Perspectives 54

54
PERSPECTIVES
March 2007
VARIETIES WITHIN CAPITALISM?
THE MODERNISATION OF FRENCH
AND ITALIAN SAVINGS BANKS,
1980-2000
VARIETIES WITHIN CAPITALISM?
THE MODERNISATION OF FRENCH
AND ITALIAN SAVINGS BANKS,
1980-2000
Olivier Butzbach
Faculty of Political Science
Second University of Naples
Via del Setificio, 15
Complesso Monumentale Belvedere San Leucio
81020 Caserta (CE)
Italy
E-mail: [email protected]
Acknowledgments
This study draws on my doctoral dissertation; my thanks, therefore, go
first of all to my doctoral thesis advisor, Martin Rhodes, who helped me
focus and asked me the right questions throughout my research and
writing. My thanks also go to the other three members of my doctoral
jury: Colin Crouch, Richard Deeg and Adriano Giannola, who provided
me with precious comments in the last phase of the writing process. I also
thank all my interviewees, whom I cannot list here, and all of those who,
at various stages, have facilitated my research. In particular, I wish to thank,
in France, Valérie Delumeau and Jean-Philippe Goethals and the staff at:
the Caisse d’Epargne de Picardie, the Caisse d’Epargne de Provences
Alpes Corse, the Fédération Nationale des Caisses d’Epargne and the
Caisse Nationale des Caisses d’Epargne; in Italy, the Associazione fra
le Casse di Risparmio Italiane, Mrs. Giacchetti and the Associazione
Bancaria Italiana.
I further wish to express my gratitude to my Italian friends and colleagues,
in particular Adriano Giannola and Giuseppe Pennisi who have honoured
me with their trust and given me, at various stages of my doctoral life,
very valuable support and opened for me the doors to the University.
Last but not least, I wish to thank Mita and Nicolas for their continuous
support and their resistance to “doctoral fatigue”.
This study has been published by ESBG (European Savings Banks Group)
in the framework of the first Savings Banks Academic Award. The objective
of the Savings Banks Academic Award is to stimulate comparative
research projects on the rich historical heritage of the European savings
banks and to propose solutions for the future.
The findings, interpretations and conclusions expressed in this paper do
not necessarily reflect the views of ESBG (European Savings Banks Group
or WSBI (World Savings Banks Institute). ESBG nor WSBI guarantee the
accuracy of the data included in this work. The material in this publication
is copyrighted.
ESBG – The European voice of savings and retail banks.
4
EXECUTIVE SUMMARY
The world of finance has changed rapidly over the past two decades:
heightened competition, financial globalisation, technological innovations,
regulatory changes… European savings banks, which constitute a pillar
of European political economies, have had to adjust.
French and Italian savings banks have been all the more exposed to change
as they formerly belonged to a very specific kind of financial system
characterised by heavy state intervention and regulation; and as such
state-administered credit systems have been completely dismantled during
the 1980s. Savings banks in both countries faced, therefore, a dramatically
altered environment to which they had to adjust in order to survive.
This research, building on a case study approach, aims at uncovering the
process of change in the savings banks sector in France and Italy; and
at identifying the factors of change in each country. According to the
literature on comparative political economy, adjustment patterns (of firms
or national economic systems) are shaped by existing institutions.
Institutional specificities, which are path-dependent over time, determine
the peculiar outcome of change in each country; and while convergence
is the outcome of market forces, divergence reflects the operation of
“rigid” national institutions. The research question addressed here
concerns, therefore, both the direction of change and its causes. In other
words, what explains French and Italian savings banks’ apparent different
trajectories in front of common pressures to adjust?
Findings show simultaneous convergence and divergence forces at play
within French and Italian savings banks’ adjustment processes. French
savings banks have become a nationally integrated cooperative banking
group, while Italian savings banks have either merged with other banks
to form nationally integrated commercial banking groups, or formed
alliances at the regional or local level.
5
On the business side, the evidence is even less linear: savings banks in
both countries have demonstrated a suprising ability to innovate (at the
level of products or markets), while maintaining strong positions in their
traditional activities. Findings suggest, therefore, the presence of a multilayered process of change, where institutions both determine and are
determined by the strategies pursued by top management.
6
VARIETIES WITHIN CAPITALISM?
THE MODERNISATION OF FRENCH
AND ITALIAN SAVINGS BANKS,
1980-2000
Table of Contents
Acknowledgments
4
Executive summary
5
Introduction
9
1. Factors and directions of change in European banking
17
2. Organisational and institutional change
in national financial systems
39
3. The role of savings banks in the European economies
in the XXth century: the cases of France and Italy
53
4. The unravelling of state administered credit systems
and their impact on banking
93
5. The regulatory normalisation of savings banks
141
6. The changing boundaries of coordination: savings banks’
corporate restructuring and sector organisation
169
7. Changes in savings banks’ corporate governance
199
8. Changes in savings banks’ corporate strategies
219
9. Conclusions
251
Bibliography
263
7
8
INTRODUCTION
1. The research puzzle: European savings banks’ adjustment
to radical shifts in their environment
Savings banks fill both an important and peculiar space in the history of
European financial systems. In fact, savings banks can be considered as
trademarks of the economies of Germany, Belgium, Spain, France, Italy
and the Netherlands, since they are intricately linked to those countries’
industrial and financial development, and because they exhibit strength
and financial power rarely seen elsewhere.
The first savings banks were created in the early to mid XIXth century in
the UK and Germany as deposit banks catering for the low income
earning populations, who were then ignored by other credit institutions.
Along the years, the savings banks movement spread throughout Europe
and savings banks expanded their activities on the asset side, through
lending both to individuals and small firms – considered too risky by large
national banks - and through financing public investments via the holding
of government securities.
Initially, savings banks were mostly local, private, non-profit banks often
organised in strong sector associations at the local, regional and national
level – epitomised by the German model of “giro” associations. Most savings
banks were originally set up by local power-holders and institutions linked
to the church or to the rising elites of the new industrial society. Their nonprofit nature meant that, in contrast to commercial banks, they did not
have to make profits or pay dividends. In fact, savings banks carried out
an explicit redistributive mission, giving part of their yearly revenues to
the poor or to the local economy. Hence savings banks’ profound rooting
in local economies and communities.
9
Savings banks usually benefited from a protective legal status that allowed
them to exert their mission as public goods providers without being
confronted to the same market pressures faced by commercial banks.
In Germany, for instance, the Sparkassen used to enjoy unlimited state
guarantees that enabled them to secure the highest possible credit rating
(which recurrently raised the concerns of for-profit competitors and
European regulators).
Most European savings banks retained their specific organisational and
governance features throughout the XXth century. Today, they are still
powerful actors in the banking sector in France, Germany, Italy, Norway,
Belgium, Spain, Austria, Portugal, and Sweden. Their local rooting and
ownership, the trust they built over the years among depositors, the
occasional protection and regulatory advantages provided to them by
the state enabled savings banks to reap and keep, until today, high
market shares in the deposit (and in some cases the lending) market in
the nine countries mentioned above.
More precisely, in 2002 European savings banks represented, on average,
25% of housing loans in their home country, 23% in lending to firms and
households, and held 19.6% of total assets in the banking market; on
the liability side, they held around one third of total deposits1. In Spain,
the 46 Cajas held, as of December 2002, 46% of banking loans and 47%
of deposits. And these market shares have been growing over the past
ten years. In 2000, French savings banks “weighed” 36.6% of total
lending to households (commercial banks held a 44% market share in
this segment), against 27.4% in 1995; more generally, cooperative banks
increased their shares in deposits, up to 59.7% of the market in 20002.
In Italy, (former3) savings banks held in 2003 a 27% market share for
deposits, and a 17% market share for lending. In Germany, the nonprofit sector is even more dominant; in 2002 75% of deposits were at
Sparkassen or at Deutsche Genossenschaftsbank, the lead institution of
the co-operative banking sector.
1
2
3
10
Data from the European Savings Banks Group’s 2003 Annual Report. The data refer to the eight
countries mentioned above plus 15 other European countries – all members of the ESBG.
Source: Banque de France, CECEI, 2000 Report.
As will be precised later on, all of Italy’s savings banks have lost their specific legal status
during the 1990s. Many of them have merged or been acquired by commercial banking groups.
And its hegemony does not seem to be questioned by the failed mergers
between Deutsche Bank and Dresdner Bank, and then between Dresdner
and Commerzbank. Savings banks are also important actors when
compared internationally. In 1999 the French Caisse d’Épargne ranked 39th
among the world’s largest banks, with 1,012 billion dollars in assets4.
Savings banks’ resilience is all the more surprising as European financial
systems have been exposed to strong pressures to change since the late
1970s. Such changes have led to much more market-oriented financial
systems, thus giving private, for-profit banks a premium when compared
to non-profit banks such as savings banks. Indeed, as mentioned above,
the savings banks philosophy is opposed to the free-market view. As Revell
put it in the late 1980s, “the conflict is between the free market philosophy,
with its single goal of profit maximisation, and the philosophy of the
savings banks in all countries, which attaches value to the economic
welfare of a particular locality, to social works for the benefit of the
inhabitants of that locality, and co-operation rather than conflict and
competition between individual savings banks.” (Revell 1989: p.1.)
Thus the first issue tackled by this research presents itself: how have
savings banks successfully adjusted to exogenous changes that were a
priori unfavourable to their specific business profile? In other words, as
the Institute of European Finance put it in a 1999 report: “how might
those savings banks survive?” (IEF, 1999) Indeed, successful adjustment
can be measured on the basis of the survival of a business organisation
in an adverse environment (tight selection). Of course, survival here means
conservation of the organisation's business identity (core activities,
structure, objectives). Survival, therefore, does not preclude
transformation; but to “successfully adjust” a firm should maintain, in a
changed environment, the core elements that characterised its business
model in the previous environment. In our cases, legal and corporate
statuses could change, therefore; as long as savings banks remain
distinguishable from other types of banks, they will have adjusted in a
successful way.
4
Source: The Banker, July 1999.
11
The issue is all the more relevant in those countries where changes have
been more severe, i.e. France and Italy. These two countries were long
characterised (at least since the late 1920s) by extensive state intervention
in the economy, and especially in the credit system – giving birth to what
has been known as a “state-administered credit system” in France and
other countries (see Zysman 1983; Loriaux, 1991; and Loriaux et. al,
1997), a category that could include Italy, too (as will be argued in
chapter 4)5. In both countries, savings banks were a key component of
state-administered credit, especially on the liability side: in short, they
collected savings that were in turn channelled to fund public investment
predominantly through government securities. In exchange for taking
part in administered credit, savings banks received regulatory protection
against competition, which, until the late 1970s, prevented savings banks’
business homologation with, and takeover from commercial banks.
Therefore, French and Italian savings banks faced a radically altered
business environment in the 1980s and 1990s. Not only did they face
changes common to all European countries: technological innovation,
changes in clients’ behaviour, increased competition by banks and nonbank financial institutions and markets, European regulation. In addition,
French and Italian savings banks also had to cope with the unraveling of
state-administered credit in both countries, starting in the late 1970s.
They seem, however, to have adjusted successfully: as mentioned above,
French and Italian savings banks have (at least until the early 2000s)
maintained high market shares in the savings and deposit markets (the
same market share of 27.3% in 1997 for both countries) and in some
segments of the credit market as well (while savings banks lending
represented 18% of all bank lending in Italy in 1997, that proportion fell
to 5% for France – but in market segments such as lending to local
governments or households, French savings banks did perform well)6.
Yet this adjustment has taken, it seems, two radically different paths: in
France, savings banks have gradually tightened their organisational and
business ties to form a united banking group present on all segments of
the credit market, following a series of top-down impulses from regulators
and top management.
5
6
12
In his seminal 1983 work, Zysman proposed a three-fold categorisation of national
financial systems, based on the main provider of financial services and products to firms
and households: market-based systems (such as the UK and the US), bank-based systems
(Germany, Japan), and state-administered credit systems (such as France).
Numbers are from the Institute of European Finance’s 1998 report on the future of
European savings banks (IEF 1999).
In addition, the French caisses d’épargne have been granted a cooperative
status by law-makers. In Italy, savings banks have become joint-stock
companies and have disappeared as a distinct category; and the adjustment
paths differ from one savings bank to another – a process of differentiation
closely associated with territorial differences. Adjustment paths here refer
to the twenty-year long changes experienced by savings banks with
respect to: (i) legal and corporate status,; (ii) corporate ownership and
governance; (iii) inter-firm relationships and organisation; (iv) market and
product strategy.
Hence our two research questions: First, how have savings banks
successfully adjusted to a priori adverse changes in their environment?
Secondly, what can explain the different adjustment paths taken by
French and Italian savings banks, given similar points of departure and
similar pressures to change?7
2. The implications of changes in French and Italian savings
banks
Finance and banking have for a long time played a central role in defining
the peculiar characteristics of national economies. Financial systems, in
particular, are associated with specific patterns of economic and industrial
development and business-government relationships. In countries such as
France and Italy, for instance, governments have historically used their
leverage over the credit system to direct savings to industrial investment.
Moreover, capital accumulation is often associated with financial
intermediation as a driver for economic development. The credit
system allows transforming “dormant capital” into productive capital,
thus unleashing the forces of economic growth and development.
Some economic historians, such as Richard Sylla, further argue that not
only did financial revolution precede the industrial revolution; it actually
prepared it (Sylla, 2000). Yet other scholars have found that the marketgovernment nexus at the heart of modern European economic
development heavily relied on finance, and in particular intermediated
finance (Zysman 1983).
7
This study builds therefore on a “most similar cases” comparative strategy, which will be
further discussed in chapter 1.
13
In addition, recent works in comparative political economy, inspired by
new institutionalism, assign finance and financial institutions a key role in
the maintenance of a country’s distinctive path of economic development.
In particular, Hall and Soskice identified finance as one of five key institutions
(the other ones are: corporate governance, industrial relations, the role of
state and the skill production system) that together shape national
“varieties of capitalism” (Hall and Soskice 2001). Indeed, as argued in
the book’s introductory chapter, national financial systems represent an
attractive field of inquiry for comparativists, since they are seen as the
segment of the economy most exposed to globalisation, and, therefore,
to convergence pressures (for a similar argument see Cerny, 1989, Loriaux,
1991, Story and Walter, 1996).
Concretely, this means that, for instance, having locally rooted networks
of cooperative banks that own shares in local businesses will permit small
firms to rely on a stable source for long-term finance – without having
to resort to large cash flows, equity creation or market finance for their
investments. This specific financial configuration is, in turn, linked to
specific performance targets (long-term versus short-term; stable growth
versus cost-cutting, etc.) and specific organisational forms and labourmanagement relations that, together, characterise a country’s political
economy. Finance, therefore, lies at the heart of national capitalism.
More importantly for this research, banking (or intermediated finance)
lies at the heart of European varieties of capitalism. In his seminal work,
Gerschenkron showed indeed how intermediated finance was a
characteristic of late development and XXth century capitalism
(Gerschenkron 1963).
Given the central role of finance in modern capitalism, understanding
changes in finance and banking is instrumental to understanding
changes in national capitalism as a whole. As Zysman has argued, “by
knowing the financial system one can predict the nature of the process
of adjustment” (Zysman, 1983). This has two implications for researchers.
First, changes in financial structures and functioning are likely to have an
important impact on the rest of the economy. Specifically, banking
concentration, dis-intermediation and financial market de-segmentation
are likely to affect (i) the range of instruments, services and products
offered to corporate and individual customers and (ii) the conditions
under which firms and households have access to such services and
products. In fact, firms often voice their concerns over changing financing
conditions by banks and financial intermediaries.
14
For instance, the recent conclusion of the “Basle II agreement”, led by the
Bank for International Settlements, which modifies the way banks
calculate their risk ratios, led to strong opposition from Italy’s small and
medium firms’ business associations, fearing that this would further
hinder their access to banking loans.
Secondly, changes in finance and banking are likely to epitomise changes
in the political economy as a whole. Banks were among the first
companies to be nationalised by the French government in 1981-1982.
Similarly, the privatisation of Italian banks in the early 1990s constituted
the first step towards a massive shift from public to private ownership
across sectors. Finally, changes in banks’ organisation, structure and
strategies are likely to reflect, or “co-evolve” with changes in non-financial
firms’ organisation, structure and strategies. Therefore, analysing changes
in banking and finance should provide us with good insight into change
in national capitalism as a whole.
3. Outline of the study
Chapter 1 presents the existing empirical evidence on changes in finance
and banking. Chapter 2 discusses the literature relevant to the questions
spelled out above, delineates the conceptual framework of the research
and presents the methodology used. Chapter 3 explores French and
Italian savings banks’ history and presents their situation prior to changes.
Chapter 4 analyses the origins, nature and functioning of state-administered
credit systems in France and Italy and their dismantling in the 1970s
and 1980s. Chapters 5 to 8 present and analyse the research findings.
In particular, chapter 5 addresses the regulatory changes undergone
by the savings banks sector over the past two decades; chapter 6 focuses
on mergers and acquisitions and changes in savings banks’ sector
boundaries; chapter 7 deals with changes in savings banks’ governance
structures; and chapter 8 analyses changes in savings banks’ business
strategies. Chapter 9 concludes and chapter 10 discusses the implications
of the research.
15
16
1. FACTORS AND
DIRECTIONS OF CHANGE
IN EUROPEAN BANKING:
THE EXISTING EVIDENCE
1.1
The forces of change in European banking
Since the late 1970s, the environment of European banks has been
profoundly transformed. Five forces can be identified behind this
transformation: financial globalisation, shifts in industrial countries’
macroeconomic regimes, regulatory changes, technological innovations
and changes in customers’ behaviour. To these five factors one may add,
for Western European countries, the pressures linked to economic and
monetary integration, especially after the 1986 Single Act.
1.1.1 Financial globalisation and the growing interdependence
of financial markets
Today financial globalisation, characterised by a heightened volume of
exchange and the growing interdependence of financial markets, seems
more salient than global trade as a political and economic phenomenon.
As is well known, hundreds of billions of dollars worth of stocks and
bonds are exchanged each day on the world’s stock markets – which
far exceeds the financial payments requested by international trade.
Financial interdependence has reached unknown levels since the early 1900s.
Financial globalisation has a three-fold implication for domestic financial
systems. Firstly, financial actors located, for instance, in Milan or Paris may
draw into a broadened pool of resources consisting of instruments used
to spread their risks, or diversify their portfolio through stocks and bonds
issued in New York or Tokyo. Secondly, financial actors – and regulatory
authorities – face new constraints. For instance, foreign stock ownership
might – and often does, although in a diversified manner (see Goyer 2004)
– force domestic financial firms (and other businesses) into business
strategies not desired or foreseen by domestic owners.
17
In addition, institutional investors might – and often do – require compliance
with international norms or standards in terms of accounting and financial
transparency. Third, domestic financial actors face new competition from
financial institutions and instruments located abroad, but now accessible
to domestic firms and households.
1.1.2 Shifts in the macroeconomic regime
Shifts in industrial countries’ macroeconomic regimes represent a second
major change in the environment of European banks. A comprehensive
synthesis of such a shift is provided by Forsyth and Notermans: “the
growth regime of the 1950s and 1960s relied on monetary and fiscal
policy (macro-policies) to stimulate demand and thereby promote growth
and employment, while it used labour market policies and regulation
of financial markets (micro-policies) to curb inflation; by contrast, the
dis-inflationary regime of the 1980s and 1990s relied and still relies
primarily on monetary policy (macro-policy) to fight inflation and
maintain external balance, and on supply-side policies, including selective
tax cuts and other investment incentives (micro-policies) to promote
growth and employment” (Forsyth and Notermans, 1997).
Such regime change had tremendous implications for financial systems,
especially those state-administered systems such as France or Italy (see
chapter 4 for an expanded presentation and discussion of such systems).
In both countries, until the early eighties, budgetary deficits (incurred to
finance public investment programs) were monetised by the central bank;
and Treasury bonds were mainly absorbed by the banking sector, thanks
to a tight system of constraints and incentives produced by regulatory
authorities. Banks – especially savings banks – were therefore provided
with cheap and guaranteed resources, and able to maintain a large
interest spread8.
8
18
The interest spread is the difference between active interest rates, i.e. the rates charged to
the clients for (mainly) new loans, and passive interest rates, i.e. the rates paid to clients
for deposits.
In France, that accommodating policy mix (associated with what some
authors called France's “overdraft economy”9) was definitely abandoned
in 1983 with the adoption of a “competitive disinflation” strategy, based
on fiscal stability, wage freeze, a strict monetary policy predicated upon
imported disinflation through the “franc fort”. Indeed, with the monetary
policy essentially focused on the defence of the French Franc’s parity
vis-à-vis the Deutsche Mark, banks lost the certainty of being refinanced
by the central bank in case of default. This trend accelerated with the
removal of credit ceilings in 1984-86, and of exchange controls in 1990.
Similarly, in Italy, high inflation and rising public debt led to the “divorce”
between the Treasury and the Bank of Italy (henceforth Bankitalia) in
1981. That year, Bankitalia was officially relieved from its obligation to
buy Treasury bonds unsold to banks, thereby putting an end to the
monetisation of the deficit. However, the role of Bankitalia as guarantor
of financial market stability ended up carrying on the relationship in an
indirect manner – since the central bank, weary of excessive flows of
treasury bonds on the market and of its consequences in terms of interest
rates, would have to buy those bonds anyway. But the seed of a shift in
macroeconomic policy was planted. Along the 1980s, but especially
during the early 1990s, deficit reduction became a top priority, and after
the 1992 lira devaluation the central bank began to pursue a strict
monetary policy predicated upon price stability, and driven by the number
one political priority: joining the EMU.
