any Notes which have a maturity of less than one year, (i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not offer or sell any Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer;

(b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Republic of Italy

The offering of the Notes has not been registered with the Commissione Nazionale per le Società e la Borsa ("CONSOB") pursuant to Italian securities legislation and, accordingly, each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that sales of the Notes in Italy shall be effected in accordance with all Italian securities, tax and exchange control and other applicable laws and regulation.

Each Dealer has represented and agreed that, save as set out below, no Notes may be offered, sold or delivered, nor may copies of this Offering Circular or of any other document relating to the Notes be distributed in the Republic of Italy, except:

(a) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the "Financial Services Act") and Article 34-ter, first paragraph, letter b) of CONSOB Regulation No. 11971 of 14 May 1999 (as amended from time to time) (the “Regulation No.11971”); or

(b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 34-ter of Regulation No. 11971.

Any such offer, sale or delivery of the Notes or distribution of copies of this Offering Circular or any other document relating to the Notes in the Republic of Italy must be:

(a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No.

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16190 of 29 October 2007 and Legislative Decree No. 385 of 1 September 1993 (the “Italian Banking Act”) (in each case as amended from time to time);

(b) in compliance with Article 129 of the Italian Banking Act, as amended, or any applicable implementing guidelines of the Bank of Italy; and

(c) in compliance with any other applicable notification requirement or limitation which may be imposed by CONSOB or any other Italian authority.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948), as amended (the "FIEA"). Accordingly, each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer to sell any Notes in Japan or to, or for the benefit of, a resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident in Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, FIEA and other relevant laws and regulations of Japan.

General

Each Dealer has represented, warranted and agreed that it has complied and will comply with all applicable laws and regulations in each country or jurisdiction in or from which it purchases, offers, sells or delivers Notes or possesses, distributes or publishes this Offering Circular or any Final Terms or any related offering material, in all cases at its own expense. Other persons into whose hands this Offering Circular or any Final Terms comes are required by the Issuer and the Dealers to comply with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Offering Circular or any Final Terms or any related offering material, in all cases at their own expense.

The Programme Agreement provides that the Dealers shall not be bound by any of the restrictions relating to any specific jurisdiction (set out above) to the extent that such restrictions shall, as a result of change(s) or change(s) in official interpretation, after the date hereof, of applicable laws and regulations, no longer be applicable but without prejudice to the obligations of the Dealers described in the paragraph headed "General" above.

Selling restrictions may be supplemented or modified with the agreement of the Issuer. Any such supplement or modification may be set out in the relevant Final Terms (in the case of a supplement or modification relevant only to a particular Tranche of Notes) or in a supplement to this Offering Circular.

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GENERAL INFORMATION

Authorisation

The establishment of the Programme, the annual update of the Programme and the issue of Notes have been duly authorised by resolutions of the management board of the Issuer dated 30 July 2013.

Approval, Listing of Notes and Admission to Trading

Application has been made to the CSSF to approve this document as a base prospectus. Application has also been made to the Luxembourg Stock Exchange for Notes issued under the Programme to be admitted to trading on the regulated market of the Luxembourg Stock Exchange and to be listed on the Official List of the Luxembourg Stock Exchange. The Luxembourg Stock Exchange's regulated market is a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2004/39/EC).

The Issuer has in the past issued debt securities under this Programme which are already admitted to trading on the regulated market of the Luxembourg Stock Exchange and listed on the Official List of the Luxembourg Stock Exchange.

Documents Available

For as long as this Offering Circular remains valid, copies of the following documents will, when published, be available for inspection from the registered office of the Issuer and from the specified offices of the Paying Agent for the time being in Luxembourg:

(a) the by-laws (with an English translation thereof) of the Issuer;

(b) the non-consolidated and consolidated audited financial statements of the Issuer in respect of the financial years ended 31 December 2015 and 2014 (with an English translation thereof, in each case together with the audit reports prepared in connection therewith) and the unaudited consolidated interim report at 31 March 2016 and 31 March 2015 (with an English translation thereof). The Issuer currently prepares audited consolidated and non-consolidated accounts on an annual basis;

(c) the most recently published audited annual financial statements of the Issuer in each case together with the audit reports prepared in connection therewith and the most recently published unaudited consolidated interim financial statements of the Issuer (with an English translation thereof). The Issuer currently prepares unaudited consolidated interim accounts on a quarterly and semi-annual basis;

