alfredo gigliobianco

In a bank-oriented country such as Italy, bank credit is by far the most important source of external finance for firms. The allocative efficiency of banks is therefore an important element underlying the overall performance of the economy. In this paper we focus on allocation across industrial sectors. To investigate the matter, we use the concept of growth opportunities for each industrial sector, as revealed by stock market data. The paper exploits a new database which includes annual data on bank credit to different sectors (both aggregate and at the individual bank level) and parallel data on prices, earnings and capitalization of listed firms from 1948 to 2009. We assume that average sectoral price/earning ratios are a proxy for the growth opportunities of each sector, and that an efficient allocation of credit takes into account the variation of such opportunities. Cointegration between the volume of credit and the P/E ratios is tested for relevant sub-periods, keeping the ba...

Between the 1880s and the 1930s, three “regulatory cycles” can be identified in Italy. In the underlying model, each financial crisis gives rise to regulatory changes, which are circumvented in due time by financial innovation, that can then contribute to the outbreak of a new financial crisis. In Italy, overtrading of the banks of issue in the 1880s contributed to the 1888-1894 financial crisis, which yielded regulation concerning only these banks and restricting their activity. The German-type universal banks, created at the turn of the century and unconstrained in their undertakings, were at the core of the 1907 and the 1921-1923 crises. These led to a banking law in 1926 which, arguably, was born obsolete, in that it was not aimed at regulating universal banking as it had developed until then, but it contained general provisions regarding the whole range of deposit-taking institutions. Finally, the evolutionary adaptation of the universal banks into holding companies, not taken ...

The focus of the present volume - which originates from a workshop held at the Bank of Italy on 16 and 17 April 2009 - is the regulatory response given to financial crises in the past, across countries. Alongside the scholarly interest of such a review its aim is also to offer some insights that may be useful in re-designing

Between the 1880s and the 1930s, three "regulatory cycles" can be identified in Italy. In the underlying model, each financial crisis gives rise to a regulatory change, which is circumvented in due time by financial innovation, that can then contribute to the outbreak of a new financial crisis. In Italy, overtrading of the banks of issue in the 1880s contributed

ABSTRACT We provide an assessment of the role of economic theory in orienting Italy's banking legislation over eight decades. From the unification of the country (1861) to the introduction of the 1936 Banking Act, five regulatory regimes are mapped out. Whilst market discipline and self-regulation arguments characterized the first sub-period (1861-1892), the first biting issuing-bank regulation, which inaugurated the second regime (1893-1906), was a political compromise that ignored economists' requests of a return to convertibility. The third sub-period (1907-1925) was punctuated by two banking crises: the first (1907) vindicated economists who had stressed the need of a LLR, but did not lead to any crisis-prevention regulation; the second (1921-23) confirmed – to no avail – the dangers congenital to bank-industry ties, pinpointed by some members of the profession. The following sub-period (1926-1930) was inaugurated by the first commercial bank regulation (1926) and responded to the economists' call for restricting bank competition. The 1936 regulation, which marked the onset of the approximately five-decade long fifth regime, matured in a vacuum of economic debate. Financial crises were an important trigger in all the discussed regulatory episodes to which many players, amongst which economists, contributed with varying weights and roles according to the circumstances. Players' public and private motivations towards regulation were relevant drivers. The existing political regime is not found to have been a discriminating factor in determining the influence economic theory had on bank legislation. More important was instead the degree of authority and legitimacy that economists as a professional category displayed at the time of reforming the regulation. Finally, the desirability of economic theory actually percolating into banking laws is discussed, although the historical evidence on the matter is not clear-cut.