Such changes in macro and micro economic regimes echoed and
reinforced the opening of financial markets (to capital flows and foreign
investment) and led to increased competition within them – which
deepened financial globalisation, as mentioned above. Indeed, the lift of
capital controls and the abandonment of deficit monetisation policies,
both increased the depth (and therefore the attractiveness) of financial
markets and gave them, in return, greater leverage on macroeconomic
policies pursued.
9
France’s “overdraft economy” (term coined by scholars in the 1980s) was characterised by
selective credit subsidies and a very loose monetary policy, which allowed a continuous
channel of cheap financial resources to the economy, but also created a structural inflationary
bias and deficit in the balance of payments; overdraft relied on indirect (intermediate)
finance, and banks could afford, during the 1960s and the 1970s, a very low level of
reserves, having the certainty of being refinanced by the Central Bank. With the end of the
overdraft economy, banks had to strengthen their internal structure and change their
strategies (de Boissieu, 1990). See chapter 4 for a more detailed analysis.
19
Recent fiscal and social reforms throughout Europe completed the shift
in macroeconomic policy regimes evoked above. The slow transformation
of European countries’ welfare and pension systems has paved the way
to a greater involvement of financial firms and financial markets, akin to
US or British pension funds. In Germany, for instance, a 2001 pension
reform allowed employees to invest 0.5 % of their gross salary in private
schemes, rising to 4% in 2008. This is far from cancelling out the staterun pension system, but should nevertheless benefit managed savings
and might encourage a shift from traditional savings to such schemes.
Fiscal reforms might, too, have an impact on national financial systems.
In Germany, again, a 2001 reform of the income and corporate tax regimes
disposed the abolition, from January 2002, of capital gains tax on corporate
sales of shares in other companies, which threatened cross-shareholdings
at the core of German commercial banks’ activities and, more importantly,
was still expected to trigger a wave of M&As aimed at increasing
shareholder value in German businesses. This reform also concerned
non-profit banks, although in an indirect way, since it could create new
incentives for mutual banks to “de-mutualise” and take advantage of a
more liquid market in corporate shares, as has been occurring in Great
Britain for instance.
1.1.3 Changes in regulation
Shifts in industrial countries’ macroeconomic regimes led to, or
accompanied profound changes in financial regulation10. Three broad
trends can be identified: privatisation, de-segmentation (of financial
activities), and a shift from “structural” to “prudential” regulation.
The 1980s marked the eve of a new wave of privatisation in industrialised
(as well as developing) countries11. All sectors were concerned, especially
public utilities, oil firms, transportation companies, postal offices and
financial and banking firms. The United Kingdom, under Margaret
Thatcher’s leadership, led the fray, with the privatisation of steel, mining
and transportation companies in the 1980s. But the case of France is,
arguably, even more spectacular.
10 The precise causality between macroeconomic changes and regulatory changes will be
addressed in chapter 4.
11 Which were joined, of course, by Eastern European “transition” countries in the 1990s.
20
Upon their arrival in power in 1981, President Mitterrand and his socialist
government launched the widest-ranging nationalisation program since
the immediate postwar reconstruction (see Machin and Wright, 1985).
Among the newly nationalised firms were three large banks (Crédit
industriel et commercial, Crédit du Nord and Crédit commercial de France)
and two financial firms, Paribas and Suez.
A few years later, however, a newly elected right-wing government headed
by Prime Minister Jacques Chirac reversed that policy and sold dozens of
previously-nationalised companies – among which several of France’s
largest financial institutions: Paribas, Suez, the Banque Nationale de Paris
(BNP), the Société Générale, the Crédit Lyonnais... Privatisations were
suspended in 1988 (upon President Mitterrand’s reelection and socialist’s
victory in the parliamentary elections), and resumed in 1993 under another
right-wing government, but continued in the late 1990s under the
leadership of socialist Lionel Jospin. Privatisation, pursued on and off since
1986, has dramatically reduced the size of public ownership in finance
and industry, tailing well behind the reversal of the 1981 nationalisation
wave. As of 2003 only five banks were still owned by the French State, in
contrast to 36 in 1983. The only remaining financial entities within the
orbit of the French State are the Caisse des Dépôts et Consignations, the
financial arm of the Postal Office (now totally corporatised12), an
insurance firm (CNP assurances), a housing credit firm (Crédit immobilier
de France) and the Banque de développement des PME.
Italy also offers an apt example of far-reaching privatisation. And, again,
banking and finance stood at the heart of privatisation programs
implemented in the 1990s. During that decade, the state first
corporatised, and then sold shares it owned in three large banks through
the public holding IRI: Comit, Credit, Banca Nazionale del Lavoro. At the
same time, the 1990 Amato Law transformed savings banks from public to
private entities. Privatisation continued in the 1990s with public divestitures
in all sectors, ranging from telecommunications to energy and the airline
industry (The Italian Treasury still holds a minority share in Alitalia, the
country’s national carrier, which also seems to be soon for sale).
12 A state-owned enterprise is said to be corporatised when it becomes a distinct legal person
from the state, with autonomous management and budgeting.
21
Besides privatisation, policy changes from the early 1980s to the mid1990s were characterised by a new wave of “de-regulation” following
that of the 1960s and profoundly transforming the banking regulatory
regime in most European countries, along the lines of market opening
(or de-segmentation) and expansion. As Gardener argues, a deregulated
banking environment is “predicated to a large extent on the economic
desirability of a strong market orientation, a demand-determined emphasis,
in banking strategies.” (Gardener, 1994: 59.)
Those regulatory changes, along with the shift in macroeconomic
regimes described above, entailed a profound transformation of the role
played by the state in the economy. This change is even more apparent
in what John Zysman called “state-administered credit systems” (by
opposition to market-based and bank based financial systems; see
Zysman, 1983), such as France and Italy.
However, such transformations do not seem to have led to a straightforward retreat, or withdrawal of the state, as some popular accounts
may have suggested at the outset of the 1990s (in the early years of
“transition to market” in East European economies, and in the aftermath
of the anti-State rhetoric at work under Thatcher and Reagan in the
West13). Available evidence pleads for more nuanced views. First of all, as
Garret and Lange have pointed out, public spending has increased in
many countries, rather than decreasing (Garrett and Lange, 1997).
Secondly, de-regulation and re-regulation waves have followed different
paths that do not lead to the same level of state involvement (see Vogel’s
comparison between Japan and UK: Vogel 1999). Third, one should not
reduce state intervention to a single quantitative dimension. As Linda
Weiss has showed, state capacity is multi-faceted and privatisation/
liberalisation policies affected just one side of it (Weiss, 1997).
In fact, along the lines of the arguments just mentioned, financial
regulation changed its nature. To sum up, there was a shift from
structural to prudential regulation. Regulation is structural when the state
directly intervenes to shape the structures of the financial system –
through the discretionary authorisation of new entrants, setting interest
rates, setting credit ceilings, market segmentation…
13 Of course, the actual policies pursued by the successive Reagan administrations in particular,
which ended up increasing public deficits, contradict somehow the rhetoric then used.
22
Prudential regulation means that the state should guarantee the effective
functioning of the financial market, through control and monitoring of
prudential ratios by banks and other financial institutions. Within that
new framework, traditional regulatory authorities, such as the central bank
or the Treasury, did not disappear or become obsolete: they changed their
mission – for instance, they started monitoring competition rather than
actually engineering it. In addition, new regulatory authorities were set
up – for instance, the Commission des Opérations de Bourse (COB) in
France, or the Consob in Italy.
Besides changing the nature of state involvement in the economy,
such regulatory changes profoundly transformed banks’ playing field –
especially in countries such as Italy and France, where the banking and
financial sectors had heavily relied on state ownership and regulation
until the 1980s.
1.1.4 Changes in technology and in clients’ behaviour
Since the 1970s, a series of technological innovations took place that
radically transformed the business of finance over successive years.
Powerful, high-speed electronic networking has allowed real-time
information flows across markets and between institutions –
interconnectivity becoming the cornerstone of financial markets’
interdependence. Technological innovation has streamlined banking and
financial business organisation, and has changed clients’ relationships
with their banks: automatic teller machines (ATMs) first allowed
multiplying the territorial rooting of banks; e-banking later allowed
clients to perform many operations at home.
Changes in customers’ behaviour put further pressure on banks and
financial institutions to adjust. Large firms were the first to change their
financing behaviour. With rising interest rates and the emergence of
stock markets in the 1970s, many large firms throughout Europe started
resorting to the market (through commercial notes and bonds) to finance
their investment needs, thus leaving their traditional banking lenders in
search for a new strategy. With the rapid growth of the stock market in
the 1980s and 1990s and the availability of new instruments (as well as
new services geared towards helping firms access market finance), many
medium-sized firms were also tempted to shift from bank loans to bonds
issued on the market.
23
Changes in clients’ behaviour were not circumscribed to banks’ liability
side. More recently, households too have been modifying their financial
behaviour. First, they have been offered the possibility of diversifying their
portfolio and starting to earn real interest14 on some of their savings.
Secondly, households are increasingly switching their funds from shortterm savings to protect themselves against the risk of becoming
unemployed, to longer-term investment destined to complement their
pensions. Overall, “banks’ twofold dependence on money markets and
credit ratings today plays a similar role to the last-century’s fear of a
depositor’s run on the bank.” (Verdier, 2002).
1.1.5 European monetary and financial integration
A last key factor of change in the environment of European banks
consists of the changes in the regulatory regime that have accompanied
the acceleration of European integration after the mid-1980s.
Baltensperger and Dermine (1990) identify three regulatory periods since
the 1950s: a first period, from 1957 to 1973, marked by deregulation of
entry to domestic banking markets; a second period, from 1973 to 1986,
characterised by the first attempts towards the harmonisation of
domestic regulations; and a third period, from 1986 on, marked by the
efforts to create an integrated European financial market.
The first period ended with the adoption by the European Council of
Ministers, in 1973, of a Directive prohibiting barriers to the domestic
banking and financial markets. However, persisting capital restrictions and
regulatory differences seriously hampered effective cross-border competition.
Harmonisation really took off with the 1977 Directive “on the Coordination
of Laws, Regulations and Administrative Provisions Relating to the Taking
up and Pursuit of the Business of Credit Institutions” (hereafter known as
the “First Banking Coordination Directive”). That directive gave a definition
of banks as credit institutions (which would, as we will see in chapter 3,
further legitimise French and Italian lawmakers in their attempts to
de-segment the banking market) and established the home country
control principle, whereby supervision of credit institutions operating in
various member countries would be the responsibility of the home country
of the parent bank.
14 From the mid-1970s until the mid-1980s, the real interest rate earned on administered
savings (“Livret A”) in France was negative, given a fixed interest rate and high inflation.
24
Several minor Directives in the early 1980s completed those first
harmonisation efforts, notably establishing European standards for
accounting and consumer protection. Still, as Baltensperger and Dermine
note, integration was not achieved by this first wave of European
regulation. Capital restrictions were still in place in most EC countries,
and member countries retained a quasi-discretionary power on the
regime of authorisations to create new banks.
The third and last period identified by Baltensperger and Dermine is the
run-up to the completion of the single market, triggered by the 1986
Single Act. The 1985 European Commission White Paper on the internal
market set guidelines for a single banking license, home country control
and mutual recognition. Those principles were embodied in the Second
Banking Coordination Directive, proposed by the European Commission
in 1988 and adopted by the Council of Ministers in December 1989.
That Second Directive aimed at ensuring full freedom of banking services
across Europe by 1992. In particular, it provided for minimum capital
requirements and the creation of a single banking “passport” allowing any
bank authorised to operate in one member country to sell its products
and services to all others.
Building on Baltensperger and Dermine, one could further add two
periods: one spanning from 1992 up to 1999, which is marked by
the run-up to the monetary union, and the following period (from 1999
until present), characterised by a fully integrated monetary union and
the absence of regulatory barriers to the establishment or operation of
banks in any member country. In any case, the acceleration of European
monetary and economic integration, along with the build-up of a common
European regulatory regime on banks and financial institutions constitute
tremendous changes in banks’ environment, which cannot but
profoundly impact banks’ strategies and structures.
With the introduction of the Euro as a single currency and the broadening
of the single market, European authorities are indeed increasing pressure
for the dismantling of state subsidies (and guarantees and protection
in all sectors), in the name of competition and free-market principles.
Recently, for instance, the European Commission increased the pressure on
German Landesbanken for receiving direct state aid. The fourth biggest
German bank in terms of assets, Westdeutsche Landesbank (WestLB)
was fined for this reason in 1999. In 1992 WestLB, owned by the state of
North Rhine-Westphalia and the region’s publicly owned savings banks,
had acquired from the state the assets of a housing development agency.
25
Commercial banks claimed that the transfer was an illegal injection of
capital at below market prices. The European Commission ruled in their
favour, deciding that WestLB had received illegal state aid of 808 million
euro, the value of the housing agency plus accrued interests.
The Commission has been investigating other similar cases, and a complaint
by the European Banking Federation challenging the whole German
system of state guarantees led to the abolition of state guarantees15.
At stake are the special guarantees and the excellent credit ratings enjoyed
by Landesbanken. If these guarantees are stricken down, either the ratings
will be adjusted to the real financial situation of the regional banks,
forcing them out of business, or the banks will have to find new sources
of equity to support their vast balance sheets. They would have to cut
services and shred businesses. Privatisation might even appear possible.
Furthermore, with the Euro and the increased cross-border competition it
entails, certain banking practices seem hardly sustainable. This is the case,
for instance, with a decades-long agreement on free checks that limited
competition in the French banking sector. Under this rule, banks may not
pay interest on current accounts, in exchange for not charging customers
for the cost of processing checks. As of December 2004, the French
government was planning to reform this agreement, which should lead
to renewed competition in the sector and “anchor” more solidly banks in
profit-maximisation (cost-minimisation) strategies. More importantly, the
emergence of new actors in finance and banking (mutual funds,
investment funds…) increases the competitive pressure on banks and
traditional credit institutions.
Finally, one should mention the role played by international regulation,
in particular regulatory changes pursued by the Bank for International
Settlement – instrumental in diffusing prudential ratios adopted by
national and international regulatory authorities. The introduction in
1988 of the “Cooke ratio”, in particular, set the basis for prudential
regulation by national authorities and created a “minimum profitability
constraint for banking assets” (Lévy-Lang, 1990)16.
15 Taking effect in July 2005; an agreement was reached in 2004 between the EC, German
Lander and the Landesbanken to soften the impact of the abolition of state guarantees on
banks’ ratings.
16 The Cooke ratio, adopted with the first Basle agreement in 1988, sets the minimal amount of
own funds a bank should possess in function of the risks born by its liabilities. More precisely,
the Cooke ratio imposes two constraints: (i) the ratio (own funds + quasi-own funds)/total
liabilities should be superior to 8%; and (ii) the ratio own funds/total liabilities should be
superior to 4%.
26
With the Basle II agreement, signed in 2004, banks will be submitted to
individual risk management with the Mac Donough ratio (successor of
the Cooke ratio), which should start being implemented in 2006.
1.1.6 Convergence mechanisms
The vast transformations in European banks’ regulatory, technological and
competitive environment in the 1980s could not leave banks unaffected.
In fact, even while the transformation of banks’ environment was under
way, many observers made conjectures on what changes banking would
undergo (see European Commission 1990; and PriceWaterhouseCoopers
1988). In particular, four trends were identified: (i) growing competition;
(ii) banking disintermediation – that is, the crowding out of bank
intermediation by market actors and activities; (iii) the marketisation of
banking – that is, the increased reliance of banks on financial markets for
their revenues, and the transformation of banking strategies to better suit
market incentives and constraints; (iv) the “rationalisation” of banking
structures – that is, the restructuring of the banking system through
mergers and acquisitions. This restructuring trend was also to lead to a
fifth expected change: the emergence of an integrated European
financial market, with cross-border mergers leading to the constitution of
truly European banking or financial groups operating on a level playing
field – the same market with identical instruments and regulations.
Finally, since the same changes affected European national financial
systems, those systems were expected to converge on one another and
appear more alike. In particular, along with dis-intermediation, banks
were to become much more market-oriented – being more responsive to
competition, better able to rapidly adjust their strategies. This led to the
widespread expectation that non-profit, cooperative or public banks were
bound to lose their identity – or disappear (PriceWaterhouse, 1988).
Such expected convergence was not limited to finance and banking; a
growing literature saw “globalisation” leading to irresistible convergence,
across countries, of both macroeconomic performance and microeconomic
structures (see, for a review, Berger 1996). Berger lists five mechanisms
for convergence: competition, imitation, trade, capital mobility and diffusion
of best practice (Berger, 1996). These five mechanisms are all associated
with globalisation. Deeg (1999) adds the technical revolution, and the
pressure to adopt lean production – both of which could be subsumed
into the ‘imitation and ‘diffusion of best practice’ category.
27
Some of these mechanisms are pure market mechanisms, such as
competition or trade. Others are not. For instance, imitation or the
diffusion of best practice also occurs through self-consciously pursued
harmonisation. According to Deeg, “because national economies are
organised around different rules and institutions that create structural
advantages and disadvantages for their firms in international
competition, firms in one nation will push for a ‘level playing field’
leading to the harmonisation of economic policy, regulation and,
ultimately, economic structures.” (Deeg 1999).
There are also ‘pure’ political mechanisms – several “convergence” and
“divergence” scholars agree that changes are driven by the policy decisions
of financially powerful states. Eric Helleiner has emphasised the role
played by the United States in the transformation of the international
political economy (Helleiner, 1994). Similarly, Loriaux underlined how the
crisis of the interventionist model in France was provoked by the policy
shifts within the hegemon (Loriaux, 1991, 1998a, 1998b). Finally, even
the proponents of the “convergence” view accept the idea that change
does not happen simply as a result of external pressures, but out of a
combination of external pressures with ‘domestic pull’ – that is, the
action of domestic actors pushing for a specific agenda that reinforces
and transforms external pressures into policy (Ogata 1996, Upham 1996).
However, the actual changes observed in the late 1980s and the 1990s
departed significantly from the convergence story.
1.2
The evidence: mixed outcomes
1.2.1 Growing competition in the banking market
The changes in banks’ environment mentioned above were expected,
as early as the 1980s, to intensify competition on the banking market
and force all banks and financial institutions to radically adjust their
business behaviour and strategies. In particular, the already mentioned
1988 PriceWaterhouse study on the expected impact of the completion
of the internal market argued that the latter should bring to a levelling of
prices across a broad range of economic sectors – among them banking
and finance (PriceWaterhouse, 1988). Price levelling has not taken place
(yet?). But competition has definitely increased throughout European
banking markets.
28
Across countries, successive EU regulation has indeed lifted the barriers
to entry on national markets for foreign banks; and indeed, foreign banks
have entered national markets, although at a varying rhythm and with
varying successes: in France, for instance, 17% of all active bank branches
in 2004 belonged to foreign banks or banking groups; in Italy, foreign
banks held a 21% market share in the 2003 market for deposits17.
But competition has increased above all within countries, following market
de-segmentation and the lift of price controls. In some countries, increased
competition can be observed through the rapid rise in the number of
bank branches. This is the case in Italy, where the number of bank branches
has jumped from 23,460 in 1980 to 30,890 in 200418. In others, even
though the number of bank branches has not changed, or has varied only
at the margin (such as France, where the number of bank branches
increased from a total of 25,490 in 1984 to a total of 26370 in 200419),
increased competition can be seen through the diversification of banks’
products and services: for instance, the multiplication of savings products
at the beginning of the 1980s clearly threatened French savings banks’
quasi-monopoly on the market for savings deposits.
More importantly, perceived competition has increased, even where or
when competition has not effectively increased yet. In many European
countries, the advent of the Euro and the substitution of national
currencies in 2002 were expected to unleash a new wave of competition;
banks anticipated the change by previously modifying their strategies.
Similarly, where banks were not directly threatened by other banks or
financial intermediaries, they nevertheless modified their behaviour as if
competition had increased. This phenomenon was effectively captured by
the theory of contestable markets (Baumol, Panzar and Willig 1982).
According to this theory, a perfectly contestable market is one in which
entry and exit are absolutely costless. In such a market, competitive
pressures supplied by the perpetual threat of entry, as well as by the
presence of actual current rivals, can prevent monopoly behaviour20.
17
18
19
20
The data is from central bank annual reports in both countries.
Source: Banca d’Italia, Bolletino statistico, 1980 and November 2004.
Source: Banque de France, Bulletin, December 2004.
Although the theory is not universally accepted and presents many questionable elements
(for instance the overlooking of regulatory barriers to entry), it still provides a good approach
to analyse the mechanisms by which the threat of competition is internalised by firms.
29
1.2.2 The growth of financial markets
The growth of stock-markets has led to: an increased reliance on external
finance for large companies; a wave of financial innovations (with new
instruments such as credit and currency swaps, futures and caps etc.); and
the emergence of new financial actors. Faced with these developments,
banks were expected to lose their central role in most European countries’
financial systems, to the profit of market finance, epitomised by stock
market activities. Indeed, “market” finance represented 12% of external
finance for large firms in 1980, in contrast to 35% today21 – meaning
that bank loans have, logically and at least in relative terms, lost ground.