(d) the Trust Deed, the Agency Agreement and the forms of the Global Notes, the Notes in definitive form, the Coupons and the Talons;

(e) a copy of this Offering Circular;

(f) any future offering circulars, prospectuses, information memoranda, supplements and Final Terms (save that a Final Terms relating to a Note, which is neither admitted to trading on a regulated market in the European Economic Area nor offered in the European Economic Area in circumstances where a prospectus is required to be published under the Prospectus Directive will only be available for inspection by a holder of such Note and such holder must produce evidence satisfactory to the Issuer and the Paying Agent as to its holding of Notes and identity) to this Offering Circular and any other documents incorporated herein or therein by reference; and

(g) in the case of each issue of listed Notes subscribed pursuant to a subscription agreement, the subscription agreement (or equivalent document).

In addition copies of this Offering Circular, any supplements thereto, each Final Terms relating to Notes which are admitted to trading on the Luxembourg Stock Exchange's regulated market and each document incorporated by reference are available on the Luxembourg Stock Exchange's website (www.bourse.lu) and a paper copy of the Offering Circular, any supplements thereto, each Final Terms relating to Notes which are admitted to trading on the Luxembourg Stock Exchange's regulated market and each document

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incorporated by reference will be delivered to a Noteholder, upon its request and free of charge, by the Issuer.

Clearing Systems

The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg (which are the entities in charge of keeping the records). The appropriate Common Code and ISIN for each Tranche of Notes allocated by Euroclear and Clearstream, Luxembourg will be specified in the applicable Final Terms. If the Notes are to clear through an additional or alternative clearing system the appropriate information will be specified in the applicable Final Terms. The address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.

Conditions for Determining Price

The price and amount of Notes to be issued under the Programme will be determined by the Issuer and each relevant Dealer at the time of issue in accordance with prevailing market conditions.

Significant or Material Change

Save as described under "Description of the Issuer – Recent Developments", there has been no significant change in the financial or trading position of the Group since 31 March 2016 and there has been no material adverse change in the prospects of the Issuer since 31 December 2015.

Litigation

Save as described under "Description of the Issuer – Legal proceedings", neither the Issuer nor any other member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) in the 12 months preceding the date of this document which may have or have in such period had a significant effect on the financial position or profitability of the Issuer or the Group.

Principal Shareholders

In accordance with the by-laws of BPM, each member has the right to a single vote regardless of the numbers of shares held.

Pursuant to article 21(a) of BPM's by-laws and Article 30 of the Italian Banking Act (as recently amended), no person can hold (directly or indirectly) shares in a co-operative bank representing more than 0.50% of its share capital, except for collective investment of transferable securities funds (UCITS funds), each of which is subject to the limitation set forth in provisions applicable to them.

As at 31 March 2016, BPM's share capital totalled €3,365,439,319.02 and comprised 4,391,784,467 ordinary shares without nominal value. As at the date of this Offering Circular, BPM's share capital totalled €3,365,438,319.02 and comprised 4,391,784,467 ordinary shares without nominal value. As at the date of this Offering Circular, according to information available to BPM and accessible on the web-site of CONSOB, the shareholders listed in the table below hold more than 3% of BPM's share capital (please note that, Article 1, paragraph 6 of Legislative Decree No. 25 of 15 February 2016, increased the lower threshold for reporting significant shareholdings set forth in Article 120 of the Financial Services Act from 2% to 3%). Information contained on the CONSOB’s web-site reflects the status of shareholdings updated on the basis of disclosures made pursuant to the requirements of law.

Shareholder Number of shares % of share capital WRM Capital Asset Management S.A.R.L

(as general partner and manager of the Athena Capital Fund 214,011,657 4.873 ISCAV – FIS, which controls the companies that own the

BPM shares) (*) Norges Bank (**) 136,672,333 3.112

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(*) Participation divided as follows: (0,015%) Pop 1 S.A R.L.; Pop 3 S.A R.L. (0.406%); Pop 4 S. A R.L. (0.406%); Pop 5 S. A R.L. (0.406%); Pop 6 S. A R.L. (0.406%); Pop 7 S.A R.L. (0.406%); Pop 8 S.A R.L. (0.406%); Pop 9 S.A R.L. (0.406%); Pop 10 S.A R.L. (0.406%); Pop 11 S.A R.L. (0.406%); Pop 12 S.A R.L. (0.406%); Pop 13 S.A R.L. (0.297%), Athena Capital Fund SICAV – FIS (0.501%). (**) of which 2.839% directly held by Norges Bank.

