Opera Omnia Luigi Einaudi

Banking Changes – A New Body

Tipologia: Paragrafo/Articolo – Data pubblicazione: 14/11/1931

Banking Changes – A New Body

«The Economist», 14 novembre 1931, pp. 910-911




Turin, November 9



The great event of the week was the Banca Commerciale Italiana arrangement, which was officially announced on Tuesday night. Italian banking traditions partake at the same time of the French and German systems. As in France, the bank of issue is not only the bakers’ bank, but deals directly with the public, and is, therefore, a direct competitor of ordinary banks. This is largely explained by the fact that the banks of issue were founded in the fifties, when ordinary banking was very litde developed. When, afterwards, commercial banks arose they thus found themselves deprived of a part of the ordinary discount business, in which their deposits would have found their most obvious outlet. On the other hand, there do not exist, except for loans on land and houses, special organisations for making permanent advances to industry. Great industries, such as textiles, iron and steel, navigation and electricity, could not be created had they not found in the banks a permanent aid. Credit to industry is, according to the German model, fatally tied up for a more or less long period of time. In the past, banks have come to grief because they have overstepped the limits of prudence in apportioning deposits between short discounts and advances and long investments. Sometimes these limits were exceeded because the bank was in the power of the industries which were its customers. The most famous instance was the Banca Italiana di Sconto, which failed in 1921 because it became the prey of the Ansaldo group.



In 1918 an attempt was made on the part of certain industrial groups to get control of the Banca Commerciale and of the Credito Italiano; and the struggle between the Perrone-Ansaldo group and a group of friends of the B.C.I, (the Gruppo Marsaglia) ended in the victory of the latter. In March, 1920, the assault on the B.C.I, was repeated on a bigger scale. The Perrone-Ansaldo group, in the endeavour to get hold of a majority of the capital shares of the B.C.I., pushed the price of the shares in a few days from 1,255 to 2,450 lire. For the second time the attempt failed. Then the “Consorzio Mobiliare Finanziario” was created, which bought all shares sold by the discomfited Perrone-Ansaldo group and subsequently worked in alliance with a financial syndicate of supporters and large shareholders of the B.C.I., so as to secure the bank against future attempts by industrial and commercial customers to capture the bank and its deposits. During the period from 1920 to 1931 this syndicate acquired, so it appears, a large amount of B.C.I, shares.



The present arrangement aims, firstly, at consolidating this long-drawn-out development. The “Consorzio Mobiliare Finanziario” is to increase its capital from 210 to 630 million lire; the fresh capital, the subscription of which is already guaranteed from sources outside the bank, being devoted to buying the “syndicate” B.C.I, shares. Thus, the majority of the capital shares of the B.C.I, will become the definite property of the Consorzio; and the shareholders of the Consorzio (directors of the bank, financiers, stockbrokers and other supporters of the B.C.I.) will constitute in their turn a syndicate which shall keep in safe hands the shares of the Consorzio and guarantee the B.C.I, against any possible inroad. In 1930 a similar arrangement was arrived at for the Credito Italiano.



Now comes the second part of the arrangement. War and inflation influenced the B.C.I., as all other banks. Probably the frozen credits and investments might have been disposed of if the stabilisation of the lira at a level about 25 per cent, lower than the average level current from 1921 to 1926 and the subsequent deflation policy of the Bank of Italy – the notes issued were reduced from 17,992.2 at the end of 1927 to 14,441 at the end of October, 1931 – had not made customers of the B.C.I, desirous of further aid. The world crisis, coming on the top of the deflation crisis, made it well-nigh impossible to float industrial shares on the internal markets and closed the American market to issues of debentures. It is to the credit of the B.C.I, managers that they were able to avoid increasing their discounts and advances during these trying years. Discounts were 4,149.5 million lire at the end of 1924, as against 4,075.8 at June 30, 1931, and loans against, collateral were 688.5 and 683.8 million respectively. Investments and “partnerships” rose, however, during the same period from 571.9 to 1,382.7 million, and sums due by correspondents from 1,670.8 to 3,268.2 million lire. It is no wonder that in these assets there should be some measure of frozen investments. Under an energetic guidance these assets may in the end prove to be good; but it will take some years of organisation and abstinence from dividends to come through the ordeal.