However, European finance today is still highly intermediated (intermediated
finance still represented around 75% of total external finance of nonfinancial actors from 1992 to 1998 in France and Germany22). But while
this intermediation was essentially based on credit until the 1990s, it now
increasingly involves hybrid forms of finance, with banks and other
intermediaries being active market actors, and earning a sizeable portion
of their revenues from market activities. Moreover, the parallel increase
in “securitisation” has led to an increasing dependence of banks on
financial markets (both for credit ratings and off-balance sheets operations).
1.2.3 The marketisation of banks’ business
Commercial and non-commercial banks in most European countries have
undergone significant changes in their organisation, profit strategies and
their product mix. Banks have become hybrid, somewhere in between
markets and traditional financial intermediaries – a phenomenon that has
been called “marketisation” of banking, “market intermediation” (Courbis,
Froment & Karlin, 1990), “variable geometry banks” (Lubochinsky and
Métais, 1990), or “assetless banking” (Giddy, 1985).
In particular, there has been a shift in banks’ product strategies: banking
intermediation in the traditional sense (lending and deposit activities) has
decreased, while “market transactions” (financial instruments operations)
have increased. Banks are now multi-product firms, which draw from
financial markets enough resources to counterbalance traditional asset
and liability management.
21 Source: The Financial Times, October 23, 2000.
22 Source: Paranque et al., 1999.
30
Decomposition, more target risk analysis and management overcome the
diversification and scale strategies previously pursued – trends reinforced
by the new Basle accords23. In addition, securitisation permits the
outsourcing of risk management, while helping to de-emphasise lending –
a necessity for banks facing increased competitive pressures on the lending
market. Already, the big German banks get most of their revenue from
these activities.
Moreover, banks throughout Europe have grown much more shareholder
value-oriented, with a strong emphasis on profit objectives and performance
targets such as return on equity or return on assets24. The increasing
importance of profitability and ROE were pointed out in 1994 (Morgan
Stanley, 1994). In addition, the IEF report emphasised the growing
importance of value-added – i.e. the value corresponding to the excess of
revenues on costs. Value-added strategies are intrinsically marketoriented – since, as the IEF report points out, “Value-added returns and
the respective costs are increasingly based on comparisons with other,
competing products and services in the market. […] Value-added is an
externally focused, opportunistic measure” (IEF 1999, p.8).
However, again, those changes are not all-encompassing. Onado’s 1990
work on a sample of 108 Italian banks showed that banking competition
had undeniably increased in Italy during the 1980s, but that did not result
in fundamentally altering banking performance or business (Onado 1990).
Increased competition was, according to Onado, a kind of “lop-sided
process”, characterised by a mere transformation of bank revenues from
direct intermediation to placement fees. “Alternatively stated, banks
have not lost their relationship with the customer and that certainly
helped to maintain segmentation (by location, type of deposit, class of
customer, size of accounts, etc.)” (Onado, 1990: 104). More recent
evidence supports similar findings. Affinito et al., in particular, emphasise
the persistent differences in the balance sheet structure of European
banks (Affinito et al., 2003); while Murinde at al. and Flier et al. point to
the divergent business strategies followed by banks across European
countries (Flier et al., 2003; Murinde et al., 2004).
23 Interestingly, as pointed out in the IEF 1999 report, in 1997 the European Savings Banks
Group, in comments made during the debate on the completion of the Internal market,
underlined that current European banking regulation mainly derived from rules elaborated
within the Basle Committee, which themselves reflected the practical supervisory needs of
international commercial and investment banks (IEF 1999: p.19).
24 See “Blot on the landscape”, The Banker, February 2001, pp.44-46.
31
1.2.4 Shifts in corporate ownership and control
Market and regulatory pressures have also led to a wave of corporate
restructuring in banking, characterised by two trends. A first trend is
the continuous and rapid decrease in the number of credit institutions.
In France, for instance, from a peak of 2,152 in 1987, it fell to 1,837
in 1991, 1,445 in 1995, and 1,143 at the end of 199925. The decrease is
almost twofold in 12 years. All banks were affected, but especially mutual
and cooperative banks (down from 663 in 1984 to 155 in 1999).
A second trend is the increased concentration in banking. In France, for
a long time, the banking sector had been characterised by very little
concentration, compared with other sectors. Only one bank, the Crédit
Agricole, had a market share of over 10% (of both total loans and
deposits). And the restructuring activities that took place in the 1980s
and the early 1990s did not affect much the level of concentration of the
banking sector, since they happened within same groups (mergers
between ‘banques populaires’, savings banks…) By contrast, since the
mid-1990s, new, large-scale M&A activities have signaled an acceleration
of concentration in the sector26. One can cite the takeover of Crédit du
Nord by the Société Générale in 1998, the takeover of Paribas by the BNP
(and the failed takeover of Société Générale by the latter) and, of course,
the takeover of the Crédit Lyonnais by Crédit Agricole in 2003.
However, contrary to what the 1989 Cecchini Report predicted, such
restructuring did not lead to a complete upheaval of the banking sector
in most European countries. First, many banking markets remain
characterised by a high number of operators – far from the markets for
automobile, oil, or electricity, for instance. In France and Italy there are
about a thousand active banks and financial firms. Secondly, a closer look
at the banking M&A that took place in the 1990s shows that those
mergers occurred mainly between banks belonging to the same networks
(savings banks, cooperative banks) or credit institutions active in the same
market. Thirdly, European banking markets remain less concentrated.
In France, the CR5 ratio (ratio of concentration of the 5 biggest credit
institutions vis-à-vis the whole banking sector, in terms of assets) was
39,20 in 1998 (against 41,30 in 1995, but 34.45 in 1990). In Germany,
the ratio is even lower: it stood at 19,15 in 1998, from 16,67 in 199527.
25 Source: Banque de France, Internet site, August 2001; see chapter 4.
26 The number of M&A operations over FFm 500 jumped from 54 in 1994 to 98 in 1998
(Source: Banque Magazine, February 2000)
27 Source: European Central Bank Statistics, June 2001
32
Finally, again contrary to most expectations (European Commission 1989;
PriceWaterHouse 1988), there is no unified European financial market.
Cross-border mergers between financial institutions have been rare and have
not led to a level playing field at the European level. National authorities
have been busy strengthening or creating their own national champions,
and remain wary of the idea that a foreign bank, be it from another
European country, should take over a large national bank28.
1.2.5 Limited convergence between banking systems
The literature provides evidence on financial regimes appearing more alike.
Vitols (1997) presented evidence supporting the argument that the
differences between the three ideal-types of financial systems identified
by Zysman (1983) - securities market-based systems; bank-based systems
and state-based, administered credit systems, are fading away. The latter,
in particular, are unraveling everywhere, while market and bank-based
systems seem to be taking on similar features. In Germany, for instance,
the close relationships between companies and their banks have been
weakened by the increased ability and willingness of large corporations
to avail of the services of competing banks, especially in foreign markets,
or to resort to market finance (Lutz, 1998). In addition, moving beyond
the boundaries of finance and banking, dominant economic and sociological
theories of organisation assert that globalisation is leading to a convergence
towards a single model of the firm29.
Story and Walter’s book on European financial systems also cites evidence
showing that the construction of an integrated financial market in Europe
(a development that accompanies and reinforces the “globalisation process”
itself) reveals a strong converging trend to similar financial regimes, despite
a “battle of systems”30 (Story and Walter 1997).
28 See the recent public exchange between EU Commissioner for Internal Market and the
Governor of the Italian central bank on the degree of opening of the Italian banking sector.
29 See Fligstein, 1996, for a critical account of this literature.
30 Here is the difference between financial systems and regimes, according to Story and
Walter: the financial system is the ensemble of relationships between financial institutions,
whereas a financial regime is the ensemble of rules that enable these relationships to take
place. “In equilibrium, the process of financial intermediation evolves within a financial
system that is regulated according to a hierarchy of norms, effectively implemented” (Story
& Walter, 1997, p.106). This is a tricky distinction, since even the authors show some
confusion in their analysis of the European situation. Subtitled “A battle of systems”, their
book is indeed much more focused on financial regimes… We will see later on how that
confusion might have important consequences at a theoretical level.
33
Others, such as Forsyth and Notermans, point towards broader convergence
at the level of macro-economic regimes (Forsyth and Notermans 1997).
Such convergence is attributed to a variety of reasons: the pressure of
international trade and finance; the obsolescence of Keynesian
economics; the unraveling of those coalitions (or policy communities) that
had supported the previous regulatory arrangements (see Moran, 1984).
Yet if differences between financial regimes tend to fade away, financial
systems remain quite distinct from one another. In other words, although
Zysman’s third ideal-typical financial system – the state-administered
model – has clearly collapsed, banking intermediation remains the prevalent
source of corporate finance in most continental European countries.
Several recent works (Busch, 2002; Deeg, 1999; Vitols, 1999; Lutz, 1997;
Perez, 1997) show indeed that banking systems resist rather well to
convergence pressures. Deeg and Vitols present evidence supporting the
persistence of non-market forms of financial intermediation and of a
sizeable banking sector in bank-based systems (Deeg, 1992 and 1999
and Vitols, 1999). Others, such as Labye and Renversez, do acknowledge
that “market intermediation” has increased in countries such as Germany
or France, but emphasise that this form of intermediation “cohabits”
with more traditional, credit-based intermediation (Labye and Renversez,
2000). Here we can observe a slight difference from the interpretation
evoked before: instead of divergence, Labye and Renversez speak of
“limited convergence” or convergence towards… distinctiveness vis-à-vis
stock market based economies. Similarly, Soskice opposes “bifurcated
convergence” to “uniform convergence” (Soskice, 1999).
Moreover, even national banking systems differ from one country to the
next. In a 1994 study (which drew on data from the late eighties),
Molyneux, Lloyd-Williams and Thornton found that “competitive
conditions” in banking were still diverse across European countries
(Molyneux et. al., 1994). But these authors found the same trend towards
the emergence of a handful of large banks over time “in almost every
developed country”. In other words, the changing structural characteristics
of the banking system looked very much alike across continental Europe:
France, Germany, Italy and Spain were characterised by a group of
dominant or “core banks”, who were being challenged (to a varying
degree) by mutual or cooperative banks with a strong regional or local
focus (see Molyneux et al., 1994).
34
The same authors, however, rightly pointed out that the existing “evidence”
on competitive conditions in banking markets is often inferred from
market structure variables, such as concentration ratios, branch numbers,
and number of banks (Molyneux et al., 1994). There is yet no simple,
linear relationship between market structure and effective competition,
especially in the light of contestable markets theory. The only valid
empirical study up until the 1990s remained, in that perspective, the
PriceWaterhouse study on the “costs of non-Europe” (PriceWaterhouse
1988). Molyneux, Lloyd-Williams and Thornton used a non-structural
measure of competition (the Ross-Panzar statistic31) to investigate competitive
conditions in banking in five European countries, from 1986 to 1989.
They concluded that as of the late 1980s, commercial banks’ revenue
in all of these countries “behaved as if earned under monopolistic
competition”, noting that this significantly diverged from contestable
markets theory, which holds that potential competitors force competitive
pricing strategies upon incumbents. (Molyneux et al., 1994: p.25)
Similarly, in a 1994 study on Italian banking, Cesari, Conti and Onado found
that “the sign and speed of changes are by no means clear”, although
previous works carried the expectation that competition forces would put
pressure on national banking systems and eventually lead to convergence
of market structures and business conditions. Furthermore, the same
authors found that increased competition (from 1986 to 1990) led to a
reshuffle of market shares in individual segments, rather than changes
in the aggregate market shares of individual banks. They concluded
by saying that “even in an integrated country, even in a period of
deregulation and greater competition, differences tend to remain” (p.39).
More recent evidence gives mixed support for the convergence thesis.
Several works exploring the degree of integration between European
financial systems point to the significant convergence of macro and
quantitative indicators. Calcagnini, Farabullini and Hester, for instance,
show that money market interest rates have converged across European
countries in the twenty years preceding the advent of the single currency
(Calcagnini et al., 2000). Similar observations are made regarding interest
yields on stocks and government bonds by Danthine et al. (2000).
31 The “Rosse-Panzar H statistic”, first elaborated by Rosse and Panzar in the late 1970s and
then used and refined by several banking economists, measures the sum of total revenues
related to input prices. Rosse and Panzar, and the users of the H statistic after them, hold
that such value cannot be positive if a firm is a profit-maximising monopoly. Indeed, under
such conditions, an increase in input prices will increase marginal costs and, consequently,
total revenue.
35
However such macro-level convergence does not necessarily lead to
micro-level convergence. In fact, the evidence for banking systems
convergence is much less straightforward.
Building on a cross-country and longitudinal study of banking in 10 countries
from 1993 to 1997, Murinde et al., for instance, find that convergence
across European banking systems is only found in terms of loans to
the private sector and foreign liabilities; but not in terms of loans to
public administrations, demand deposits and time and savings deposits
(Murinde et al., 2004). Flier et al. have studied the diffusion patterns of
regulatory and technological developments in five European countries
(France, Italy, the Netherlands, Sweden and the United Kingdom) on a
27-year period (from 1972 to 1999) (Flier et al., 2003). They find that at
the national level, differences (in the pace of diffusion) tend to decrease
over time; but at the firm level, they find significant differences between
strategic behaviours amongst countries. According to them, such
findings indicate “divergence and room for managerial intentionality in
the process of strategic renewal” (Flier et al., 2003: 27). Affinito et al., for
their part, show that there is a great dispersion between the average
balance sheet structures of European banking systems – their study
covers 11 countries for a 1996-2001 period (Affinito et al., 2003).
Thus, there is contradictory evidence on both the nature and the direction
of the actual changes that took place in banking and finance during
these past two decades. National financial systems seem to have
simultaneously converged and diverged; profoundly changed and kept
the same characteristics. Nowhere are these paradoxes more apparent than
in the most idiosyncratic sectors of European banking: savings banks.
1.2.6 What about savings banks?
Savings banks have been exposed to the same “environmental” changes
affecting other banks or financial institutions. But their peculiar
characteristics made them even more vulnerable to those external
pressures. First of all, state guarantees, or statutory protection for their
non-profit activities, are threatened – both by de-segmentation and
competition law. This is especially true in countries such as France and
Italy, where savings banks were part of state-administered credit systems.
Secondly, increased competition and marketisation, similarly, threaten
their non-profit and redistributive purpose.
36
Third, competition and corporate restructuring threaten their independence
and their viability as locally rooted financial institutions. In sum, savings
banks are presented, it seems, with a difficult alternative: to adjust to
their new environment – and lose their identity and specificity; or to
disappear. How have savings banks reacted so far? Is there a common
(converging) adjustment path across countries?
The existing evidence is mixed. In many countries, the total number of
savings banks has shrunk over the years, along a pace much more rapid
than in the commercial sector. Moreover, savings banks have actively
taken part in the M&A wave of the 1990s. In France, in 1999, the
network of Caisses d’épargne et de prévoyance took over Crédit foncier
de France; and more recently, the savings banks groups went ahead with
the takeover of the merchant bank operations and subsidiaries of the
state-owned Caisse des Dépots et Consignations. In Italy, Cassa di Risparmio
delle Province Lombarde (CARIPLO), Milan-based biggest Italian savings
bank, struck an alliance in the 1990s with a large former public bank,
Comit, leading to the formation of Banca Intesa, Italy’s largest banking
group. Similarly, savings banks from Turin and Bologna formed alliances
with other former public banks, before merging to form large banking
groups. And the restructuring wave is not over. In 2002-2003, there were
talks of status change for German savings banks, in order to allow them
to merge with each other or with privately owned banks. This discussion
arose when, with the perspective of the removal of state guarantees, one
expected a spur in M&As – but the legal status prevented, for instance, a
merger between two neighbouring savings banks such as Frankfurt’s
Sparkasse and the Nassauische Sparkasse. Discussions around status
change often referred to the French and Italian example32.
Furthermore, since the early 1990s, savings banks have also taken part in
the “universalisation” of banking33. Savings banks now look more like
commercial banks, with their presence in most markets, their ability to
offer any service to any kind of client; their “statutory homologation”
with commercial banks. Quesada (1994) finds that Spanish banks in
general and savings banks in particular have integrated the financial
innovations rather well. And according to Gardener, the growing role of
the marketing function in savings banks indicates the growing “demanddetermination” of banks’ strategy (Garderner 1994).
32 See « Status critical for Sparkassen » in The Banker, August 2002, pp.27-29.
33 As Revell (1994b) notes, the term “universal banking” has come to mean many things
different to many people. The two defining criteria, according to him, are that the
universal bank (i) undertakes both retail and wholesale business and (ii) operates in other
countries than its home country.
37
However, the existing evidence equally points to the resistance or resilience
of savings banks’ identity in the face of homogenisation pressures. French
savings banks, for instance, have not disappeared, nor aligned to
commercial banks status. Actually, in 1999, they became a cooperative
group, moving further away from for-profit banking. In Italy, although
savings banks have indeed lost their non-profit purpose, most remain
locally rooted and at the service of their old clientele. In both countries,
savings banks still hold an edge in savings accounts and related products.
More puzzling still, despite their limited adjustment, savings banks in
most continental Europe (and especially in France and Italy) have not lost
their stronghold position within the banking sector, as numbers quoted
above have indicated.
To sum up, the evidence on changes across financial systems is ambiguous:
there seem to be some strong common trends and even convergent
forces at play across national banking systems; but there also seems to be
persisting idiosyncrasies within each system, preventing fully fledged
convergence – and savings banks seem to be a good example of persisting
cross-country variation. How can one make sense of this mixed evidence?
In other words, how can one theoretically account for persistent crosscountry variation in national financial systems, especially with regard to
savings banks?
38
2. ORGANISATIONAL AND
INSTITUTIONAL CHANGE
IN NATIONAL FINANCIAL
SYSTEMS
2.1
Explaining varieties of financial systems:
the role of institutions
2.1.1 Explaining cross-variation in history: the static role
of institutions
Strictly speaking, there is no cross-country comparative work on savings
banks34. There is, however, a vast comparative literature on financial systems.
This heterogeneous literature builds on a stylised fact: financial systems
vary from one country to the next. Moreover, this literature addresses two
closely related but distinct issues. The first one relates to the origins of
cross-country variations in financial systems. The research question is the
following: how do we explain the existence (and the origin) of different
financial systems between nations?
The second issue has to do with the persistence of cross-country variations
throughout the years. This later issue has given rise to a literature that is
closely linked to the wave of comparative political economy works that,
since the 1970s, have sought to understand the variety of adjustment
patterns of countries / systems in the face of growing external pressures
to change (technological change, globalisation…). The question addressed in
this literature is the following: why are national financial systems not
converging on each other (or on a third model)? This issue specifically
relates to the research question tackled in this study – namely, the
direction of changes. It has come to the fore with the debates about
globalisation and its impact on national paths of economic development
and national production systems.
34 Apart from the already cited 1999 IEF report. There are comparative historical works on
savings banks, but they mostly rely on a juxtaposition of monographs. (See Mura, 1996;
and Mentré and Mérieux, 2002).
39
2.1.2 Cross-country variation in the presence of convergence
pressures: the dynamic role of institutions
Path-dependency lies at the core of the neo-institutionalists’ theory of
institutional change, which itself constitutes the pillar of recent works
that seek to explain the persisting variation of national financial systems
in the face of globalisation and homogenisation pressures. According to
those works, it is institutions that shape adjustment (and non-adjustment)
patterns. Vitols, for instance, finds that Germany’s bank-based financial
system’s resilience is due to the stability of patterns of savings and investment
by households and companies alike (Vitols 2004). Such stability is in turn
linked to low levels of income inequality (favourable to long-term savings
and risk-adverse behaviour from households) and the characteristics of
the German production system. Therefore, the German financial system,
despite Anglo-Saxon inspired regulatory reform, remains true to its postwar founding principles – since it is embedded in the broader political
economy of German capitalism. In her work on Spain, Sofia Perez
underlines the role domestic politics played in bending the regulatory
reform in a certain direction – cogent with the interests of a small group
of reformers within the central bank and of private bankers (Perez 1997).
Deeg and Perez (2000) further argue that the limited convergence of
corporate finance and corporate governance systems between countries
has much to do with the politics of reform; and the ways in which
external pressure is mitigated by internal institutions. Similarly, Lutz argues
that the extent of regulatory convergence is linked to the existence (or
absence) of what she calls “institutional veto points” in the domestic
political system (Lutz 2003).
In fact, most of the recent studies on banking and finance cited here
– even though they are more substantial on the empirical side than on
the theoretical side - explicitly rely on new institutionalism to explain national
financial systems’ persisting differences. In particular, those persisting
differences are attributed to (a) the interlock of various institutions
shaping firms (banks or financial institutions)’ expectations and
behaviour, (b) institutions’ path dependence and (c) the role played by
regulatory authorities and politics in mitigating external pressures on
domestic firms (banks). Those three mechanisms stand at the heart of the
“varieties of capitalism” approach, which, itself, builds on the broad
theoretical literature on new institutionalism. Further analysis of these two
related theoretical frameworks is thus required.
40
•
Neo-institutionalism and persistent cross-country variation in national
production systems
As is well-known, the rediscovery of institutions by social scientists in
the 1970s has led to a new conceptualisation of the role institutions
play in shaping economic and social agents’ behaviour and, therefore,
social, economic and political outcomes. “New institutionalism” was
defined both in opposition to the behavioural and structuralist theories
in vogue in the social sciences in the 1950s and 1960s; and in contrast
to the “old institutionalism” present in the works of economists,
sociologists and political scientists in the first half of the XXth century
(Veblen, Commons, Schumpeter…).
