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  • Online publication date: December 2014

7 - Alternative Banks in a Dualistic Economy: The Case of Italy before and during the Euro Crisis

from Part II - Comparative Country Cases

Summary

Introduction

Between the early 1990s and 2005, the Italian banking system has experienced a profound transformation. The acceleration of European economic integration, culminating in the adoption of the euro, and the birth of a highly integrated European financial market have accentuated competitive pressures: Italian banks, which had been operating for a long time in a closed and protected market, suddenly faced a much more competitive market characterized by the widespread presence of large credit institutions.

These challenges have led successive governments to devise banking regulatory reforms and to choose new models of supervision. Thus Italian banking has gone from a closed system, in which access to the market and the range of services offered were subject to stringent administrative constraints, to one in which all obstacles to banking activities were removed, keeping only prudential controls in order to ensure stability.

A legitimate question would therefore be to ask whether, before the 2007–8 global financial crisis and the eurozone sovereign debt crisis but after the radical changes mentioned above, the Italian banking system was still able to meet the needs of an economic system characterized by a profound north–south dualism and dominated by small businesses dependent, almost exclusively, on bank credit for their funding.

Furthermore, it is interesting to see whether and to what extent non-profitbanks, which in the Italian context are mainly small, local cooperative banks (banche di credito cooperativo) and medium to large-size cooperative banking groups (banche popolari), have behaved differently from joint-stock banks in the context of this transformation.