None of the shareholders can individually control BPM, as such term is defined in Article 93 of the Financial Services Act.

Save as described in BPM's "Report on Corporate Governance and Ownership Structure" for the year 2015 (drawn up pursuant to Article 123-bis of the Financial Services Act), BPM is not aware of any arrangements the operation of which may at a subsequent date result in a change in control of the Issuer.

For completeness, it should be noted that:

(a) on 28 February 2014, Banca Popolare di Milano and Fondazione Cassa di Risparmio di Alessandria jointly agreed an amendment to their shareholders’ agreement signed on 9 September 2011. In relation to the first expiry date of the agreement (scheduled for 9 September 2014), this amendment established that the deadline for submitting notice of withdrawal would be 30 June 2014 (instead of 9 March 2014);

(b) subsequently, on 25 June 2014, Banca Popolare di Milano and Fondazione Cassa di Risparmio di Alessandria agreed that a revision of the clauses would be appropriate and established – for the purpose of renewing the agreement due to expire on 9 September 2014 – that their shareholders’ agreement would remain in force until 31 December 2015, with the exclusion of those clauses that envisage automatic renewal after that date; and

(c) on 13 July 2015, Banca Popolare di Milano and Fondazione Cassa di Risparmio di Alessandria jointly agreed to extend the shareholders’ agreement for a period of three years starting from 13 July 2015, with the express exclusion of any automatic renewal following the expiration of such period, and provided that the shareholders’ agreement will terminate upon the earlier of (i) BPM’s transformation into a joint-stock company, or (ii) upon a corporate merger that affects BPM becoming effective.

An extract of the agreements, as amended, will be published – as required by law – on the Bank’s website (www.gruppobpm.it) in the “Governance, Shareholders’ Agreements” section.

Material Contracts

Save as described in "Description of the Issuer – Material Agreements", neither the Issuer nor any of its consolidated subsidiaries have entered into any contracts in the last two years outside the ordinary course of business, which could result in any Group member being under an obligation or entitlement that is material to the Issuer's ability to meet its obligations to Noteholders in respect of any Notes issued under the Programme.

Independent Auditors

EY S.p.A. was the external auditor for the period 2007-2015. The engagement of EY S.p.A. expired upon approval of the Issuer’s financial statements as at and for the year ending 31 December 2015. EY S.p.A. audited the 2014 and 2015 Consolidated Financial Statements. The 2015 Consolidated Interim Report of the Issuer has not been audited or reviewed by EY S.p.A..

EY S.p.A. is authorized and regulated by the Italian Ministry of Economy and Finance (“MEF”) and registered on the special register of auditing firms held by the MEF. The registered office of EY S.p.A. is at Via Po, 32, 00198 Rome, Italy.

The shareholders’ meeting of the Issuer held on 11 April 2015 resolved to appoint PricewaterhouseCoopers S.p.A. as external auditors for the period 2016-2024. The engagement of PricewaterhouseCoopers S.p.A. will expire upon approval of the Issuer’s financial statements as at and for the year ending 31 December 2024. The 2016 Consolidated Interim Report of the Issuer has not been audited or reviewed by PricewaterhouseCoopers S.p.A..

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PricewaterhouseCoopers S.p.A. is authorized and regulated by the MEF and registered on the special register of auditing firms held by MEF. The registered office of PricewaterhouseCoopers S.p.A. is at Via Monte Rosa 91, Milan, Italy.

Rating Agencies

Each of Standard & Poor's Credit Market Services Europe Limited, Fitch Italia Società Italiana per il Rating S.p.A., Moody's Italia S.r.l. is established in the European Union and registered under the CRA Regulation, and is included in the list of registered credit rating agencies published on the website of the European Securities and Markets Authority at http://www.esma.europa.eu/page/List-registered-and- certified-CRAs.

Trustee's Action

The Notes provide for the Trustee to take action on behalf of the Noteholders in certain circumstances, but only if the Trustee is indemnified to its satisfaction. It may not be possible for the Trustee to take certain actions and accordingly in such circumstances the Trustee will be unable to take such actions, notwithstanding the provision of an indemnity to it, and it will be for Noteholders to take action directly.