In the field of comparative political economy, the neo-institutionalist
agenda was given a strong impetus from the crisis that affected
industrial countries in the 1970s and, above all, the variety of
responses to it. As Goldthorpe has argued, distinct institutional matrices
produce diverse responses to similar economic problems (Golthorpe
1984). A first generation of neo-institutional studies thus addressed
the variety of post-crisis adjustment patterns among industrialised
countries, focusing in particular on the effect such adjustment patterns
had on national economic performance. These studies were followed
by a second generation of works in comparative political economy
interested in the differences between the structure (not the performance)
of national economic systems, and their persistence over time (Berger
and Dore 1996; Crouch and Streeck 1997; Boyer and Hollingsworth
1997; Kitschelt et. Al 1999; Quack et al. 1999; Hall and Soskice 2001;
Whitley 2002).
Most of these works argued that globalisation pressures do not lead
to convergence in the functioning and organisation of economic
systems. Moreover, most of those studies explicitly based their
theoretical frameworks on neo-institutionalism. Institutions, they argue,
shape social outcomes, and thus give their distinct flavour to national
forms of capitalism. As Whitley puts it, “specific patterns of economic
organisation result from, and are effective within, particular
institutional environments so that variation and changes in the latter
generate differences in the former” (Whitley 1995: 5). This causality
occurs at different levels and runs through various channels.
41
Soskice, for instance, argues that institutions structure coordination
between and among firms, which in turn shapes national production
regimes (Soskice 1999). Kristensen claims that different institutional
contexts determine different firm-types (Kristensen 1995). And, according
to Quack and Morgan, national institutions shape national patterns of
organisational innovation and adaptation (Quack and Morgan, 1999).
In addition, most of these authors explicitly identify the key institutions
that shape production regimes, innovation or organisation patterns.
These include the financial system (the literature heavily draws on a
distinction between market and bank-based financial systems),
industrial relations, welfare arrangements, and corporate governance
institutions. Fligstein adds cognitive institutions, under the form of
“conceptions of control” that influence actor’s behaviour – and,
ultimately, national patterns of behaviour (Fligstein 1995).
Of course, there are several types of neo-institutionalism. Hall and
Taylor list the three main strands: historical institutionalism,
sociological institutionalism and rational choice institutionalism
(Hall and Taylor, 1996). The problem with the second generation of
comparative political economy works is their difficulty to theoretically
account for the permanence of institutional frameworks in front of
external pressures to adjust. The third generation of neo-institutional
works, what we call here the “Varieties of capitalism” (VOC)
approach, after the homonymous book by Hall and Soskice (2001),
aimed precisely at overcoming such difficulty.
•
The Variety of Capitalism approach
The VOC approach has been applied to a broad range of constitutive
elements of national production systems – industrial relations, corporate
governance, corporate finance... The starting question of VOC works
is the same as that tackled by the earlier generations of comparative
political economy works. Namely: what can explain national capitalisms’
tendency to diverge despite strong convergence pressures? In their
seminal work, Hall and Soskice (2001) proposed an answer based on
two innovative hypotheses: (i) the hypothesis of comparative institutional
advantage; and (ii) the hypothesis of institutional interlock and path
dependence. According to Hancké (2001), these characteristics
distinguish VOC theory from other forms of neo-institutionalism,
analysed above.
42
The theory of comparative institutional advantage developed by Hall
and Soskice systematises previous theoretical arguments and empirical
findings and builds on trade theory, and in particular on Ricardo's law
of comparative advantage, which states that countries specialise in
the production for which they have a (relative) comparative advantage
in trade. In VOC works, comparative advantages arise from different
institutional configurations, or different ‘national models of
organisation’ (Quack et al., 1999). More precisely, institutions (or web
of institutions) endow firms with different capacities to innovate.
Coordinated market economies, for instance, are characterised by
institutions (apprenticeship, work councils, house banking) that
encourage long-term, incremental innovation; liberal market economies,
by contrast, are characterised by institutions (stock-markets, flexible
labour markets…) that encourage radical, short-term innovation
(Hall and Soskice 2001).
The second progress accomplished by Hall and Soskice (as compared
with earlier works on comparative political economy) consists in
explaining why and how such comparative advantage persists – in
other words, why national capitalisms remain distinct. Hall and
Soskice formulate two key assumptions: on the one hand, modern
economies are based on institutional complementarities that produce
specific sets of constraints and incentives for economic actors, which
make institutional change very difficult. On the other hand,
institutions are path dependent – hence the resilience of national
capitalisms over time. The second assumption will be discussed in
section three, since it is a core feature, not only of VOC works, but of
new institutionalist approaches in general. The first assumption is
analysed in detail in the following paragraphs, along with the
institutional approach used in all four theories mentioned above.
Institutional interdependence, or institutional interlock, consists in
the fact that, as Soskice puts it, “each element of the institutional
framework reinforces the other” (Soskice, 1999, p.110); and, one
could add, each element calls for the other, or makes it necessary.
In other words, institutional interlock is not the contingent outcome
of heterogeneous forces; it is functional. For instance, in Germany
vocational training (a property of the skills production sub-system)
requires both long-term finance (a property of the corporate finance
subsystem) and corporate control by stakeholders, including creditors
and workers (a property of the corporate governance subsystem)
(Soskice 1999; Hall and Soskice 2001).
43
Here the authors build on previous works showing complementarities
between various institutions, especially employment contracts and
long-term finance (Aoki 1994).
Within such a framework, external pressures to change (i.e.
macroeconomic shocks) are mediated by internal institutions which
mitigate its impact on single firms; even as one piece of the
institutional framework (for instance, corporate governance rules or
corporate finance behaviour) tends to change, other pieces remain
more or less stable; therefore, on the whole, firms face a stable
institutional environment which prevents a massive shift in corporate
behaviour. In dynamic terms, adjustment patterns vary between
countries because each national economy is embedded within a
specific web of inter-related institutions. In other words, firms adjust
to a shock (and thus change their behaviour) but within the
boundaries of the various institutions that determine their behaviour;
hence the different outcomes brought by adjustment to similar
external forces.
Both Verdier’s theory of the origins of universal banking and the
works on banking and finance inspired by neo-institutional (and in
particular VOC) theories of change suggest, therefore, two relevant
hypotheses for our two cases. The first hypothesis is that varieties of
(savings banks’) adjustment patterns are caused by the idiosyncratic
and systemic characteristics of institutions surrounding actors and
shaping their behaviour through a stable set of incentives and
constraints. The second hypothesis is that resistance to change is
reinforced over time, either through “strict” path dependency or
through political intervention (protection) – the latter being
reconductible to Verdier’s mention of interest group politics (Verdier
2002). Although very useful, this combined theoretical framework
presents several weaknesses that are addressed in the following
section.
44
2.1.3 The weaknesses of the neo- institutionalist story
Neo-institutionalist works rightly emphasise the role of institutions in shaping
individual firms’ response to external shocks and determining aggregate
adjustment paths. Furthermore, one critical contribution of such literature
to our understanding of the functioning and evolution of national
financial systems lies in its insistence on the role of politics and public
policy in the production of incentives and constraints that shape, in turn,
(banking) firms’ behaviour. However, such approaches also present two
weaknesses that become apparent when applying them to our cases.
•
Overlooking organisations
First, such analyses overlook the organisational dynamics at play
within (banking) firms’ adjustment strategies. This is all the more
apparent when looking at two similar sets of firms (savings banks),
placed in similar institutional environments (state-administered credit
systems) and exposed to similar external pressures, who embark on
different adjustment strategies. Given institutional similarity, variety or
divergence cannot be solely attributed to institutions and institutional
constraints and incentives. In other words, there must be some other
variable that produces such different outcomes. Such variable might be
found within firms (banks) themselves, that is, within their organisation.
Yet most neo-institutional works do not pay attention to the
organisation, and focus on institutional change at a systemic level
(Soskice 1999; Vitols 1999, 2001; Thelen 2001) even as some of them
(in particular Hall and Soskice 2001) claim to put the firm at the
centre of their analysis. In fact, those works seem to mistake
institutions for aggregate patterns of behaviour. More fundamental,
however, are the theoretical problems associated with new
institutionalism. First, neo-institutionalist theory is unable to model
agent’s behaviour independently from institutions. There is no room,
in this model, for understanding agency other than a simple reaction
to institutional change (or persistence). More recent works have
instead emphasised the autonomous role of firms and managers in
choosing the adjustment paths (see, in particular, Morgan 2005).
45
Secondly, institutions always end up being treated as an exogenous
variable. Institutions shape the external environment of firms.
As Hancké argues, firms are seen as institutions-takers – not
institutions-makers (Hancké, 2002). This view might be correct when
looking at small firms in large economies; it is not, however, when
analysing large French firms’ adjustment patterns, as Hancké
convincingly shows (Hancké, 2002). In recent works this interaction
has been more systematically analysed (Morgan 2005).
•
Problems with neo-institutionnalists’ theory of change and use of
narrow path dependence theory
Comparative political economists are not only interested in crosscountry variation; they also aim at understanding the trajectories of
one political economy over time. Most comparative political economy
works, as shown above, rely therefore on descriptive accounts of
historical trajectories (of countries, sectors, firms). The problem is that
they rarely theorise these trajectories – why do they take the turn they
seem to have taken? Is the dynamic endogenous? What are the
mechanisms ensuring the reproduction or the transformation of a
system/institutional configuration over time?
This under-theorisation of change is common to many works in social
science, which not only treat timing and sequence as irrelevant
(see Pierson, 2000a, for a critique), but also make longitudinal
inferences from cross-country comparisons (Tilly, 1984). As Pierson
convincingly argues, “it is not the past per se but the unfolding of
processes over time that is theoretically central” (Pierson 2000a: 265).
Neo-institutionalists, however, have made a strong effort to integrate
such a conceptualisation of historical change in their theories. To most
of these authors, the key dynamic behind institutional resilience is path
dependence. Broadly speaking, path dependence theory (henceforth
PDT) consists in the argument that past events, however small in
importance, may have large consequences – and that particular
courses of action, once started, can be difficult to reverse.
46
As mentioned above, the early objective of the neo-institutionalist
literature was to confront the convergence thesis. Neo-institutionalist
scholars showed the opposite was true: capitalisms persist in their
variety. This early concern, however well-founded, built into a flawed
binary vision of change in modern economies: a system either converges
or diverges (that is, it remains the same). Path dependence theory
helped buffer the divergence thesis. In a sense, the neo-institutionalist
literature developed the assumption that national economic systems
are homogeneous and consistent over time, i.e. they present similar
static characteristics that evolve in the same direction. In Crouch and
Farrell’s words, users of PDT emphasise “coherent logics of ordering”
(Crouch and Farrell, 2002).
This assumption raises a double issue: at the empirical level, it does
not account for contradictory evidence (simultaneous change and
non-change). Taking, again, the German example, one quickly notices
that not only is the financial system dual; its various sub-systems are
moving in different directions: large banks are converging on an
international model, while small public banks follow the same old
path. There is, therefore, convergence and divergence at the same
time (Deeg, 2002). This modified version of PDT is not alien to the
narrow formulation provided by Pierson, who specifies in his seminal
article that “change continues, but it is bounded change – until
something erodes or swamps the mechanisms of reproduction that
generate continuity.” (Pierson 2000: 265) At the theoretical level,
moreover, change does not have to be necessarily associated with
convergence, that is, with a process of adjustment towards a single
efficient outcome. There are other types of change than changing
paths: there is change within the path, there are changes off the
path… The trouble with path dependency is that one can always
conceptualise a broader “path” that would contain any observed
change. Attempts to sketch alternative possibilities are numerous but
remain underdeveloped by the literature. Kitschelt et al., for instance,
speak about ‘refracted divergence’, in which “some of the past
patterns of diversity disappear, are replaced by new ones, reflecting
institutionally mediated responses to the challenges posed by the new
environment” (Kitschelt et al. 1999b: 442). Similarly, Deeg has tried,
in successive works, to endogenise change – or to find endogenous
bases for incremental change. Such attempts are not fully
satisfactory; a better solution would be to go back to the original
formulation of PDT (see next section).
47
2.2
The role of organisation and timing in the dynamics
of change
Neo-institutionalism, and neo-institutional theories of change are good at
explaining (i) the origins of cross-country variation in economic structures
and (ii) the reproduction mechanisms that help perpetuate variation over
time. However, as seen above, they present significant weaknesses, which
are all the more apparent when they apply to the case of French and
Italian savings banks. Indeed, differences in the institutional framework
do not seem to be at the root of different adjustment patterns in the two
countries; change has occurred, but it seems that it has taken a much
more complex form than the bilinear convergence/divergence possibility
assumed in neo-institutional theories of change. Those weaknesses might
be overcome by (a) emphasising the organisational dimensions of change
and (b) adopting a more flexible use of path dependence.
2.2.1 Organisation, governance, strategy as the dependent…
and independent variables
The twin hypothesis developed here is that firms (savings banks) (i) are
institution-takers AND institution-makers (Hancké, 2002); (ii) are
organisations, and are influenced by organisational dynamics and power
structures. First, firms are institution-takers and institution-makers.
In other words, they sometimes have to adjust to exogenously-induced
institutional change; and they sometimes can induce institutional change
that upholds their own behaviour. For instance, large firms in France in
the early 1980s were exposed to dramatic shifts in their external,
institutional environment (nationalisations); over time, however, they
built on that changed environment (the arms-length relationship with
their benevolent public owner) to shape the institutions that conditioned
their successive redeployment (Hancké, 2002). An important implication
is that firms face different types of institutions, on which they have
different degrees of influence. Specifically, for instance, individual firms or
sectors might be unable to influence macroeconomic policy or industrywide regulations, but they might be capable of shaping sector-wide
regulations and policies directly affecting them. Hence the multi-faceted
relationship between institutions and firms’ behaviour.
48
The second hypothesis developed here is that firms and sectors are
organisations, and are therefore influenced by organisational logics and
power structures. This hypothesis has a double implication. First, it means
that individual banks’ and banking sector’s organisation constitute a
good dependent variable – in other words, it might be useful to analyse
change at the organisational (sector, firm) level rather than at a broader
institutional level. Several authors acknowledge the important role of
organisation at the level of the banking firm. Gardener points out that
paying attention to organisational design helps to respond to two
fundamental drives in modern firms: specialisation and coordination
(Gardener, 1994).
In particular, Gardener argues that the kinds of organisational changes
he studies (the rise of marketing functions within banks) are “in large
part the product of a greater demand orientation in banking strategies”,
adding that “a bank’s organisational structure may be seen simply as a kind
of interchange system between the external (outside) environment and the
internal resources of the bank.” (Gardener, 1994: 61.) Similarly, Morison’s
work on organisational changes in UK clearing banks emphasises the links
between external and internal change. Morison argues that organisational
change is peculiar (both difficult and interesting, as he puts it) in banking,
given that industry’s specificities, namely: the pace of change, the
interdependencies between the different parts of banking business, and
geography (Morison, 1994). He, like Gardener, takes organisational
change as the dependent variable, arguing that it results from changes in
banks’ environments and shifts in banks’ strategic priorities. Morison argues
that changes in British banks’ environments during the 1980s – mainly
regulatory changes, technological changes and changes in demand –
were both driven by and the cause of “increased pressures on industry
profitability and increased concern to enhance financial performance,
where necessary by radically reconfiguring the business being
undertaken” (Morison, 1994: 81). Morison insists that the causality
between structure and strategy (and performance) is blurred – and his
arguments implicitly pave the way for introducing path-dependent-like
dynamics, such as, for instance, feedback effects. Morison sees five
phases in the organisational evolution of “a typical clearing bank”, which
are historically contingent: from the unit bank to the multi-branch bank,
from trust companies to refocused banks in the 1970s and productdriven banking groups in the early 1990s.
49
Beyond the organisation within individual banks, the organisation of
coordination at the sector or industry level constitutes a key factor behind
the peculiar structure of national banking systems and, beyond, of
national production systems. VOC scholars themselves have emphasised
the role of coordination in the conceptualisation of their ideal-types of
varying capitalisms: liberal market economies, where competition
prevails, on the one hand; and coordinated market economies on the
other, where non-price coordination prevails (Soskice 1999). Both forms
of coordination, Soskice argues, “tend to encourage the development of
long-term cooperative relations, between one company and another,
between companies and employees, and between companies and their
owners” (p.106). Sector and group coordination shape the various
institutions that form, in turn, the particular framework of constraints
and incentives faced by firms – corporate governance, corporate finance,
industrial relations. In a sense, then, sector and group coordination could be
considered as ‘meta-institutions’ – institutions shaping other institutions.
The organising principles characterising coordination are thus the core
elements of the specificities of national capitalism. For instance, Deeg
shows how the federal organisation of German public and savings banks
is key in structuring sector coordination (Deeg 1999)35. In that case, the
territorial rooting of coordination is a constitutive element of German
capitalism both as the ‘shape’ of coordinated action between actors and
as a form of economic organisation per se (in other words, it is both
the wine and the bottle of wine). Similarly, Quack and Morgan (1999)
emphasise variation in the institutionalisation of sectors. Such arguments
fit well with Verdier’s thesis about the linkages between state
centralisation and banking market segmentation (Verdier, 2003).
Sector coordination is a key component of European savings banks’
history. Sector organisations have long helped maintain the cohesion and
distinctiveness of savings banks. Such organisations are not poised to
disappear. In Germany, for instance, where, by 2005, savings banks will
lose the system of guarantees provided by their public owners, there is a
renewed emphasis on savings banks’ own sector support mechanism,
through the giro association, which will constitute the basis for rating36.
35 The importance of such ‘primary’ organising principles for patterns of institutional creation
is also mentioned by Skocpol et al.’s recent work on NGOs in the United States (Skocpol
et al., 2000).
36 See “Basis of ratings for Germany’s Sparkassen set for change”, The Banker, September
2002, p.16.
50
Understanding how these meta-institutions work and change is thus an
important part of understanding institutional change and persistence
within national financial systems. From a convergence standpoint, one
would expect banking de-segmentation to have put an end to the ancient
sector organisation of savings banks and to have replaced it with more
competition. From a divergence standpoint, by contrast, coordination
should have been maintained, keeping its specific features in each
country. Again, then, our task is both to understand what happened and
why it happened.
In the research the issue of organisation has been broken down into
two main elements. The first one is what I call “shift in savings banks’
corporate boundaries”. This is obviously in reference to ‘orthodox’ and
Williamsonian views of the firm, which ignore its boundaries - focusing
instead on the bundle of contracts the firm is supposed to be. These views
of the firm are, I argue, central to the divergence literature. By focusing
on shifting boundaries I am assuming, by contrast, that there is such a
thing as corporate boundaries – and, indeed, changing those boundaries
was one of the most problematic issues of the 1990s, both for policymakers and savings banks actors.
The second element is concrete sector organisation, through hard (or
formal), as opposed to soft (or informal) institutions: mainly, sector banks
and associations, which were a strong feature of both the French and
Italian banking system in the 1970s. This second part is closely related
to the first one, since it deals with the ‘interior’ of sector boundaries
(as opposed to the definition of firm and sector boundaries mentioned
above). This dialectic questions Hollingsworth’s distinction between
bottom-up and top-down sources of sector change, and more precisely
his categorisation of sector boundaries as a ‘top-down’ mechanism, along
with the imposition of rules by public authorities (Hollingsworth 1994).
•
Balance of power within the organisation: the issue of ownership and
control
From what has been said above, the role of organisational dynamics
appears to be central in shaping firms’ institutional strategies and
corporate behaviour. Organisational dynamics, in turn, can be linked to
the evolution of the balance of power within firms, and in particular
the evolution of ownership and control. Patterns of corporate
ownership and control are among the key characteristics of national
economic systems.
51
For many economists (and policy-makers), an efficient market for corporate
control guarantees good economic performance. This relationship,
indeed, stands at the core of a rich literature that emerged in the
1990s, building on Eastern Europe “transition economies” and on
previous works on corporate ownership and control (see La Porta et
al., 1999 and 2001, for a review). The aim of most studies belonging to
that strand of research is to explain differences and variation in firms’
and nations’ performance by looking at legal and social institutions,
such as the patterns of ownership rights, the effectiveness of law
implementation, legal culture and structure and so on. Discussing this
literature is, however, outside the scope of this study.
What interests us, rather, is to understand the evolution of savings
banks’ corporate governance patterns in France and Italy. Again, the
analysis aims at uncovering transformations in a comparative way, so
as to understand the differences the two countries may or may not
continue to exhibit at that particular level of organisation. Beyond the
fact that, as mentioned above, control and ownership patterns are
often seen as key factors in a country’s economic development, there
are two further reasons to focus part of our analysis on this issue.
The first one is that banks’ ownership and control is and has been a
central issue in both the reforms of the banking sector and the
debates around it (see chapter 5). The second reason is that corporate
governance is perhaps the single institution where political economy
scholars locate the major source of resistance to convergence.
Indeed, quite similarly to those economists interested in the role of
cultural factors in explaining economic change and non-change,
many works within the Voc literature try to assess the role of specific
institutions in preventing or facilitating the drive towards a
competitive market for corporate control (see, for instance, Soskice
1999; Casper 1997).
This study will explore the evolution of savings banks’ corporate
governance to understand the relationship between institutional
change, organisational change and shifts in ownership and control.
The hypothesis explored here is that there are multidirectional
relationships between those three levels of analysis: institutional
and organisational change shape patterns of ownership and control,
while patterns of ownership and control influence institutional and
organisational change.
