We can identify two phases in the policy for the defence and promotion of competition in banking and finance since the 1950s, placing the turning-point in the late 1970s. During the first phase the Bank of Italy ensured the independence of banks from industrial groups, that is from non-financial firms. It also ensured that the banking system consisted of a suitable number of banks, grouped into various institutional categories and size classes. These two objectives were instrumental to the fundamental aim of countering industrial monopoly. Under the logic of ‘second-best’, competition internal to the banking system — competition between banks in setting interest rates — was sacrificed to that higher goal. At the same time, the backwardness of the money and financial markets and the restrictions on cross-border capital movements limited competition external to the banking system. The economic crisis of the 1970s marked a watershed in the central bank’s action for competition. In keeping with the analysis of the nature of the crisis set out above, the Bank acted to promote competition on prices and in all other legitimate forms, within the banking system as well as externally. The low level of concentration in banking, the progress of the capital markets, the increasing popularity of government securities and the opening-up of the economy to international capital flows also worked to favour competition between banks and throughout the entire financial system.
KeywordsEconomic Crisis Europe Income Defend Monopoly
Unable to display preview. Download preview PDF.
- 2.D. Menichella, Stabilità e sviluppo dell’ economia italiana, 1946–1960, Laterza, Rome and Bari, 1997, vol. 1, p. 705.Google Scholar
- 4.P. Ciocca, C.A. Giussani and G. Lanciotti, Sportelli, dimensioni e costi: uno studio sulla struttura del sistema bancario italiano, Quademi di ricerche dell’Ente Einaudi, Rome, 1974.Google Scholar
- 6.The seminal contribution was that of W.J. Baumol, The Stock Market and Economic Efficiency, Fordham University Press, New York, 1965.Google Scholar
- 8.G. Cristini, ‘I rendimenti delle azioni e l’efficienza della borsa’, Contributi alla ricerca economica, no. 8, Banca d’Italia, Rome, 1978. An earlier study of stock exchanges in eight European countries, including Italy, from 1966 to 1971 had reached the following conclusions: ‘Deviations from the random walk seem slightly more apparent in the European stock price behavior than in the American price behavior … Explanations for these departures from the random walk can probably be found in some of the technical and institutional characteristics of European capital markets: loose requirements for disclosure of information, discontinuity in trading. With the exception of the British market, where prices seem to behave much like U.S. stock prices, all other markets tend to exhibit quite unexpectedly similar behavior.’ (B. Solnik, ‘Note on the Validity of the Random Walk for European Stock Prices’, Journal of Finance, 1973, p. 1158).Google Scholar
- 9.T.F. Bresnahan, ‘Empirical Studies of Industries with Market Power’, in R. Schmalensee and R.D. Willig (eds), Handbook of Industrial Organization, North-Holland, Amsterdam, 1989, table 17.1, p. 1051; S. Shaffer, ‘A Test of Competition in Canadian Banking’, Journal of Money, Credit, and Banking, 1993, pp. 49–61; S.A. Berg and M. Kim, ‘Oligopolistic Interdependence and the Structure of Production in Banking: An Empirical Evaluation’, Journal of Money, Credit, and Banking, 1994, pp. 309–22; P. Coccorese, ‘The Degree of Competition in the Italian Banking Industry’, Economic Notes, 1998, pp. 355–70;Google Scholar
- P. Angelini and N. Cetorelli, Bank Competition and Regulatory Reform: The Case of the Italian Banking Industry, Working Paper no. 32, Federal Reserve Bank of Chicago, 1999.Google Scholar