The Trust Deed contains provisions permitting the Trustee to rely on any certificate or report of any other person called for by or provided to the Trustee (whether or not addressed to the Trustee) in accordance with or for the purposes of the Trust Deed, the Notes and/or the Coupons notwithstanding that such certificate or report and/or any engagement letter or other document entered into by the Trustee in connection therewith contains a monetary or other limit on the liability of such other person.

Interests of natural and legal persons involved in the issue/offer

Certain of the Dealers and their affiliates have engaged, and may in the future engage, in financing, in investment banking and/or commercial banking transactions and may perform services for the Issuer and its affiliates in the ordinary course of business. Certain of the Dealers and their affiliates may have positions, deal or make markets in the Notes issued under the Programme, related derivatives and reference obligations, including (but not limited to) entering into hedging strategies on behalf of the Issuer and its affiliates, investor clients, or as principal in order to manage their exposure, their general market risk, or other trading activities. In addition, in the ordinary course of their business activities, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer or Issuer's affiliates. Certain of the Dealers or their affiliates that have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, such Dealers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes issued under the Programme. Any such positions could adversely affect future trading prices of Notes issued under the Programme. The Dealers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. The relevant Final Terms will specify any other interests of natural and legal persons involved in each issue/offer of Notes under the Programme. For the avoidance of doubt, for the purpose of this paragraph the term "affiliates" also includes a parent company.

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THE ISSUER

Banca Popolare di Milano S.C.a r.l. Piazza Filippo Meda, 4 20121 Milan Italy

TRUSTEE

Citicorp Trustee Company Limited Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

ISSUING AND PAYING AGENT

Citibank, N.A., London Branch Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

PAYING AGENT

Banque Internationale à Luxembourg SA 69, route d'Esch L-2953 Luxembourg

LEGAL ADVISERS

To the Issuer as to Italian law To the Issuer as to Italian tax law

Studio Legale RCC Studio Tributario Associato Via Boschetti, 1 Facchini Rossi & Soci 20121 Milan Foro Buonaparte, 70 Italy 20121 Milan Italy

To the Dealers as to English and Italian law

Clifford Chance Studio Legale Associato Piazzetta M. Bossi, 3 20121 Milan Italy

To the Trustee as to English law Clifford Chance LLP 10 Upper Bank Street London E14 5JJ United Kingdom

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AUDITORS

Until 11 April 2016 From 12 April 2016

EY S.p.A. PricewaterhouseCoopers S.p.A. Via Po 32 Via Monte Rosa 91 00198 Rome 20149 Milan Italy Italy

DEALERS

Banca Akros S.p.A. - Gruppo Bipiemme Banca Banca IMI S.p.A. Popolare di Milano Largo Mattioli, 3 Viale Eginardo, 29 20121 Milan 20149 Milan Italy Italy

Banca Popolare di Milano S.C.a r.l. Barclays Bank PLC Piazza Filippo Meda, 4 5 The North Colonnade 20121 Milan Canary Wharf Italy London E14 4BB United Kingdom

Citigroup Global Markets Limited Crédit Agricole Corporate and Investment Citigroup Centre Bank Canada Square 12, Place des Etats-Unis, CS 70052 London E14 5LB 925447 Montrouge Cedex United Kingdom France

Deutsche Bank AG, London Branch Goldman Sachs International Winchester House Peterborough Court 1 Great Winchester Street 133 Fleet Street London EC2N 2DB London EC4A 2BB United Kingdom United Kingdom

J.P. Morgan Securities plc Mediobanca – Banca di Credito Finanziario 25 Bank Street S.p.A. Canary Wharf Piazzetta Enrico Cuccia, 1 London E14 5JP 20121 Milan England Italy

Merrill Lynch International Morgan Stanley & Co. International plc 2 King Edward Street 25 Cabot Square, Canary Wharf London EC1A 1HQ London E14 4QA United Kingdom United Kingdom

Nomura International plc Société Générale 1 Angel Lane 29 Boulevard Haussmann London EC4R 3AB 75009 Paris United Kingdom France

The Royal Bank of Scotland plc 135 Bishopsgate London EC2M 3UR United Kingdom

LUXEMBOURG LISTING AGENT

Banque Internationale à Luxembourg SA 69, route d'Esch L-2953 Luxembourg

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