52
3. THE ROLE OF SAVINGS BANKS
IN THE EUROPEAN ECONOMIES
IN THE XXTH CENTURY:
THE CASES OF FRANCE AND ITALY
3.1
The rise of savings banks
3.1.1 Origins and diffusion throughout Europe
The first savings banks were created in Europe in the late XVIIIth – early
XIXth century. Indeed, “the savings bank concept is a European idea”
(Kohler 1996), which first took root in continental Europe. According to
recent works, the world’s first savings bank was the Ersparnisklasse der
Allgemeine Versorgungsanstalt (savings section of the Prudential
Institute), created in Hamburg in 1778 (Wysocki 1996). In the late XVIIIth
century several similar institutions were founded in Northern Germany:
the Leihekasse der Grafschaft Lippe (now Sparkasse Detmold), in Detmold;
the ancestor of the Landessparkassen zu Oldenburg in the city of Oldenburg;
and Kiel’s savings bank, all three created in 1786. The savings bank movement
then spread throughout all German territories, reaching a number of
110 banks in 1825. Savings banks were established in Switzerland at around
the same time, with a Dienstenzinskasse (employees’ cashier) founded in
Bern in 1787, the Caisse d’Épargne et de Dépôt founded in Geneva in
1789, another one in Zurich in 1805 and then in other cities.
But the savings banks movement took its real impulse in Great Britain,
from which it then spread to the entire world. Some local savings banks
were created in the late XVIIIth century by British aristocrats. Savings banks
gained ground in England and followed a rapid expansion path during
the first decades of the XIXth century: there were 289 savings banks in
Great Britain in 1820. Savings banks gained official consent in 1817 with
a bill that created the trustee savings banks system. In 1841, the British
Isles had 555 savings banks. From Great-Britain, the savings bank movement
then reached Denmark (with its first savings bank created in Holsteinborg
in 1810), Ireland (Kilkenny, 1816), the Netherlands (with two savings banks
established in 1817: in Workum and Haarlem), Scandinavia (Norway,
Sweden, Finland) in 1820.
53
France and Italy followed suit, respectively, with the establishment of a
savings bank in Paris in 1818 and in Padua in 1822 (see next section).
Savings banks were then established in Belgium (Tournai, 1825), Spain
(Madrid, 1838), Portugal (Lisbon, 1844) and Luxembourg (1853). By the
mid-XVIIIth century, therefore, savings banks were established and operated
throughout most of Western Europe. The savings banks movement then
reached other parts of the world, such as the United States (first savings
bank created in 1816) and the British Dominions (Australia in 1835,
New Zealand in 1847).
3.1.2 The early developments of savings banks in France and Italy
The first French savings bank was the Caisse d’Épargne de Paris, founded
in May 1818 by Benjamin Delessert, a philanthropist and member of the
protestant high bourgeoisie. As Duet notes, however, at first the expansion
of the savings banks movement in France was quite slow: only two Caisses
were founded in 1819 (Bordeaux and Metz); one in 1820 (Rouen); four
in 1921 (Marseille, Nantes, Brest and Troyes); two in 1822 (Lyon and
Le Havre); one in 1823 (Reims), none from 1824 to 1827, one in 1828
(Nimes); two in 1830 (Toulouse and Rennes): thirteen new Caisses in
twelve years.
The process of expansion accelerated after 1833: 257 Caisses were created
within five years, which brought the total number of French savings
banks to 284 in 1839. That number reached 364 in 1848, 536 in 1880,
546 in 1900, and 560 in 1930. The number of savings banks stabilised
after the Second World War, at around 556 Caisses. The stabilisation of
the creation of new savings banks was compensated by the rapid
increase in savings banks branches (see section 2.2.1).
In Italy, the first savings banks were founded in 1820s in the more
economically-advanced, Austrian-ruled regions of Lombardy (Milan) and
Veneto (Padua, Rovigo, Venice, Udine, Castelfranco Veneto). The pattern
that followed the creation, in 1823, of the Cassa di Risparmio delle
Provincie Lombarde, or Cariplo, is typical of many cases throughout Italy:
first, a “central charity committee” (Commissione centrale di beneficienza)
was set up by the Austrian authorities during the 1816 famine to
coordinate assistance measures intended for the victims of the famine;
the committee was asked to set up a savings bank for the region, which
it did in 1823.
54
The savings bank, originally aimed at “craftsmen, workers and the less rich”,
soon attracted upper middle-class clients in search of rare investment
opportunities. Cariplo grew fast, and within a year it had branches in
seven out of the eight provinces of Lombardy.
Following Lombardy and Veneto, savings banks were then founded in
Piedmont and Tuscany, with the Casse di risparmio of Turin (1827) and
Florence (1829); savings banks soon mushroomed throughout the Grand
Duchy of Tuscany: Prato (1830), Pistoia (1831), Siena (1833), Pisa (1834)…
A savings bank was founded in Rome, in the Papal States, in 1837,
followed by Bologna (1837) and Ferrara (1839). The regions of Romagna
(which belonged to the Papal States) and Marche were soon speckled
with savings banks: Forli (1839), Ravenna (1840) and Rimini (1841) on
the one hand, Pesaro (1840), Ascoli Piceno (1842), Macerata (1845) and
Jesi (1846) on the other hand. The Duchy of Modena had two savings
banks founded in those years: first in Carpi (1843), then in Modena
(1846). The total number of savings banks rose from 25 in 1840 to 60 in
1850 and 91 in 1860 – but more than half of deposited funds (86 million
lire), by that date, were held at Cariplo in Lombardy.
Only belatedly did the savings bank movement reach the Southern
regions – only, in fact, after the fall of the Bourbon rule over the kingdom
of the two Sicilies. Interestingly, Southern savings banks were founded,
unlike their Northern counterparts, by the State: in Palermo, the Cassa
Centrale di Risparmio Vittorio Emanuele per le Province Siciliane was set
up in October 1861 by order of the king, and was controlled by the State
through its regional representative, the Prefect, who appointed board
members. In Naples, the savings bank was similarly created from the top, in
1862; but, after a few years of operation, it was merged with the Banco di
Napoli, the multi-secular issuing bank, and became a division of the latter.
3.1.3 The peculiar identity and purpose of savings banks:
Philosophy…
At the root of the savings banks concept were the ideas of self-help
promotion on the one hand (the idea that individuals should be educated
to manage their funds in a sustainable manner) and access to lending on
the other (the idea that poorer borrowers should be freed from usury).
The latter had already led to the establishment of pawnbrokers in
XVIth century Spain and Italy (the “Montes Pietatis” and “Monti di
pieta”, respectively).
55
But savings banks differed from pawnbrokers on many accounts, among
which lie the freedom to save whatever amount of money, the payment
of interest and the liquidity of deposits. Moreover, and more importantly,
pawnbrokers did not emphasise self-help and individual emancipation:
these were teachings from the Enlightenment, and they impregnated the
origins of savings banks.
The philosophy at the origins of the savings bank movement helps
explain why the creation of the first savings banks in all countries was a
private, localised initiative. Duet speaks of congruence between the initial
localised organisation of savings banks and their mission37. Local initiative
was not limited to wealthy individuals: local authorities became involved
too – this was the case in Italy and the Netherlands, but especially in
Germany. In Belgium, the first savings banks were founded as part of an
initiative to create a network of municipal savings banks.
Beyond individual bankers and philanthropists, however, the “public order”
potential of savings banks explains why the State later on played an active
role in promoting the establishment of savings banks. Early successes in
attracting a considerable volume of savings also shed much light on the
potential benefits such institutions could accrue to the State. Postal savings
banks were founded in Great Britain in 1869, France38 and Italy in 1875.
Most of these state-owned savings banks were very successful in
attracting a sizeable proportion of savings; in Belgium, for instance, the
Caisse Générale d’Épargne et de Retraite (CGER), a public entity created
in 1865, accounted for 90% of all banking deposits as early as 1890
(Vanthemsche, 1996).
Finally, the philosophy at their origin gave savings banks a peculiar
identity whose main components they kept throughout the XXth century.
These core components of savings banks’ identity include: (i) savings
banks’ social responsibility; (ii) savings banks’ local rooting and (iii) their
focus on private individuals (mainly low income earners) and on small and
medium-sized businesses.
37 The same author notes, quite interestingly, that the creation of savings banks presented a
paradox: while they were locally rooted (bottom), they were founded from the country’s
social elites (top) (Duet, 1999).
38 Postal savings banks, helped by their diffuse network reaching out to those remote rural
areas yet deprived of savings banks, soon proved to be savings banks’ fiercest competitors.
In Great Britain, for instance, by 1900 the Postal office savings banks had 5 times the
number of depositors of the Trustees savings banks, with more than twice as much deposits.
56
Savings banks’ particular mission led to or was tied to a peculiar way of
doing business, on both sides of the balance sheet. On the liability side,
savings banks differed from existing commercial banks (up to the middle
of the XIXth century) in that the funds they managed did not come from
their own funds or from the deposits given by a small group of wealthy
individuals: they mainly came from small savings. In that regard, the initial
funds provided by savings banks’ often wealthy founders did not intend
to be invested, but were an investment in themselves, geared towards
allowing the nascent institutions to start collecting savings from modest
clients. Indeed, savings banks’ corporate identity built first and foremost
on savings deposits, which constituted in many cases and for a long time
their core liability (they remain so for the French savings banks). As Wysocki
points out, when they were first introduced, savings deposits represented
a true product innovation, since they were not offered then by other
financial intermediaries (Wysocki, 1996).
Savings deposits were conceived for small amounts of money – the kind
of savings commercial banks were uninterested in, since they implied
diseconomies of scale and did not allow for a flexible policy on the asset
side. In other words, lending money on the basis of small deposits was
not an attractive business for XIXth century bankers. From the depositors’
point of view, savings deposits represented the first medium tailored to
their needs – the first entry into the world of credit. In addition, savings
deposits presented three characteristics that made them attractive
when compared to the alternative (that is, keeping the money at home):
(a) they were interest-bearing deposits (although the interest rates paid
on savings deposits were, and have ever been since, small in comparison
to other types of banking products, they were still better than no interest
at all); (b) they were secure (both because lending was at first either
forbidden or strictly regulated, and because many savings banks
benefited from public or State guarantee); (c) they were liquid (upon a
short period of notice).
Beyond savings deposits, savings banks faced limitations on their
liabilities at the outset, especially ceilings on deposits (in Great-Britain,
under the 1817 Trustee Savings Bank Act; and in France and Italy in
successive regulations). However, over the years (but at different points in
time in different countries), savings banks opened themselves to other
forms of liabilities – such as sight deposits, generally along with the
development of payment procedures, and in particular cashless payment
procedures (checks and money transfers).
57
Germany was an early starter, with a 1908 law that allowed savings banks
to issue checks, and with the 1909 creation of the first giro association in
Saxony. By 1924, savings banks covered the entire territory through their
giro network. Denmark quickly followed suit, introducing savings banks’
checks in 1914. In all remaining European countries, however, this
diversification of business on the liability side took place much later:
Greece in 1953, UK and Ireland in 1965. France stands among the late
comers with the authorisation to draw checks dating back to 1978.
On the asset side, savings banks differ from one period to the next and
from country to another. Most savings banks faced early limits on lending
– mostly articulated in savings banks’ statutes, before being included in
state regulations. Danish savings banks did not engage in lending until
the 1840s. Nor did the French savings banks; the latter were allowed by
an 1829 Decree to invest part of deposited funds into savings accounts
held at the Treasury. The Act of March 1837 entrusted the administration
of such funds to the “Caisse des dépôts et consignations” (CDC) – the
French Treasury’s financial arm, which invested most of its assets in longterm government securities. The transfer of funds was nothing but an
option, left to the choice of local savings banks – but they all chose that
option at the exclusion of others (such as investments in industry).
Therefore the Decree of April 15th, 1852, which made it mandatory for
all funds collected by savings banks to be transferred to the CDC merely
sanctioned a de facto restriction.
The preferred asset, for most European savings banks during the XIXth
and early XXth century, was government securities. According to a 1817
act, British savings banks’ trustees were required to invest their funds in
a special account with the British Commissioners for the National Debt,
who paid a guaranteed fixed annual interest. Investment in government
stock and other public debt securities (such as local government loans)
was not limited to British savings banks – it was a widespread practice in
France, Denmark and Italy . Such reliance on public bonds was often
associated with legal or regulatory provisions in savings banks’ statutes.
They could also be interpreted, as Wysocki contends, “as a measure for
the precautionary securing of liquid resources where the possibility
existed for such instruments to be used as collateral for advances at times
of sudden increased demands for payment.” (Wysocki 1996:18).
58
When savings banks were allowed to engage in lending activities, they
usually turned to mortgage loans, which to this day represents a typical
lending activity for savings banks. As Wysocki argues, mortgage loans
combine the high security requirement for the use of savings deposits
and relatively simple administration. In many cases, mortgage lending
offered a secure alternative for government securities, or vice versa.
In Italy, for instance, mortgage loans did not take off until the late 1870s
(when government securities reached a low point), and represented up
to 56% of savings banks’ total assets in 1960, then declining in favour of
government securities; in Germany, government securities were slowly
dethroned by mortgage loans as the main asset at the turn of the century.
Beyond government securities and mortgage lending, savings banks did
not, at first, engage in other forms of lending, with the exception of
German and Danish savings banks, which, in the early XIXth century,
offered personal loans, bill businesses (Germany) and loans, guarantees
and bills (Denmark). In the 1830s and 1840s, ministerial decrees in Prussia
promoted the establishment of district savings banks to provide personal
loans and to meet the need for credit of industry and agriculture.
However, an 1838 bill restricted lending to mortgages and the acquisition
of public sector securities, and put ceilings on small loans.
3.2
Evolution of the role of savings banks
within European political economies
3.2.1 The run-up to the 1900s: expansion and (limited)
modernisation
In the final decades of the XIXth century, European savings banks
experienced large fluctuations associated with the fluidity of financial
systems at that time. In France, both the number of savings banks and
their turnover grew at a rapid pace.
Despite this expansion, however, French savings banks remained, as a whole,
reluctant to diversify their business or to adopt modern banking techniques
already used in other countries. The growth that followed their “start-up
phase” (until 1875-1880 according to Moster and Vogler) did not bring
forward modernisation. Indeed, according to most observers (Duet 1999,
Moster and Vogler 1996, Thiolon 1979), from the late XIXth century until
the mid-1960s French savings banks remained “fossilised” within an
archaic business model and under a stringent relationship with the State.
59
This is not to say, however, that the “savings banks world” was
homogeneous in its reluctance to change. There were modernisers, such
as Eugène Rostand, chairman of the savings bank of Marseille at the turn
of the century, who attempted to link the growing collected funds to
local economic development and social cohesion (through targeted
investment programs); but their attempts at modernising savings banks
failed (see next section).
In Italy, the number of savings banks doubled from 91 in 1860 to 183 in
1880, mainly in the Marche and Southern regions (where the newly
created savings banks were mainly small institutions). Total deposits at
savings banks grew fast as well, increasing tenfold in forty years; by 1904,
total deposits amounted to ITL 1,777 million. Cariplo still led the fray,
however less dominantly, with ITL 688 million in 1904, or 39% of the total.
Cariplo’s balance sheet was second only to that of the main issuing banks
(Banco di Napoli, Banco di Sicilia). Tuscan savings banks followed with
11.5% of total deposits, then Veneto, Emilia, Piedmont. Southern savings
banks, although numerous, represented only 9% of total deposits.
Savings banks’ trademark activity, on the asset side, was mortgage
lending – as in other European countries, with the notable exception of
France. In 1860, it is estimated that 56% of Italian savings banks’ total
assets were made up of mortgage credit. By the third quarter of the XIXth
century, virtually all savings banks granted mortgage-secured loans,
especially in agriculture. However, successive State regulations constrained
the mortgage lending business through market segmentation: an 1866
Act limited mortgage bonds issuance to four major banks and two
savings banks (Milan and Bologna). Each bank was assigned a territory
where it was able to offer such products. Eventually, other banking
institutions were invited to join in other parts of the country. In 1884, a
new law abolished territorial monopolies and allowed authorised credit
institutions to extend their mortgage credit activities over the whole
national territory; among savings banks, the only one to take up that
opportunity was Cariplo. A few years later, in 1890, the State created the
Istituto Italiano di Credito Fondiario (Italian mortgage credit institution),
which became, besides Cariplo, the sole institution authorised to offer
mortgage credit on a national basis. As a whole, by the end of the XIXth
century, mortgage lending had decreased in importance. It remained a
marginal instrument for financing investments in agricultural production
– although for some banks, it represented a sizeable part of business:
Cariplo, for instance, dedicated 64% of its mortgage lending, from 1866
to 1885, to finance the acquisition of agricultural land.
60
Despite its decreasing importance, however, mortgage lending had
enabled savings banks to develop credit and lending functions which,
according to Clarich, successfully shielded them from competition from
Postal savings banks after 1875 (Clarich, 1984: 22).
In the final third of the XIXth century, Italian savings banks, like other
banks, turned more and more towards public securities, which accounted
for 9% of total assets in 1860, 46% in 1880 (against 20% for mortgage
loans) and 56% in 1904. These changes, as Hertner notes, mirrored
profound transformations in the economic structure of the country, with
the State and public corporations taking a leading role in fostering
“heavy” investments in infrastructure and industry (Hertner 1996).
Apart from (decreasing) mortgage lending and securities, most savings
banks did not venture into other types of investments until late in the
XIXth century. Cariplo, for instance, did not propose bill discounting to
ordinary clients until the turn of the century – whereas the latter constituted
a widespread business outlet among large, non-savings banks. Only a few
savings banks in the Emilia and Romagna regions made an exception,
with the Cassa di risparmio di Parma, for instance, whose lending made
up 60% of its assets in 1890 – mainly consisting of credit discount to
agriculture. Overall, however, savings banks’ business strategy remained
driven by its liabilities – small savings. That is why the new generation of
cooperative banks that appeared in the late XIXth century, the Banche
Popolari, reaped immediate success and were called by some observers
“improved savings banks” since, beyond collecting small-scale savings, they
also made sure to invest those funds into productive undertakings by their
members (see Clarich, 1984: 21). On the other hand, savings banks precisely
and repetitively boasted their careful lending strategy, a cornerstone in
the stabilising role they aimed to play within the financial system.
3.2.2 Regulation at the turn of the century
In several countries, savings banks’ self-regulation prevailed until the last
decade or so of the XIXth century, which witnessed government regulatory
intervention39 in banking, and in particular in the savings banks sector.
Germany, again, was an exception, since Prussia passed a Sparkassenreglement as early as 1838, which became the “basic law” model for
savings banks throughout German states; so did the United Kingdom,
with the 1817 Bill that founded the Trustee Savings Bank system.
39 By contrast with direct state intervention through setting up public or quasi-public banks.
61
The late XIXth century expansion of savings banks met closer scrutiny
from public authorities, in a period of stricter regulations on banking and
finance. In many European countries, the 1880s saw the first wave of
regulatory efforts towards savings banks: Denmark’s 1880 Savings Banks
Act, which created a supervision authority; the 1904 Savings Bank Act
in Great-Britain, which eased the restrictions on deposit (ceilings) and
lending; the 1895 law in France and the 1888 law in Italy.
•
France
During the XIXth century, French regulatory authorities (i.e. the Treasury)
were especially concerned with the rapid growth in deposits that,
since they were mostly invested in public debt, risked inflating State
debt and reducing its creditworthiness. In the preamble of the Law
of July 20, 1895, reference was made to the “threatening expansion”
of deposits. There were two ways of dealing with such expansion.
One was to diversify the use of funds. The other was to impose limits
on deposits. The first part of the alternative was at the centre of a
debate that arose after 1885, when several law proposals were
discussed in Parliament – a debate known as the “quarrel on the use
of funds” (see Duet, 1999).
That debate pitted reformists against the defenders of the status-quo.
In addition, there were two groups of reformists: one moderate and
one radical. The moderate reformists, headed by MP Hubbard, proposed
the diversification of the use of funds by the Caisse des Dépots –
away from rentes d’Etat towards lending to local governments,
chambers of commerce and other para-public entities. Under this
proposal, savings banks would have had the responsibility of
“suggesting” the beneficiaries so that there be “a tangible link
between lending and the deposited funds” (cited in Duet, 1999: 48).
However, that idea was not even discussed, its vindication
corresponding to parliamentary recess. Yet it would lay the basis for
the Minjoz reform some 60 years later (see next sections).
The second group of reformists, more radical, was led by Eugène
Rostand, chairman of the Savings Bank of Marseille, lawyer and
newspaper director, a colourful character, who argued in favour of
the free use of funds by savings banks - on the German and Italian
model – mainly through mortgage lending, investment in bonds
issued by welfare institutions and cooperative credit.
62
Such proposal, in Rostand’s view, did not endanger the security of
funds, since it circumscribed the political risks tied to rentes d’Etat;
furthermore, it guaranteed a more efficient allocation of funds since
private actors were, in his view, better equipped and had more
incentive to do so.
The 1895 law, however, marked the victory of the status quo. Even
the slightly innovative proposals put forward by the law’s rapporteur
(such as the possibility for the Caisses to use a fraction of collected
funds to be invested in the local economy) were wiped away by the
parliamentary debates. The law was mainly concerned with
sustaining the value of the State pensions (rentes) and by imposing
limits on deposits. The latter - the second element of the alternative
facing regulators, constituted a constant in French regulatory policy
since the early XIXth century: the ceiling on deposits was first set at
FRF 3,000 in 1835, down to FRF 1,500 in 1845 and FRF 1,000 in 1851,
raised to FRF 2,000 in 1881 and lowered again by the 1895 law to
FRF 1,500, from which level it did not move until 1916. According to
Moster and Vogler, therefore, the 1895 Act represented a
“Malthusian choice” that “froze the whole system until 1945”
(Moster and Vogler 1996).
