Economic Theory and Banking Regulation: The Italian Case (1861-1930s)

Abstract

The purpose of the Economic History Working Papers (Quaderni di Storia economica) is to promote the circulation of preliminary versions of working papers on growth, finance, money, institutions prepared within the Bank of Italy or presented at Bank seminars by external speakers with the aim of stimulating comments and suggestions. The present series substitutes the Historical Research papers -Quaderni dell'Ufficio Ricerche Storiche. The views expressed in the articles are those of the authors and do not involve the responsibility of the Bank.

Crisis and Reform: The 1893 Demise of Banca Romana

“…The law also formally provided for the restoration of convertibility, but deferred its implementation to a royal decree that was never issued. In practice, in the years following the reform, the new monetary anchor was not the exchange rate but the legal limits on money supply (i.e., circulation), which preserved some degree of flexibility (Gigliobianco and Giordano, 2010). 91 The Law also authorized -but did not require -the Bank of Italy to outsource the liquidation of all or part of its long-term assets (including those acquired from Banca Romana) to a "bad bank," an option that the Bank of Italy preferred not to use in order to avoid incurring the losses associated with selling its assets at a discount.…”

“…About 400 million lire.35 About 280 million lire, including (mainly) reserves of precious metals (gold and silver), as well as claims on foreign entities, and certificates convertible in gold: data fromSpinelli and Fratianni (1991), taken in turn from de Mattia (1967).36 The real estate boom is documented by contemporary anecdotal evidence (e.g., in contemporary newspaper articles and parliamentary speeches) and by recent studies (e.g.,Confalonieri, 1974;Negri, 2003) Gigliobianco et al (2009). andGigliobianco and Giordano (2010) explicitly mention a "real estate bubble," andQuilici (1935) reports that property in Rome that a suburban vineyard that was sold for 35,000 lire was re-sold a few years later for half a million lire and sold again after a few months for 2 million; and the price per square meter of properties just outside Porta Pia increased from 3 lire in 1882 to 15 lire in 1884 and 32 lire in 1887.37 The increase in asset prices contributed, in turn, to attract foreign capital in search for yield. To some extent, foreign investors may have underestimated the risks involved in the rapid price increase and overestimated its sustainability; they may also have overestimated the buffers provided by their investment intermediaries (such as banks) whose capital, as proved by later events, was not always capable of absorbing the full amount of the losses.©International Monetary Fund.…”

“…SeeGigliobianco and Giordano (2010).88 Supporters of the "single bank" option were divided into those that favored a merger of the existing banks (or a phasing out of the authorization to the minor banks to issue banknotes) and those who promoted granting the monopoly of issue to a government-owned "state bank" to be established ex novo.©International Monetary Fund. Not for Redistribution…”

The effects of systemic banking crises in the inter-war period

“…Bernanke and James (1991), , Gigliobianco et al (2009, and Gigliobianco and Giordano (2010) list this as a banking crisis year. Following from this the Banca Agricola Italiana was broken up on 1931 and a number of other banks were subject to panic and government reorganisation.…”

“…Italy 1921 (A) , Gigliobianco et al (2009, and Gigliobianco and Giordano (2010) view this as a banking crisis. The Banca Italiana di Sconto, which extended loans heavily to war industries, failed in 1921.…”