Provision has to be made in the meantime for frozen credits and assets at present unsaleable. The amount of these non-banking assets can only be guessed. On the basis of the difference between the present and the 1924 figures of the above-quoted items, we may reach a figure of roughly 2,000 million lire, mainly holdings in and debts by iron and steel, chemical, naval and shipping industries. Whatever the total sum, the entire block will be sold to a new body, called the Società Finanziaria Italiana, with a share capital of 300 million lire. The sale will be made at a price involving no loss for the B.C.I. Shareholders of the new Società are to bear the whole risk of the operation. It is hoped that no loss will ultimately be incurred, inasmuch as the new body will have plenty of time to liquidate. Of course, the new Società Finanziaria will not be able to pay for the whole of the frozen assets purchased, which amount to some 2,000 millions, out of its own 300 millions capital. A new semi-public body, on the pattern of the existent Credit Institutes for Public Utilities and Public Works, or the Shipping Credit Institute, is to be created, which will issue debentures on a large scale. The arrangement thus aims at transforming banking assets not quickly disposed of to a public which is not to-day in the mood for purchasing large amounts of industrial shares into debentures issued by a semi-public body, which should be bought more easily by the saving public. Everybody recognises the difficulty of selling debentures directly to a saving public, which in Italy, as in other countries, is very shy of “new” securities, albeit buying voraciously “old” securities like Treasury bonds, railway debentures, mortgage, land and houses bonds, etc. The new debentures now under consideration, as those of other semipublic credit institutes, will find an outlet in savings banks and other superannuation and pension funds, which have a regular source of revenue from new savings and premiums, and can easily, by disposing of old securities, absorb large quantities of them.



The general conclusions which may be drawn from these far-reaching events are manifold. In the first place, no recourse will be had to the printing of notes, and the stability of the lira will not be impaired. Secondly, the Banca Commerciale will recover its full freedom of movement and, freed from the incumbrances of the past, reassert its hardly and ably won supremacy in the field of commercial banking. Thirdly, these recent events make imperative the study of a re-arrangement of the various inter-related banking agencies. They consist at present of 1) several thousand small and medium-sized private, popular, savings and rural banks with a limited field of action. A country where agriculturists and small industrialists and traders number millions cannot well do without these small banks, provided they are well managed. A supervision such as that exercised by the Bank of Italy is all that is needed. 2) A small group of commercial banks, at the head of which are the Banca Commerciale Italiana and the Credito Italiano. 3) A small group of powerful semi-public banks and savings banks, such as the Bank of Naples, the Bank of Sicily, the Lombard Savings Bank, the Turin Savings Bank, etc. 4) A few public institutions for the granting of credit to public utilities, public works, naval concerns, including the new Institute for Industries. 5) The Institute of Liquidation, a creation of the Bank of Italy, whose business is the wmding up of 1,500 millions of old and new frozen assets from 1921 to 1930. 6) A few investment trusts, the outstanding instance of which is the Meridional Railways Company. 7) A big State bank, the Cassa Depositi e Prestiti, which centralises the deposits, about 14,000 million lire, of the postal savings banks. 8) The Bank of Italy.



Between these various banking types some sort of division of labour already exists. The short commercial credit in the usual English sense should be the appanage of groups 1 and 2; the long-term credit to industries, trade and agriculture is in principle the privilege of groups 3, 4 and 5, which also, together with the Cassa Depositi e Prestiti, finance public bodies. If these lines of division were more stricdy observed, if new investment trusts, run indepen-dendy of the banks, were created, and if, finally, the Bank of Italy, renouncing its old ordinary bankbg functions, were to remain only a central bankers’ bank, our banking system would work very well. The Banca Commerciale arrangements, as well as those for the Credito Italiano last year, make for progress on these lines, but such a development cannot be completed if a market is not created for fixed-interest bonds and debentures. At present, such a market exists only for State securities, land and houses mortgage bonds, some old railways and local public bonds. The industrial bond market is practically nonexistent, and industrial bonds are perforce kept in the coffers of some of the above-mentioned bariking groups (2 to 6, with some occasional transfer from group 2 to the others). Of course, such a development cannot be perfected at a time of crisis, but a cautious beginning could be made, taking advantage of the keen public demand for fixed-interest, well-secured bonds. The Lombard Savings Bank mortgage bonds are negotiated, even in these days of dear money, at a yield of about 5 per cent., and other similar industrial mortgage bonds could be equally good sellers, if only purchasers were sure of the possibility of reselling them in case of necessity.


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