The Treasury and the CDC were staunch defenders of the status quo.
However, the 1895 restrictive regulatory regime cannot be seen as
imposed by conservative State actors on reformist savings banks.
Actually, most savings banks administrators (who then played the
leading role in governing the Caisses) were strongly attached to the
status quo and reluctant to diversify the use of funds, let alone
to actually manage them. At their 1890 Congress, which discussed
the Rostand proposal, only 5% of participants declared themselves
in favour, despite the former’s careful wording – the free use of funds
was only proposed as an option to savings banks and circumscribed
to 25% of funds (Duet, 1999). Even local experimentation by three
savings banks was rejected at the same Congress. As Duet notes,
such aversion to risk, or at least to innovation, was probably not only
characteristic of savings banks managers but also of their clients, who,
even though many of them were small and medium entrepreneurs,
did not demand another use of funds by the Caisses.
63
There were two exceptions to the restrictive regulatory regime put in
place by the 1895 law: the regulations concerning the savings banks
of Alsace and Lorraine and those concerning the Post Office Savings
Bank (see above). After the 1871 German annexation of Alsace and
Lorraine, the most important savings banks of the Land were
authorised, by an 1895 Act, to use freely 40% and 50% of the funds
collected in favour of local authorities. Subsequently, a 1912 Act
provided savings banks with largely independent management and
lifted the ceilings on deposits from DEM1,000 to DEM4,000. The Act
provided that up to 20% of deposited funds should be invested in
securities, up to 50% in loans to local governments and other public
institutions and up to 20% in mortgage loans to individuals. After the
French sovereignty was recovered, the same regime persisted until 1984,
despite modifications.
•
Italy
In Italy, the legislation governing the savings banks sector evolved
slowly over the years and presented numerous inconsistencies. Like in
the French case, regulation of savings banks was at first a matter of
self-regulation, mainly through the statutes – whose diversity preserved
the initial institutional pluralism among Italian savings banks. Only in
the second half of the XIXth century did the State and other public
authorities start intervening.
Those statutes initially imposed strict limitations (ceilings and floors)
on the volume of deposits and restricted the range of possible uses
for the funds collected (safety was the main concern) to public
securities, public bonds, and lending to local governments. Along the
years and with the transformation of savings banks’ clientele (with
the apparition of the middle-class), savings banks implemented
statutory changes that allowed them to differentiate among various
types of deposits (to which various ceilings, floors, conditions, …
corresponded) and allow for more profitable use of funds.
With the increased economic relevance of savings banks came the end
of the statutory freedom Italian savings banks enjoyed in their first fifty
years of life. The first regulatory act specifically targeted to savings banks
was a Sardignia Law of 1851 that created fiscal incentives for savings
banks to limit their lending and remain welfare institutions. A Piedmont
law of 1851 treated savings banks merely as charitable entities; that
law inspired other regional regulations passed during the same decade.
64
As seen above, some savings banks were also concerned with
successive legislation on mortgage bonds issuance and mortgage
lending in general.
Those regulations all revolved around the issue of the exact nature of
savings banks, their legal identity, and the regulatory authority that
should monitor them. In 1876, a decision by the State Council
(Consiglio di Stato, the highest juridical institution for administrative law)
put savings banks on an equal footing with other credit institutions in
terms of constraints on lending and the use of funds. But that decision
did not put an end to the ongoing debate on the nature of the Casse
di risparmio. In particular, it was unclear whether savings banks should
legally be assimilated to charitable institutions that, among other
things, benefited from a favourable fiscal status – which explains why
savings banks, who rejected the qualification of charitable institution
given their economic role, did not embrace commercial banks’ status
either. That debate provided the background to Italy’s first countrywide legislative act towards savings banks, the law of July 15, 1888,
n.5546, “sull’Ordinamento delle Casse di Risparmio”.
Like in France, the State’s legislative intervention happened in a context
characterised, on the one hand, by the extension of the State’s
involvement in the economy (especially through the realisation of
ambitious and costly public works programs, such as the construction
of railways…), with a simultaneous rise in public spending financed
through the issuance of bonds; and, on the other hand, by the State’s
attempts to insert itself into civil society so as to crowd out the
competing influence of the Catholic church40.
The 1888 Act, like France’s 1895 law, set up general guidelines for the
entire sector, while giving savings banks “considerable freedom of
movement within the confines of their own self-imposed statutory
basic rules”41. The 1888 Act drew largely from the first savings banks
congress, which was held in Florence in 1886. Like in France, savings
banks’ top administrators did not agree on which direction regulatory
reform should take – although unlike France, the discussion was less
about the substance of regulation than about its extent.
40 Clarich compares the 1888 Law with a 1890 law on welfare institutions, the latter aiming
to bring under the control of the State local welfare institutions founded by or linked to
the Church (Clarich, 1984: 34).
41 Ministero dell’Agricoltura, dell’Industria e del Commercio, Le Casse Ordinarie di Risparmio
in Italia dal 1822 al 1904, Roma 1906, cited in Hertner 1996.
65
Against a “radical” group of savings banks that was firmly opposed
to any state intervention at all, the 1886 Congress gave reason to a
more moderate group of banks intent on playing the card of
legislative intervention precisely to protect savings banks from further
encroachments from the part of the state. Both groups, however,
strongly supported the supremacy of the status as a source of
regulation; and they were determined to defend savings banks’
autonomy with respect to statutory design and changes.
The 1888 Law, therefore, confirmed savings banks’ nature as credit
institutions; and it reinforced the emancipation of savings banks from
their founders. In particular, the law conferred legal personality to
savings banks, recognising the existence of such a thing as “Casse di
risparmio” (art.1 and 28 of the law); provided them with organisational
autonomy; submitted the creation of new savings banks to the approval
of the Ministry of Agriculture, Trade and Industry; obliged savings
banks of “foundational” origins to differentiate savings banks’
patrimony and administration from that of the founding entities
(art.4); provided that the original contributions to savings banks’
equity should be returned to the contributors.
A key part of the law was dedicated to what is now called the
“corporate governance” of banks, and was aimed at freeing savings
banks’ activity from the influence of private interests. The law put an
end to the relationship between the holding of shares and the quality
of member of the board or the general assembly; and banned the
payment of dividends to stakeholders. These two dispositions (art.5
and 6 of the 1888 law) effectively transformed, as Clarich notes, the
general assembly from the representative organ of shareholders into
the “place of confluence between all relevant economic and social
stakes within the community” (Clarich, 1984: 36).
In the same spirit of recognising both savings banks’ autonomy and
their nature of credit institutions, the 1888 law did not impose
constraints on savings banks’ use of funds, merely underlying the
need to avoid “imprudent business practices”42.
42 Although Clarich notes that the terminology used in the law somewhat tempers this
recognition of the banking nature of savings banks; in particular, art. 1 of the law
emphasises savings banks’ role in collecting savings, while it does not mention their role
and function as lenders (Clarich 1984: 40).
66
The law also emphasised the importance of small savings, and authorised
the opening, by savings banks, of current account deposits43. For all
other aspects the law referred to statuses, thus giving rein to savings
banks’ autonomy of decision in the field of business operations.
At the prospect of savings banks becoming fully-fledged credit
institutions, the 1888 law also paid careful attention to patrimonial
ratios; in particular, in addition to the obligation of constituting a
“fondo di dotazione” (own funds) at the moment of the constitution
of a new savings banks, the law provided that 90% of annual profits
should accrue to a reserve fund of up to 10% of total deposited funds.
In that way, according to Clarich, the legislators wanted to strengthen
savings banks’ financial solidity, to enable them to face the greater
risks involved by a more dynamic credit activity (Clarich, 1984).
The three application decrees signed shortly after the law, although
they contained several regulatory elements typical of the State’s
relationship with charitable institutions, include dispositions that further
asserted savings banks’ commercial raison d’être. Furthermore: according
to Clarich, such regulations, taken together (the 1888 law and its
application decrees) actually paved the way for a legal recognition of
the banking firm as such – while the 1882 Code of Commerce
ignored the specific role and functions of banks, apart from minor
provisions – which became a reality in 1893, with Italy’s first banking
law. In addition, at around the same time, even the Monti di pieta,
those institutions that appeared in the XIVth century – their mission
being to lend small amounts of money to poor households – were
seen as the predecessors of savings banks, and were gradually
acquiring banking characteristics – the Monti were submitted to the
1888 law as well.
Overall, therefore, while the French and Italian reforms of the late
XIXth century express a common concern towards regulating savings
banks and towards a greater monitoring from the state, the content
of the reform was quite dissimilar: restrictive in France, much “looser”
in Italy.
43 According to Pin (1973), that disposition was critical for the future of savings banks, in that it
paved the way for a transformation of the latter from non-monetary financial intermediaries
into monetary intermediaries.
67
Moreover, these reforms fit neatly within the framework of Verdier’s
argument, examined in chapter 1: in France, centralisation led to
functional segmentation, and the state pre-empted savings banks
resources. In Italy, by contrast, a much weaker state (in a historically less
centralised country) did not impede savings banks in the development
of their business, especially on the asset side. These reforms had a
strong bearing on the successive development of savings banks, as
we will see in the following sections.
3.2.3 The second period of expansion: 1900-1945
The first decades of the XIXth century saw a rapid growth of savings
banks in most European countries. Such growth can be attributed to
many factors, among which: (i) strong economic growth following the
1890s slump; (ii) a profound change in the social and demographic
structure of industrial societies (with growing working classes
accompanying the diffusion of industry); and (iii) the slow rise of real
wages within the working class, leading to higher savings.
As Vanthemsche further noted, the late XIXth century also witnessed
an important change in the practice and philosophy of savings. As seen
above, the conception at the core of the savings movement animated by
philanthropists was that savings were a long-term effort by the individual
– and so should be promoted. From the 1890s on, however, other savings
practices emerged (short-term and collective) that crystallised into new
organisational forms – in particular, in Belgium and Germany, the consumer
cooperatives linked to the labour movement or to Catholic farmers.
Those new organisations at first diverted sums from already established
savings banks. Soon, however, they created their own savings banks.
In some countries, the 1910s and 1920s offered savings banks new
opportunities to diversify their business. In Germany, for instance, the
First World War allowed savings banks to hold a foot in the securities
business; and a 1921 decree lifted the restrictions on deposit and current
account transactions, authorising them, in particular, to lend against bills
and to purchase securities on behalf of customers. These were important
steps in German savings banks’ path towards universal banking; in a few
years, German savings’ total intermediated funds jumped from 1.5 billion
Reichsmarks (1924) to 16.5 billion Reichsmarks (1934). In this regard,
France and Italy represent two contrasting situations.
68
•
France
In France, the first half of the XXth century did not witness significant
growth or developments within savings banks. Duet showed that
the volume of deposits in1950 of constant prices differed little from
that of 1925 or even that of 1890. There were 585 savings banks in
1952, a figure not very different from that of the late XIXth century,
and 3,000 deposit-receiving agencies in 1946, up only 50% from the
number four decades earlier. Several factors may account for such
stagnation. First among these was savings banks’ risk aversion,
reinforced by the French state’s primary focus on public debt (and not
on private investments – see previous section). Secondly, price
and monetary fluctuations from the 1910s up to the 1950s caused
considerable swings in the value of deposits in constant francs.
The Postal savings banks (Caisse Nationale d’Epargne, or CNE) did
better than its private counterparts, making up for its late start – and
benefiting from private savings banks’ lethargy. The number of
savings accounts at the CNE rose from 5 million in 1904 to 10 million
in 1935 and 12,728,000 in 1945 – more than the savings accounts
held at private savings banks, which amounted at around 11,892,000
that same year. The volume of deposits grew simultaneously from
FRF 1 billion in 1900 to FRF 5 billion in 1914 francs in 1933, to reach
the level of private savings banks in 1945.
Overall, according to Duet, CNE’s and private savings banks’ customers
accounted for nearly 60% of the population in 1955; and savings
deposits accounted for as much as 33% of the country’s monetary
resources in 1938. Such “giant” deposit institutions were, however,
“dwarves” in lending or even direct securities holdings.
•
Italy
In Italy, the first decades of the XXth century were characterised by
huge swings in market shares and important innovations on the asset
side (in contrast to France), and the permanence of high market
shares in savings deposits (like in France). On the liabilities side, savings
banks maintained, until the late 1930s, the dominant market position
they had secured since the mid-1850s: from 68% of total fiduciary
deposits (savings and current accounts) in 1870 (against 26% for
commercial banks and 6% for cooperatives) to 73% in 1900 (after a
slight decrease during the 1880s), to 75.6% in 1932 (against 16% for
commercial banks and 8.4% for cooperative banks) (Polsi 2001).
69
On the asset side, and despite the prevalence of public securities in
savings banks’ assets at the turn of the century, most of the Casse di
risparmio also engaged in other types of assets. The 1893-94 banking
crisis and the 1897-98 general economic downturn led to a new
dynamism on the asset side from the part of savings banks. The latter
were also certainly stimulated by the rapid growth of new commercial
banks created in those years, such as the Banca Commerciale Italiana
and the Credito Italiano. Even at Cariplo, which made no mystery of
its conservative investment policy (a “splendid isolation” according to
Confalonieri), the proportion of public securities out of total assets
dropped from 68% in 1897 to 48% in 1913, while the bill portfolio
increased from 1.5% of total assets in 1897 to 7% in 1913. In Milan,
the bill portfolio mainly consisted of loans to the railway and
electricity sectors and to major industrial firms. Moreover, Italian
savings banks played an especially important role in the development
of agricultural credit.
In addition, savings banks became a resource often tapped by the central
bank or the regulatory authorities in times of crisis through, in particular,
their participation into loan syndicates to sectors in difficulty (such as
the steel industry in 1911 or even the banking sector in 1907).
Savings banks were also invited by the Treasury to contribute to the
capital of the central credit institution for cooperatives (the future Banca
Nazionale del Lavoro), created in 1913. In that sense, it has been argued
that savings banks acted as “mute participants” in the constitution of
major public financial institutions (Conti and Ferri 1997).
The First World War had a huge impact on Italian savings banks’
business. First, money printing and inflation eroded the propensity to
save; second, the issuance of public securities crowded out liquid
savings; both phenomena led to a fall in savings banks deposits, from
ITL 2,730 million in 1913 to ITL 1,070 million in 1919. On the asset side,
public securities again rose in savings banks’ balance sheets: from
42.6% of total assets in 1913, public securities rose to 68% in 1919.
The 1920s marked a “return to normal”, with a renewed growth in
deposits (which amounted to ITL 3,400 million in 1928) and a new
decrease in securities out of total assets (49% in 1920, 32% in 1928).
However, the war years had taken their toll, especially on the asset
side, and savings banks did not recover fast enough to compete with
commercial banks, which played the central role in the second phase
of industrialisation – while savings banks were still facing statutory
restrictions when it came to financing industry.
70
3.2.4 The 1930s regulatory changes and their impact
on savings banks
The 1929 stock market crash and the ensuing financial and economic
crisis, which affected all industrial countries, led to a dramatic re-haul of
the financial and banking regulatory regimes in all European countries.
Savings banks also faced both general banking law reforms that affected
them (see next chapter) and specific reforms aimed at the sector. The latter
showed similarities between countries.
First, stronger administrative regulation stood at the core of savings banks
regulatory reforms. In several countries, the 1930s reforms made regulations
more stringent and imposed on savings banks a series of obligations and
restrictions unknown before. In Belgium, a December 1934 Royal Decree
established a system of legal supervision that entailed authorisation for
the creation of new savings banks, minimal capital requirements, limitations
on the use of funds, interdiction of shareholdings in trade or industry, and
supervision by an “Office Central de la Petite Epargne”, created that
same year. In Denmark, a May 1937 law delimited savings banks’
business and distinguished different categories of authorised investment.
In some cases, however, the 1930s regulatory reforms actually led to
empowering savings banks by expanding their business horizons.
In Germany, a first series of Presidential decrees in 1931 severed the
organic links between savings banks and local governments, by granting
banks legal personality, transferring to new entities the ownership of
their own funds, separating the board of directors from local government
(while maintaining the system of local authorities’ guarantees). The 1933
Banking Inquiry, which was prompted by the banking crisis and aimed
at streamlining savings banks’ business (at the “instigation of their
competitors”, according to Mura 1996), actually ended up legitimising
savings banks’ extensive line of business, and especially short-term loans
and giro transactions. Finally, the 1934 Reich Credit Act extended to
savings banks the regulatory regime applied to commercial banks
State control over banking in general and savings banks in particular were
not, however, circumscribed to authoritarian regimes. In countries such as
Great Britain, for instance, the financial strains imposed by the First World
War and then by public (mostly military) investment programs led to the
issuance of War Savings Certificates managed by a War (then National)
Savings Committee, competing with both the Post office savings banks
and the Trustees savings banks to attract British subjects’ savings to
channel them into government treasury needs.
71
•
Italy
In Italy, the regulatory changes of the late 1920s and 1930s were
intertwined with the particular political economy of the fascists’
authoritarian regime, put in place progressively after 1922. The new
regime’s economic interventionism – which was not too dissimilar
from state intervention in democratic countries – led to four major
developments concerning savings banks.
First, the 1926 Banking Act, the first of its kind, because it identified
credit and banking as a specific area for regulation. The law identified
the Bank of Italy as the sole and thus the central issuing institution;
it imposed new requirements on all banks, including savings banks,
and included (i) the introduction of an authorisation regime for the
creation of new banks, delivered by the Ministry of Finance; (ii) the
introduction of mandatory reserves; (iii) the introduction of an
obligation of information; and (iv) the introduction of ceilings on
loans to private individuals. Furthermore, the 1926 law created a new
regulatory regime, whereby commercial banks were submitted to
supervision by the Bank of Italy and the Ministry of Finance – while
savings banks remained under the supervision of the Ministry of the
Economy, formerly known as the Ministry of Agriculture, Industry and
Commerce. Importantly, all other legal and administrative regulations
governing the savings banks sector were maintained, provided that
they did not clash with the principles laid down in the 1926 Act.
In fact, as Clarich argues, the 1926 law followed a logic close to the
one that had prevailed in the 1888 law on savings banks; among the
new measures included in the 1926 law as steps towards ensuring
the protection of depositors, were minimum capital requirements and
mandatory reserves, both of which had been first created for savings
banks by the 1888 law.
For that reason, savings banks were relatively unaffected by the 1926
law. The latter just extended to savings banks the more stringent
supervision rules applied to commercial banks, including the
authorisation regime.
A second major trend was the forced restructuring of savings banks.
This, like the 1926 law, was a reaction to a rapid (“chaotic” according
to Clarich) rise in the number of banks and bank branches in the
preceding years.
72
The Legal Decree of February 10, 1927, n.269, disposed a radical
revamp of the whole sector: savings banks with total deposits of less
than ITL 5 million were required to merge with larger institutions,
while savings banks with total deposits of between ITL 5 million and
ITL 10 million had the possibility of doing so. Further regulations in
1938 disposed that savings banks with less than ITL 30 million in
deposits should merge within the provincial capital’s savings bank.
As a consequence, the total number of savings declined sharply:
from 205 to 98 in one single year (1930), and then to 78 by 1939.
The 1927 Act also forced savings banks to unite at either provincial
or regional levels in Federations, each of which was required to set up
a common guarantee fund to be used in the event of customer default.
Finally, the 1927 Act also impinged on savings banks’ statutory
autonomy by transferring the power to amend those statutes from
the annual general assembly to the administrative board – much
easier to control for the state. A further 1938 reform (by decree)
disposed that the appointment of the chairman and vice-chairman of
the board of savings banks would be decided by the State supervisory
body, after consultation with the ACRI, savings banks’ association.
A third key component of the regime’s interventionist approach to
banking was credit segmentation. As early as October 1923, a Royal
Decree stipulated that savings banks could open new branches only
in areas where they were already operating. Interestingly, this measure,
which was a first step towards the territorial limitation of competition
in banking, was suggested by savings banks themselves at their
congress held in Trieste the previous year. Furthermore, the foundation
of all new savings banks branches was to be subject, to approval,
by the Ministry of Economic Affairs.
Further credit segmentation was introduced by the 1936 Banking Act,
which re-organised the entire banking sector and introduced a strict
division of business activities for various types of banks. This specific
measure did not have a particular impact on savings banks, although
they were included under the category of “credit institution” for the
first time. The 1936 Act also remodelled the regulatory institutional
framework, with the creation of a specific supervisory body with
inspection powers, the Ispettorato per la difesa del risparmio e per
l’esercizio del credito – an institution headed de facto by the governor
of the central bank and dependent on the Bank of Italy for operations
and personnel.
73
But despite those new institutional arrangements, which concerned
savings banks as well, the latter still abided by the 1888 regulation
and their own statutory provisions – an ambiguous regulatory regime
that remained in place up until the 1980s. Finally, the authoritarian
flavour of the 1927 reform was confirmed with the introduction, by
a February 1938 legislative decree, of the government appointment
of the chairman and vice-chairman of the savings banks, upon a
proposal made by the Ispettorato and after advice from the national
Federation of savings banks.
Savings banks were therefore subject to an interventionist regulatory
framework that for the first time threatened their autonomy;
and they collectively expressed their concerns at their sixth annual
congress in 1937. Ironically, the 1936 law also crowned their previous
efforts to see their “banking identity” recognised, with their
assimilation to the broad category of “credit firms” (aziende di
credito). More importantly, a small passage of the 1936 law implicitly
maintained the authorisation given to savings banks by previous
legislation to lend medium and long-term through mortgage credit
and lending to moral persons.
