Abstract
Since the 1980s, banking systems worldwide have experienced growing competitive pressures, mostly due to non-bank financial institutions entering into traditional banking areas (as is the case with the United States market) and to the globalisation of the financial services industry. In Italy, this trend was even more pronounced given the ongoing deregulation of the banking industry in line with the process of European integration.
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Notes
Polyfunctional groups provided commercial banks with the opportunity of offering a wide range of financial services which had to be produced by distinct institutions within a financial group; the commercial bank can be, and often is, the parent company for such distinct entities.
See the Bank of Italy Annual Report (Relazione della Banca d’Italia) for various years.
See L. Di Battista, M. Grillo (1988) ‘La concorrenza nell’industria bancaria italiana’, ( Competition in Italian banking industry ), Banca Commerciale Italiana.
The increase in the securities/loans ratio at the end of 1993 was due to a combination of factors: virtual stagnation in loan growth (see Section 1.4) and an increase in investment securities portfolios in the final four months of the year when the increase in securities prices allowed banks to realize substantial gains on trading.
Source: Flow of Funds Accounts, Board of Governors of the Federal Reserve System.
Banca d’Italia ‘Modello mensile del mercato monetario’, Temi di discussion N° 108, Banca d’Italia Ed. 1988.
See E. Giovannini, ‘Fabbisogno pubblico, politica monetaria e mercati finanziari’ (Public sector borrowing requirement, monetary policy and financial markets), Franco Angeli Ed., 1993.
M. Parkin, ‘Discount house portfolio and debt selection’, Review of Economic Studies, October 1971. D.H. Pyle ‘On the theory of financial intermediation’, Journal of Finance, June 1971. O.D. Hart and D.M. Jaffee, ‘On the application of portfolio theory to depository financial intermediaries’, Review of Economic Studies, January 1974.
M.A. Klein, ‘A theory of the banking firm’, Journal of Money Credit and Banking, May 1971. M. Monti, ‘A theoretical Model of Banks’ behaviour and its Implications for Monetary Policy’, L’Industria, June 1971.
Source: Banque de France, Tableau d’operations financieres en encours.
Source: Bank of Italy, Conti finanziari.
In 1989, there were 5.3 branches per 10,000 inhabitants in Italy compared with an average of 6.8 in the G10 countries excluding Italy (Source: Bank of Italy).
Reference is made to spatial competition models, due originally to H. Hotelling (1929) ‘Stability in Competition’, Economic Journal, n. 59.
Source: Bank of Italy.
Bank of Italy, unpublished data.
Bank of Italy, unpublished data.
The coefficient of the ‘branches’ variable rose to 0.65 (with a t statistic to 4.67) versus a value of 0.14 (and t statistic of 0.74) for the industry.
In 1990, the personal expenditures variable exhibits a coefficient of 0.18 (with a t statistic equal to 2.18) versus a figure of 0.85 for the entire system. While the economic variable gained more significance in the following year for the industry (the coefficient rose to 0.93 and the t statistic went from 2.18 to 4.78 in 1991), the same variable lost significance in the determination of Credito Italiano’s market share (the variable declined to 0.15 with a t statistic which fell to 1.88).
With the only exceptions being Banca Commerciale Italiana and Banco di Roma, which is now known as Banca di Roma following a merger transaction.
J.A. Clark (1984) ‘Estimation of economies of scale in banking using a generalized functional form’, Journal of Money, Credit and Banking, February, provides a discussion on economies of scale and scope at both an individual firm and sector level.
See R.W. Nelson (1985) ‘Branching, scale economies and banking costs’, Journal of Banking and Finance, regarding the discovery of economies of scale related to increases in branch networks. Moreover, he demonstrated that this trend is more important to deposit taking than to other banking activities.
W.C. Hunter and S.G. Timme (1986) ‘Technical Progress, Organization and Bank’s Productive Structure’, in G. Coppola e D. Corsini (eds.) Teoria dell’Intennediazione creditizia, Studi e Informazioni, Banca Toscana, 2/1993.
Data are extracted from Credito Italiano’s balance sheet.
v. Cerasi (1994) ‘La concorrenza nei servizi bancari al dettaglio: modelli teorici di branching’ ( Banking Competition in Retail Market: Theoretical Branching Models) mimeo, provides information on the existence of sunk costs entailed in branch openings.
For example, following the branch deregulation in Spain, banks started competing in interest rates paid on deposits because the market was overbranched.
For an analysis of the rate war in Spain, see A. Barzaghi (1993) ‘Il sistema bancario spagnolo e l’integrazione europea’ (Spanish Banking Industry and European Integration), Bologna, Il Mulino.
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Modiano, P., Mollame, L.E., Valenti, V. (1994). New Competitive Strategies in the Italian Financial Services Industry. In: Fair, D.E., Raymond, R. (eds) The Competitiveness of Financial Institutions and Centres in Europe. Financial and Monetary Policy Studies, vol 28. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-8350-3_13
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DOI: https://doi.org/10.1007/978-94-015-8350-3_13
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