In fact, beyond the regulatory elements mentioned above, the 1936
law left intact the previous regulatory framework and all measures
relative to the organisation and functioning of the Casse di Risparmio.
3.2.5 Increased coordination at sector level: the role of
savings banks’ associations
Around the turn of the century, savings banks started to organise at
sector level within each European country. The most achieved example of
such sector organisation is, of course, Germany where, since the early
1880s, savings banks created associations44 entrusted with the twin task
of promoting savings banks’ interests and diffusing the idea and practice
of savings among the population. The associational movement among
German savings banks set the stage for the establishment of the giro
system, which followed a 1908 state act that gave savings banks the right
to draw checks.
44 The first one being the Association of savings banks in Rhineland and Westphalia, created
in Hagen in 1881.
74
As Mura notes, “the introduction of cashless payments by the savings
banks proved to be a watershed for the development of the German
‘savings banks units’” (Mura 1996: 108). The giro system was a clearing
system, where regional giro associations, together with savings banks,
acted as guarantors for the central giro institutions (“Girozentralen”)
through which giro payments were cleared.
The first savings banks and giro associations were set up between 1920
and 1925, as well as the Girozentralen, most of which later became
independent banks45. During the late 1920s – 1930s, most Girozentralen
merged with state banks (Staatsbanken and Landesbanken), thus leading
to the emergence of powerful Landesbanken / Girozentralen at the
Land level. The giro association was led by the Deutsche Zentral.
Giroverband, which created savings banks’ central bank, or Girozentrale,
in 1918. Finally, the Deutscher Sparkassen und Giroverband was created
in 1924, unifying at a national level the giro and savings banks networks.
The association, as Mura notes, was set up as a public corporation, to
be able to function as guarantor for the liabilities of the Deutsche
Girozentrale.
The role of the giro associations was to operate as savings banks’ regional
clearing institutions – holding cash deposits for savings banks, transferring
liquidity to cash-deprived savings banks. One of the 1931 emergency
ministerial decrees obliged savings banks to hold cash reserves at the
giro institution, further strengthening the role of the giro organisation.
But the sector dynamics embodied in the giro system did not stop there.
The association played a key role in making the savings banks sector more
homogeneous and powerful: in 1927, it enacted “status-types”, which
became the basis for further state regulation of savings banks; it created
a research and a training institute (1928); it engaged into national
advertising campaigns, gave managerial instructions, and published journals.
The association survived national-socialism, but after the war it was
reduced to guarantor of the Deutsche Girozentrale, while its associational
functions were transferred to another body in 194746.
45 Giro central banks soon engaged in lending of their own – they started offering short-term
personal loans in 1921.
46 The “Arbeitsgemeinschaft Deutscher Sparkassen und Giroverbande und Girozentralen”
(Union of German Savings Banks, Giro Associations and Central Giro Institutions), later
renamed into the “Deutscher Sparkassen und Giroverband e.V.”
75
From that time on, the association continued playing a key role defending
savings banks’ interests (for instance, against threats by the occupying
powers of abolishing the savings banks payments network) and
(successfully) lobbying successive governments to shape banking regulation
in favour of savings banks’ interests.
The strong sector organisations existing in Germany had but weak
counterparts in France and Italy.
•
France
Up until the post-war years, French savings banks were loosely
organised at the regional and national level. At the regional level, the
550 savings banks (in 1900) belonged to broad regional associations
– there were seven of them in 1958, covering large territories and
including several dozens of members each. These members would
meet once a year at a general meeting and a congress, whose agenda
reflected the concerns of the time (ceiling on deposits, interest
rates…). At the national level, the regional associations belonged
to the Conférence Générale des Caisses d’Épargne, a national
association founded in 1911. The Conférence Générale was
competent for concluding collective wage agreements; it set savings
banks’ line of conduct for discussions at the Commission Supérieure
(the regulatory authority - see below); and it represented savings
banks at the institutional level.
Besides the “official” sector organisation, a Bureau Central des Caisses
d’Épargne was created in 1906 as a private initiative and under the
form of a partnership owned by the Laurent family. At first, the Bureau
Central functioned as a marketing agency for the Caisses d’Épargne;
it then extended its reach to sector publications (the Journal des
Caisses d’Epargne) and even training activities (see below).
However, until the post-war years the truly effective sector organisation
was a corporatist body, the Commission Supérieure. The Commission
was created by the 1895 Law as an advisory body working with the
Ministry of Finance on the regulation of savings banks, and focused
on savings banks’ functioning and organisation. The Commission
Supérieure was composed of 22 members, 12 of whom represented
savings banks and were appointed by the Conférence Générale.
76
Over the years and until the post-war years, the Commission
Supérieure worked as a platform for dialogue between savings banks,
the Treasury and the CDC.
•
Italy
In Italy too, coordination between and among savings banks first arose
as a reaction against the first attempts at state regulation, in 1881
– savings banks then collectively presented petitions to the Parliament
against a law proposal that assimilated them to welfare institutions.
That first aggregation led to the organisation of the first national
congress of savings banks, which was held in Florence in 1886
and aimed at elaborating a common strategy to be submitted to
the Parliament. As mentioned above, the 1888 law largely drew on
those suggestions.
Meetings were then organised at the regional level, and a standing
committee was created for purposes of representation and lobbying.
Only in 1911 however, at their second national congress in Turin, did
savings banks agree to found an association, the Associazione fra le
Casse di Risparmio Italiane, or ACRI, which was officially born in April
1912, with its headquarters in Rome and 150 members (out of the
184 then existing savings banks). ACRI’s original mission was to
provide advice to its members on matters relating to legal, financial
and fiscal issues. It soon became, however, the central political organ
of savings banks, some of whom regularly asked to have the ACRI
systematically associated to any state regulation towards the sector.
In 1912, the association started publishing a Bulletin, which became
the Rivista delle Casse di Risparmio in 1926. In 1938, ACRI founded a
guarantee fund, called “fondo per anticipazioni a casse di risparmio”.
In 1919, savings banks undertook a significant step in furthering their
coordination at the sector level, through the creation of a financial
umbrella organisation, the Istituto di Credito delle Casse di Risparmio
(ICCRI) – the official creation took place in October 1921. Conceived on
the model of the German Girozentralen, the ICCRI was set up as a
public corporation whose capital was entirely owned by savings
banks. The mission of the ICCRI was fourfold: (i) to permit money
transfers between savings banks; (ii) to work as a lender of last resort;
(iii) to function as a clearing centre and (iv) to engage in lending activities.
77
In the first years after its creation, the ICCRI subscribed to government
securities on the behalf of savings banks. The ICCRI was the first
among banking categories’ central institutes (in the following years
the Banche Popolari’s central institute was also founded), and
remained the most important in financial terms.
The ICCRI’s first success was the introduction of checks (assegni
bancari di categoria), which it supervised, and which successfully
appealed to savings banks’ clientele throughout Italy. The peculiarity
of such checks was that the ICCRI committed to fulfiling its clearing
obligations even when those checks were issued by single savings
banks (against a deposit). With savings banks’ extensive network
throughout Italy, check holders, even clients of the smallest savings
banks, held a means of payment universally recognised and accepted.
Beyond these two institutions, savings banks also created several
Istituti di credito fondiario (land credit institutions), while savings
banks in the Veneto region created in 1929 a consortium to integrate
their lending activities in the agricultural sector (called “Istituto
Federale delle Casse di Risparmio”, or Federalcasse). The latter got
its inspiration from the 1927 decree and the local and regional
Federations, which, however, probably because of their top-down,
government-imposed origin, remained inactive for a long time.
Interestingly, the gradual constitution of an autonomous financial
system around savings banks occurred simultaneously with the
gradual erosion of the private identity of the sector, both through
government intervention and through jurisprudence (Clarich, 1984).
In several key decisions, from 1907 to 1930, the court of cassation,
the highest judiciary authority for civil law, definitely confirmed
savings banks’ public nature and submitted conflicts within the sector
to the Council of State, the highest organ for administrative law.
Besides, many elements in savings banks ‘regulation (their non-profit
aims, the use of benefits for philanthropy, the public appointment of
board members) concurred to define them as public entities.
Throughout the years, therefore, and until the late 1980s, savings
banks were considered as part of the broad category of public credit
institutions (Istituti di Credito di Diritto Pubblico).
78
In both France and Italy, therefore, the creation of sector institutions
and the strengthening of sector coordination were closely linked with
state regulation and intervention; on the one hand, savings banks’
first national congresses and efforts at coordination coincided with
the growing awareness of a community of interests and of the need
to have those interests recognised and guaranteed at the state level.
On the other hand, in both countries the state’s need for savings
banks’ resources and support led to the cooptation of savings banks
into some form of corporatist organisation (such as the Commission
Supérieure of the late 1890s in France) that, subsequently, fostered
sector coordination and cohesion. However, there were differences in
the degrees of sector cohesion, individual savings banks’ production
and management of network externalities, which were much
stronger in Italy.
3.3
Savings banks in the post-war political economy
of France and Italy
3.3.1 From the periphery to the centre of the credit system
During the decade following the 1930s regulatory reforms, savings banks
development and growth was, like those of other banks, considerably
affected by the preparation of war and by war itself. Expansion slowed
down, and public securities started to rise again as a proportion of total
assets. Immediately after the war, therefore, savings banks focused on
lifting such constraints. The post-war years saw again, in many countries,
the growth and expansion of savings banks – in terms of deposits: in
Belgium, for instance, annual growth rate of savings fluctuated between
10% and 22% until the mid-1970s; savings deposits at Belgian savings
banks increased six-fold from 1944 until 1959 and six-fold again from
1960 until 1974. In Germany, savings banks’ turnover increased from
about 8 billion DEM in 1950 to 56 billion DEM in 1960 and 188 billion
DEM in 1970.
During the post-war period savings banks’ business not only expanded:
it also changed considerably. On the liabilities side, there was a decline in
deposits, and especially savings accounts, in favour of savings certificates
and bonds. On the assets side, there was a decrease in lending to the
public sector (54% of all assets in Belgium in 1947) and a parallel increase
in mortgage credit, while savings banks started diversifying their market
and product strategies.
79
•
France
Savings, and in particular the funds collected by savings banks, played
a key role in financing the reconstruction of France. Savings banks
were then part of the “Treasury circuit”, the financing circuit controlled
by the French State, and helped transform financial maturities – a task
which the weak capital market could not fulfil. The circuit worked as
follows: savings banks collected savings (liquid funds), then transferred
to [them] the CDC. The CDC converted those funds into medium and
long-term financing (illiquid investments), granting loans directly to
the local authorities and financing housing construction (through the
Crédit Foncier de France, a state-owned mortgage credit institution)
and making productive investments through the Crédit National
(a state-owned credit bank).
Because of savings banks’ role within the Treasury circuit, both
the Caisse des Dépots and the Treasury opposed any diversification
of savings banks’ business, either through direct use of funds or the
introduction of checking accounts. According to Moster and Vogler,
“both used the argument of the social mandate, legal form and
the diversity of the savings banks, their excessively loose organisation
as an association and their lack of banking experience” (Moster and
Vogler 1996: 82). The tax exemption on first savings accounts and the
strict regulations preventing savings banks from entering the banking
business were conceived by regulators as balancing measures which
corresponded to savings banks’ dual nature. As François-Xavier Ortoli,
Minister of Finance in 1968, put it, “the privileged position of savings
banks is connected with both the particular origin of their funds and
the customary use of funds.” (cited in Moster and Vogler 1996: 91).
But neither were savings banks convinced of the need for diversification
or modernisation. In the post-war years French savings banks were
“more concerned about the supply of funds than their use.” (Moster and
Vogler 1996: 82) Therefore their main worries were the ceilings on
deposits and the interest rate. The ceiling was raised regularly, almost
every two years, from 1944 to 1958. By 1960, the maximum amounted
to 10,000 new francs, and was raised again to 15,000 francs in 1964
– to the disappointment of the savings banks’ association, the
Conférence Générale, which has asked for more.
80
In the two decades following the Second World War, most savings
banks staff and managers could perhaps agree with that negative
definition by René Laurent, head of the Bureau central: “it is an error
to maintain that savings banks are banks. (…) In particular, savings
banks do not, by themselves, invest the funds entrusted to them by
the depositors. By contrast with banks, they engage in no transaction
other than collecting deposits and paying interest on them. (…)
[In addition], it is the characteristic of savings banks, as non-profitmaking institutions, to carry out activities of a social nature. The social
work characteristic is substantiated by the honourary activities of the
board members, the use of the surplus for social purposes and the
belonging to the broad family of prudential institutions.” (quoted in
Moster and Vogler 1996: 91)
In the late 1940s, however, there was some debate at the Conférence
Générale about the need to amend Article 1 of the July 1895 law,
which disposed that all funds collected by the savings banks should
be channelled to the Caisse des Dépots. Some savings banks actors
pleaded for the introduction of a (limited) free use of funds, on the
model of what had been done in Alsace-Lorraine’s savings banks,
whose derogatory regulatory regime, inherited from their forty years
stay within the German Empire, was further confirmed by a 1954 law.
In October 1947, therefore, the Conférence Générale submitted a
petition that aimed to “grant the normal savings banks the possibility
of direct investment of their deposits up to 30% in loans to the local
authorities and up to 10% in mortgage loans”. This petition was
carried over by Jean Minjoz, – then a socialist member of Parliament
and chairman of the savings bank of Grenoble, - and gave birth to the
so-called “Minjoz law” passed in June 1950. The Minjoz Law did not
give savings banks the autonomy to manage part of their collected
funds; rather, it authorised them to “propose” to the CDC loans to
local authorities representing up to 50% of the annual increase in
deposits. Loan applications were submitted and approved by a committee
formed in each department and chaired by a representative of the
CDC. The CDC then gave a fixed fee for savings banks for each
successful loan application – substituting the interests savings banks
might have earned had they had the right to make loans directly.
The Minjoz was an immediate success, and led to a renewed effort by
savings banks to increase deposits. The latter rose from FRF 47 billion
in 1951 to FRF 219 billion in 1955.
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Another timid step towards business diversification was the authorisation
to open savings-for-home-ownership accounts, granted by an April 1953
law. Under such schemes, the special deposits opened at individual
savings banks or at the Caisse Nationale d’Épargne were forwarded
by the CDC and placed at the Crédit Foncier for granting loans.
These schemes, however, did not meet with the same success as the
Minjoz law loans: after five years, by the end of 1957, only 90 savings
banks (out of 583) had opened just 944 savings-for-home-ownership
accounts with FRF 328.9 million of deposits. A further innovation
took place in 1955, with the same limited impact: in that year, the
Commission bancaire, the banks’ regulatory body, authorised savings
banks to invest part of their own funds (called “fortune personnelle”)
in personal social loans – loans targeted to low-earning individuals.
After three years of the new regime, only 20 savings banks had
ventured into that new possibility.
•
Italy
During the 1930s and 1940s, Italian savings banks were, like all
commercial banks, first encouraged, then (during the war years)
forced by the state to include large quantities of government debt
securities in their investment portfolios. Thus, in 1930, securities
accounted for 31% of total assets; by 1938, that figure had risen to
44.2%, and reached 57.6% in 1945. Meanwhile, prices soared, an
inflation fed in part by the almost exclusive reliance of the Italian state
on printing banknotes for financing the war effort. It is estimated that
in the second half of 1947, consumer prices had risen to 40 times
their 1938 level.
In this context, savings collapsed: in 1938, the total savings per
depositors amounted to ITL 95 lire (in 1913 gold prices); by the end
of 1947, that figure had fallen to ITL 17. Savings banks were the
hardest hit by the war economy, since their depositors – lower-income
groups – were the most affected by the crisis. In addition, savings
banks had had to compete with the Post Office Savings Bank who was
allowed by the Italian government in 1927 to increase the interests
paid on the treasury certificates (“buoni fruttiferi”) it issued, thus
attracting savings away from private savings banks. Moreover, the
1936 banking reform, which had installed the segmentation of the
banking market, ended up steering commercial banks towards shortterm borrowing (en lending), which led them to compete with savings
deposits at savings banks.
82
For all these reasons savings banks’ market position declined: their
market share fell from 32.2% of total deposits in 1938 to 20% in
1945. Savings banks’ concerns in the aftermath of the war were
therefore to get back on their feet and address the needs of their
traditional clientele – rather than trying to expand into new markets.
It is in this context that savings banks completed their transformation
into full-fledged banks, operating strategically on both sides of
the balance sheet – and not any longer focused solely on liabilities.
During the 1950s, 1960s, 1970s savings banks increased their
activities on the assets side at the local level. In particular, several
studies have shown how savings banks emerged as the first lenders
to small business in the areas that in the successive decades (the
1970s and 1980s) would become the industrial districts, the
cornerstone of the “Third Italy” (Conti and Ferri, 1997). From the
1930s through the 1980s, indeed, savings banks held a 30%-more
market share in the lending market in townships comprised in the
industrial districts areas (Conti and Ferri 1997). Economic dynamism
also translated into the territorial expansion of savings banks.
Although, by the end of 1960, the number of savings banks remained
steady at 79 (their 1940 level), the number of branches had risen fast:
from 240 in 1940 to 506 in 1940 to 2,465 in 1960. It is important to
note that those branches were concentrated in the Northern (1,336
branches) and central part of the country (796) while the Southern
regions savings banks numbered only 178 branches47.
Such modernisation bore fruit. During the mid-1950s, surfing the
wave of the economic boom, savings banks started inverting the
negative trend that had affected them since the late 1930s. Indeed,
between 1950 and 1960, the annual growth of the Italian GDP
amounted on average to 5.9%, second only to West Germany
among Western European economies. The economic boom led to
higher savings and more deposits. In only five years, from 1955 to 1960,
total deposits at savings banks rose from ITL 781 million (1913 prices)
to ITL 8,346 million, and in the same period, deposits per capita rose
from ITL 17 to ITL 163. This impressive growth was not, however,
limited to savings banks – therefore, it did not radically improve
savings banks’ market position. Savings banks’ market share of total
deposits rose from 21.6% in 1955 to 24.4% in 1960.
47 But in those regions, as Hertner rightly points out, the two former issuing banks – namely the
Banco di Napoli and the Banco di Sicilia – did carry out similar functions as savings banks in
other regions; and the former could count on a sizeable branch network (Hertner 1996: 210).
83
Such expansion was facilitated by a series of favourable regulations
adopted by successive governments in the late 1940s and 1950s.
Since right after the war, the governor of the central bank, who
received in 1947 the responsibility for the whole supervision of the
banking sector, had advocated support for small and medium-sized
banks and local credit institutions. From 1948 on, such banks (which
included savings banks) were given preferential treatment for the
authorisation of new branches – such authorisation, as we will see in
the next chapter, was a key part of the “subjective” regulatory regime
in place up until the early 1980s. Successive governments shared the
central bank’s concern with small and local banks, and therefore with
savings banks. In August 1947, when minimum reserve requirements
were introduced as part of a policy package aimed at guaranteeing
monetary stability, savings banks were explicitly exempted. In 1949,
savings banks were authorised to issue interest-bearing treasury
bonds, so that they had some long-term capital to fall back on.
In November 1953, the Treasury Ministry issued a decree lowering the
interest paid on Post Office treasury certificates that, as mentioned
above, constituted an attractive competitor of savings banks’ savings
deposits. Two months later, the government approved an increase in
the interest yields on savings accounts.
3.3.2 Organisation of savings banks in the 1960s and 1970s
The post-war expansion of savings banks’ business, their central role in
the reconstruction of France and Italy, and their important political role
led to a strengthening of sector coordination and organisation, comparable
to what simultaneously happened in other European countries (with, for
instance, the creation of the Groupement Belge des Banques d’Epargne
in Belgium in 1945, of the Danmarks Sparekasseforening in Denmark,
founded in 1947).
•
France
In France, the regional associations (the Conférences Régionales)
became in post-war years more effective in voicing their claims.
They started submitting petitions to the CDC and to the Ministry of
Finance, expressing their concerns over issues such as interest rates,
deposit ceilings, but also the Minjoz loans, banking competition…
84
Such a petition did represent effective layouts for future regulatory
efforts by the government (such as the 1950 Minjoz law). Technical
coordination also took place at the regional level, through the
Groupements d’Études Techniques (technical working groups): such
groups gathered managers and organised exchanges on a range of
technical matters, including marketing and advertising, accounting,
data processing and personnel. At the national level, the Conférence
générale started organising national annual meetings where, from
1967 on, the Finance Minister was a regular participant.
The Bureau Central, under the leadership of René Laurent, also further
developed savings banks’ sector coordination and identity. In 1949, it
published all the regulations regarding savings banks, which became
the savings banks code in 1952; it opened, in 1942 and then in 1945,
an École de l’Épargne (savings school), which provided courses for
savings banks’ executives and then for new employees; in 1957, a
Centre de Recherche sur le budget familial (family budget research
centre) was set up, its mission being to spread out savings ideas
through, mainly, family associations and schools. The Bureau central
even started publishing a children’s magazine, “Dominique”
(187,000 copies in 1966), dedicated to encouraging the “spirit of
savings” among the young.
Savings banks’ sector organisation underwent rapid changes in the
late 1960s – early 1970s. First, following the Racine Commission’s
works (see below), the Conférences régionales and the Conférence
nationale became, respectively, the Unions Régionales and the Union
nationale – with unchanged mandates. More important, however,
was the creation of the GREP and the CTIR.
The GREP, or Groupements Régionaux d’Épargne Populaire (regional
savings groups), were set up by decree in December 1969. They were
owned jointly by local savings banks and by the CDC. Their role was
to issue savings certificates, thus diversifying the collection of liquid
savings, to fund the personal loans which savings banks started to give
in 1971. The GREP were, in effect, savings banks’ “regional competitors”:
despite being partly owned by them, they were, in practice, mostly
controlled by the CDC (who staffed most of the GREP with its own
personnel) and did compete with savings banks on the market for
liquid savings. Moreover, through advertising and training within
savings banks (especially on all aspects pertaining to lending), they
did exert some kind of guardianship on them.
85
At the same time, however, savings banks gave themselves the means
to coordinate more effectively and regulate better the financial flows
between them, the GREP and the CDC. During the 1960s, local
savings banks grouped together to create regional information
technology centres (Centre techniques informatiques régionaux, or
CTIR), conceived to facilitate data processing and the exchange of
computerised information between banks. Interestingly, in contrast to
the GREP, the CTIR were bottom-up creations, formed on the basis of
existing computers and in connection with planned new investments
in information technology. The first CTIR was created in Nantes in
1966; others followed quickly (Lyon 1967, Limoges and Toulouse
1968, Roubaix 1969…). By 1972 there were 15 CTIR recognised by
the Union nationale, which numbered 406 member savings banks,
representing 83% of deposits. Computerisation brought about the
formation of savings banks’ inter-bank payment system, through a
clearing centre created with the help of the CDC.
•
Italy
Cooperation and association between savings banks increased
considerably during the post-war era. ACRI, the Italian Savings Banks’
Association, played an especially important role in this regard. First, the
national congresses organised every two or three years offered savings
banks the opportunity to exchange views and, more importantly, to
let themselves be known to the regulatory authorities, who were almost
systematically represented at such congresses with their highest
representatives (the governor of the central bank and the Minister of
the Treasury). ACRI was also very active as an interest group, and
succeeded in achieving preferential treatment for savings banks at
several occasions – such as the 1972-73 tax reform, which exempted
savings banks’ earned interests from taxation. The ACRI did not have
a direct say in the central bank’s decisions; but collectively, savings
banks were the major holders of shares of the central bank’s capital.
The ICCRI (savings banks’ financial institute), on the other hand,
became during the 1970s a major lender to the public sector, mainly
at the local level. The ICCRI received funds from savings banks, which
they paid at a high interest rate. In the late 1970s, statutory changes
authorised the ICCRI to lend to the private sector as well, and
increased savings banks’ grip on the Institute.
86
In 1972, the ACRI and the ICCRI (savings banks’ clearing institution),
together with the major savings banks, created the Institute for the
Automation of Italian Savings Banks (Istituto per l’Automazione delle
Casse di Risparmio Italiane, or IPACRI), which became the driving
force behind the computerisation of savings banks.
3.3.3 Modernisation trends in the savings banks sector
during the 1960s and 1970s
In the 1960s and 1970s, some savings banks continued their modernisation:
in Germany, for instance, the savings banks’ labour union successfully
pushed for reforms encouraging the further transformation of savings
banks into modern, autonomous business units, with the clear separation
of labour between the board of directors and the administrative board,
and the right for savings banks to manage their own staff. In Germany
still, the lift of restrictions on the opening of bank branches in 1958 and
the subsequent liberalisation of interest rates (in 1967) led to increased
competition within the banking sector, with savings banks successfully
holding to, and even expanding their market shares. Again, however,
savings banks’ post-war development differed between countries and
regulatory regimes.
•
France
In the late 1960s, a renewed effort of modernisation came through.
These efforts were preceded by a few regulatory reforms aimed at
spurring competition in the banking system: the authorisation
granted to non-savings banks for opening savings accounts (1957)
and the generalisation of saving-for-home-ownership schemes to all
banks in 1965. These regulatory reforms ended up increasing the
competitive pressure on savings banks, which still benefited, however,
from tax exemption on interests applied to savings accounts.
Furthermore, non-savings banks’ access to the market for liquid
savings was not compensated for by the possibility of savings banks
to open check accounts.
Faced with growing competition on their own market, savings banks
started seriously considering the idea of an extension of their own
business to include other areas. A first issue, of course, was that of
the free (autonomous) use of funds – outside the Treasury circuit.
87
This issue was addressed in 1965: in the same year that banks gained
access to saving-for-home-ownership schemes (SHOs), savings banks
gained autonomy on the management of such schemes. In other
words, starting that year, savings banks were authorised to grant
loans under those schemes, pending agreement with the CDC
ensuring the smooth functioning and financial stability of the system.
In practice, as Moster and Vogler note, savings banks “entered the
lending business under the supervision and mediation of the Caisse
des Dépôts” (Moster and Vogler 1996: 87-88). Alongside the main
SHOs loans, savings banks were authorised to grant additional loans
financed from secondary savings accounts, and not exceeding a
quarter of the annual growth in such deposits.
In early 1968, a “Commission on the modernisation and development
of savings banks”, composed of representatives of the savings banks
and of State institutions (Treasury and CDC) was set up, with the
mission to propose reforms to modernise savings banks. The Racine
Commission (named after its chairman, Jean Racine) submitted its
report in May 1968, in which it proposed three main measures.
The first and the third of such measures consisted in the abandoning
of the tax exemption of the Livret A savings accounts against the
extension of savings banks’ business to other areas. The second,
alternative measure consisted in a temporary maintenance of Livret
A’s favourable fiscal status and the gradual extension of savings
banks’ business. The Racine Commission, importantly, also
recommended reducing the number of savings banks, mainly through
mergers and acquisitions. In 1967, out of the 568 existing savings
banks, most were mono-branch institutions; only 118 banks had
more than ten branches, and many were open only two or three days
a week. Subsequent regulatory evolution (during the 1970s) showed
a preference, from the part of the state and of savings banks, for the
second solution suggested by the Racine commission: the gradual
expansion of savings banks’ business.
French savings banks’ lending business picked up in 1971 with the
first “personal loans”, outside savings-for-home-ownership schemes,
which gave savings banks complete freedom in risk assessment and
choice of borrowers. Personal loans were aimed at financing housing
construction of the acquisition of consumer goods (“family loans”).
They were financed from secondary savings accounts and from the
accrual of resources from savings certificates issued by the
Groupements Régionaux d’Épargne et de Prévoyance (see above).
88
•
Italy
In the first half of the 1970s, Italian savings banks were still clearly
distinct from the rest of the banking system in terms of their balance
sheet structure: in 1973, 51.4% of all deposits at savings banks were
in savings accounts, whereas in other banks the latter represented
only 38.5% of all deposits. On the asset side, savings banks had
a negligible international lending activity, with foreign currency
operations and overseas credit representing 0.9% of total assets in
1973, against 21% in other credit institutions (on average). In parallel,
savings banks placed a sizeable proportion of assets into public
securities, which even increased during the 1960s to reach 38.1%
in 1973. Finally, savings banks lent more, in relative terms, than other
banks to households and to public institutions – even though, overall,
almost two thirds of their lending was made to business during
the same period.
However, by the mid-1970s, savings banks had undergone considerable
changes. Starting in the late 1950s, Italian regulatory authorities
gradually allowed the alignment of savings banks with other credit
institutions, thus (slowly) reversing the preferential treatment given to
the former at the end of the war. In 1956, the taxation of savings
banks had been put in line with that of other credit institutions.
Two years later, the minimum reserve requirements were extended to
savings banks – but the minimum was set at a lower level than for
other categories of banks. That last provision was repealed in 1975.
In 1962, the Interministerial Committee for Credit and Savings
(Comitato Interministeriale per il Credito e il Risparmio, or CICR)
decided to allow branches of two different savings banks to set up in
the same local market. In 1966, the CICR adopted a standard statute
for savings banks (the “statuto tipo”), which aimed at harmonising
savings banks’ business practice and governance. In particular, the
statuto-tipo allowed savings banks to invest 40% of their resources in
medium-term lending or assets. This loosening of the separation of
maturities, which had applied since the mid-1930s, was then
extended to other credit institutions, in 1972, albeit with less freedom
– since the latter could invest medium-term only 8 to 10% of their
resources. In 1973, when the central bank introduced ceilings on the
volume of lending, it applied the measure to all categories of banks.
89
Furthermore, since the early 1960s Italian savings banks operated a
fundamental change in the structure of their assets – while they
consistently, until the late 1970s, relied on deposits for more than
70% of their assets, they gave increasing weight to sight deposits. In
1958-62, savings deposits at savings banks represented 75.5% of
total deposits, against 24.5% for sight deposits – the highest
proportion of savings deposits in any banking category; in 1977, by
contrast, savings deposits and sight deposits represented, respectively,
44.9% and 45.1% of total deposits – while both cooperative banks
and ordinary banks had a larger proportion of savings deposits as
compared with sight deposits48!
By the late 1970s, Italian savings banks held an important position
within the credit system. Collectively, their lending amounted to more
than a fifth of total lending by banks (21.7% in 1978, right behind
“ordinary” banks at 27.6% but before public and cooperative banks);
and they had the highest number of clients on the asset side. They held
sizeable shares of the deposit market – 27.7% of total deposits, against
25% for ordinary banks and 20% for public banks.49 Their strongest
position was on the market for savings deposits. In addition, quite
interestingly, several studies have shown how savings banks were the
first banks of industrial districts (Conti and Ferri, 1997;)
Conclusion: Italian and French savings banks in the 1970s
The compared history of French and Italian savings banks from their origins
until the 1970s raises three observations. First, by the late 1970s French
and Italian savings banks had developed along two seemingly different
paths. Italian savings banks were of a much lesser number and larger
average dimension than their French counterparts; French savings banks
were mostly savings collecting institutions, while Italian savings banks
had developed into quasi-universal banks, despite and above market
segmentation. Network externalities were, in France, mostly borne by the
state (through the Caisse des Dépots); in Italy, they were managed by the
savings banks themselves, through their sector organisation.
48 Source: Banca d’Italia, Bollettino, various years.
49 Data is from Banca d’Italia, Bollettino, various years.
90
Beyond those differences, however – this is the second observation,
French and Italian savings banks still resembled each other. The first
source of similarity is common to other savings banks throughout Europe,
and it has to do with savings banks’ enduring peculiar identity. By the late
1970s, savings banks in France and Italy were still distinct as compared
with other categories of banks. Such distinction built on five key features,
which mirrored their origins: (i) savings banks’ non-profit nature and
social responsibility (exerted through the redistribution of revenues to
stakeholders); (ii) savings banks’ ad hoc legal nature (in both France and
Italy they were considered as public, non-state entities); (iii) savings banks’
peculiar business profile (specialisation in savings product on the collect
side; in mortgage and loans to local government on the lending side);
(iv) savings banks’ territorial rooting (both in governance structures and
in lending preferences); and (v) savings banks’ sector organisation –
which made them exist as true sectors.
A second source of similarity between French and Italian savings banks
sets them apart from other European savings banks: it is their insertion,
since the post-war period, within a state-based credit allocation system.
Such a regime was put in place during the 1930s and 1940s, and ended
up maintaining savings banks, in both countries, under the authority of
the state. The Next chapter will further analyse this aspect.
A final observation is that savings banks, even in France where they seem
to have been “frozen” in their development by regulatory authorities,
have displayed signs of transformation, both in their organisation
and their operations, long before the top-down changes in regulatory
regimes brought in the 1980s and 1990s. This aspect will be analysed
in chapter 5.
91
92
4. THE UNRAVELLING
OF ADMINISTERED CREDIT
SYSTEMS AND ITS IMPACT
ON BANKING
Introduction
France has a well-explored tradition of state interventionism in the
economy (see Shonfield, 1965; Zysman, 1983; Hall, 1986; Schmidt, 1989).
Such tradition has pervaded the financial system throughout the XXth
century, leading scholars to conceptualise an ideal-typical state-administered
credit system, represented by France, as opposed to bank-based and
market-based systems, respectively epitomised by Germany, the United
Kingdom and the United States (Zysman, 1983). State-administered
credit systems are characterised by (i) the administrative setting of the
volume and price (interest rates) of lending and (ii) the dominant role
played by state or para-statal institutions in the allocation of credit.
Several other countries, alongside France, experienced state-administered
credit: Korea, Spain, Japan, all resorted to state control over credit allocation
to finance their economic development in the post-world war II years.
Italy might be associated with this group of countries as well, although at
first sight it appears, historically, as a bank-based system – with banks
playing the prime role in financing firms. However, from the late 1930s until
the late 1970s, the Italian state enforced strict control over the allocation
of credit, making its financial system become strikingly similar to that of
France and the other state-administered credit systems just mentioned.
During the 1970s, however, several factors severely altered the functioning
of state-administered credit systems – both external and internal. At first,
governments responded to such pressures to change by strengthening
the state’s grip over credit allocation. The failure of such attempts, however,
led to the gradual but rapid dismantling of state-administered credit system
and the end of “credit activism in interventionist states” (Loriaux, 1991;
Loriaux et. al., 1997). The French and Italian financial regulatory regimes
were durably transformed, which led to the transformation of the
financial system itself.
93
As mentioned in chapter 3, savings banks played an important role in
such systems, both as stabilisers and as sources of funding for stateadministered credit. This dual role mirrored the ambiguity of state policy
towards savings banks, acting both as a regulator and an actor of the
credit system. The dismantling of state-administered credit systems,
therefore, had important consequences on savings banks themselves,
through the direct changes brought to their institutional environment
(much more market-oriented). Savings banks reacted with the revamp of
their own regulatory regime (analysed in chapter 5). The present chapter
will thus explore the origins and nature of state-administered credit
in France and Italy; and its initial strengthening and then dismantling
in the context of the 1970s crisis. It will then explore the implications,
for savings banks, of the dismantling of state-administered credit in the
late 1970s and early 1980s.
4.1
The origins and functioning of state-led credit
allocation in France and Italy
4.1.1 The crisis of the 1930s and its consequences
on the banking system
The 1929 stock-market crash and its aftermath led to a complete upheaval
of credit and banking regulations in France and Italy.
•
Italy
In Italy, a late comer in terms of industrial development when compared
to France and Great-Britain, in the absence of an autonomous capital
market or of institutional investors banks were directly involved in the
capital accumulation process (see Gerschenkron 1962 for the linkages
between late industrialisation and bank- or state-based credit allocation).
In the last quarter of the XIXth century, large private banks therefore
played a key role in supporting the nascent national industry, either
through acquiring and selling shares in industrial firms, or through
granting medium and long-term loans. Two banks played a
particularly important role in financing industry – especially exportoriented industry: the Società Generale di Credito Mobiliare Italiano
and the Banca Generale. These banks had been modelled after the
Crédit Mobilier, a bank founded in France by the Pereire brothers
which financed industry through the acquisition and sale of bonds.
94
In 1893-94, a serious economic and banking crisis led to the demise of
the Credito Mobiliare and the Banca Generale, and their substitution
by mixed banks, created on the German model by a pool of Italian and
foreign bankers (mostly Austrian and German). Those mixed banks
– the Banca Commerciale Italiana, later called Comit; the Credito
Italiano, later called Credit; and the Banca di Roma - were conceived
as an improvement of the credit mobilier type of banks: besides the
acquisition and sale of bonds and stocks, they would draw on
deposits to finance their operations.
Mixed banks became, over the years, highly exposed to industrial
firms who, in turn, were highly leveraged and depended on rising
profits to be able to pay their debts. The 1929 stock-market crash, the
subsequent collapse of the gold standard in 1931 and the ensuing
economic and financial crisis, which depleted business firms’ revenues
and stocks’ value, therefore seriously affected the banking system
and especially the mixed banks. Italy had already faced a smaller-scale
banking crisis in 1921 with the bankruptcy of the Banca Italiana
di Sconto, one of Italy’s foremost commercial (mixed) banks. In the
following months, bank runs led the state to a first attempt at
adjusting the regulatory framework to perceived new threats to the
stability of the financial system. Those attempts culminated in the
1926 reform, mentioned in chapter 3. However, that reform left
unchanged the root of systemic instability: the bank-industry nexus.
The 1930-31 crisis, moreover, was of a much larger scale.
The impact of the unfolding international crisis was so stronger that
since 1927, the Italian currency had been pegged to the British
pound50, and was therefore exposed to the strong fluctuations in
exchange rate that followed the end of the convertibility of the
pound into gold. Italy went through a severe balance of payment
crisis. Firms’ solvency shrunk. Comit and Credit saw the value of their
industrial shareholdings fall as their principal “clients” ran into trouble
– such large firms as Montecatini in the chemical sector, Edison in
the energy sector, Fiat in the automobile industry, Pirelli, Ilva, Terni…
The mixed banks system was threatened. Bank runs multiplied,
leading to many bank failures – especially among the small rural and
catholic banks (Ferri 1992).
50 Since the famous “quota 90” speech by Mussolini, where the dictator, apparently moved
by impulse, decided to anchor the lira to the pound.
95
Total collapse of the banking sector was avoided in part because of
direct state intervention. First, the state created an Istituto di Liquidazioni,
which then became, in 1933, the Istituto per la Ricostruzione Industriale
(Institute for Industrial Restructuring, or IRI), which took control, in
1933-34, of the three former mixed banks (Comit, Credit and Banco
di Roma) and their industrial shareholdings. Secondly, as mentioned
in the previous chapter, the state proceeded to radically change the
regulatory framework governing credit institutions. Such efforts
culminated in the Legal Decree of March 1936, converted into law in
march 1938. As Clarich notes, the 1936 reform was the concrete
application of the principles of “interventionism” then in vogue in
fascist circles – but not only. It represented “one of the most coherent
and complete examples of administrative planning based on
segmentation” (Clarich 1984: 56).
•
France
In France, the economic depression was less pronounced than in Italy,
but it lasted longer. The relative low intensity of the depression can be
attributed to the mildness of the banking crisis of 1931-33 in France,
which was the consequence both of limited foreign financial
commitments in 1931 and of the traditional caution of most major
banks in their relationships with manufacturers. In fact, there were
670 bankruptcies in the banking sector from 1929 to 1937, but those
were mostly local banks. Only one major bank (the Banque Nationale
de Crédit) failed, and a rescue operation organised by the Treasury,
the Bank of France and the other banks succeeded in avoiding a
panic. The banking crisis took a dramatic turn only with the outburst
of several financial scandals involving politicians (the Ostrik and
Stavisky scandals of 1932 and 1933). Therefore banking regulation
was not changed until regime change in 1940-41.
At the centre of the policy interpretations of the crisis of the 1930s
in both countries lie the close links between banks and industry.
Indeed, the bank runs of 1930-31 led to a credit squeeze to heavily
indebted firms who could not, therefore, repay their loans to banks;
at the same time, the stock-market crash meant that banks’ industrial
shareholdings lost their value, and banks were unable to face
depositors’ demands. The first policy response to the crisis was
therefore the severance of those bank-industry links, so as to shield
savers from risks inherent in industry.
96
4.1.2 The new regulatory regime of the late 1930s:
market segmentation, tighter regulation and
state intervention
•
Market segmentation
The 1936 and the 1941 reforms in France and Italy, respectively, were
founded on three pillars: market segmentation, tighter regulation and
state intervention in the credit system. Market segmentation primarily
took the form of functional specialisation, which consisted in the
separation between short-term, medium and long-term liabilities. The
basic assumption behind functional specialisation was that the
maturities of assets should correspond to the maturities of liabilities,
so as to ensure the liquidity of banks’ balance sheets and, ultimately,
prevent bank runs and protect savings. Regulatory authorities held
that short-term lending should be exclusively dedicated to help firms
face cyclical downturns (cash-flow problems); while long-term
lending should finance productive investment. In both countries,
therefore, banks were to specialise in specific segments of the
banking business. The primary goal of functional specialisation was to
shield deposits from the risks associated with corporate lending.
In France, a series of reforms passed in 194151 defined banking
operations according to their maturity, and distinguished among banks
that were allowed to conduct them all or in part: deposit banks,
merchant banks and financial institutions. In Italy, the 1936 law
similarly distinguished between those banks that collected short-term
savings (called in the law “aziende di credito”, or credit firms) and those
that collected medium and long-term savings (the so-called “istituti di
credito speciale”, or special credit institutions).52 The law also provided
that the possibility to offer medium and long-term credit53 depended
on the authorisation of the central bank. The former mixed banks
were excluded from that possibility and barred from holding stocks or
shares in industrial firms, while the special credit institutes received a
legal monopoly on long-term lending. In effect, most of the lending
offered by credit firms was to take the form of cash-flow financing.
51 Laws of June 13 and 14, 1941.
52 This distinction is made explicit in articles 5 and 6, and parts V and VI of the 1936 law.
53 Short-term assets and liabilities bore maturities up to a year; Medium-term assets and
liabilities bore maturities comprised between one and five years; and long-term assets and
liabilities bore maturities longer than five years.
97
In addition to functional specialisation, the Italian and French banking
regulatory regimes of the late 1930s were characterised by the
multiplicity of statuses, laws and bylaws that divided the banking
system in several segments, or sub-sectors. This fragmentation of the
banking sector in both countries was increased in the post-war period
with the creation of a series of new (public) financial institutions.
Thus by the early 1950s the Italian banking sector was composed of
five broad segments. The first segment consisted of “ordinary”
deposit banks (“banche ordinarie di credito”) that operated on the
short and medium term. These banks were constituted as joint-stock
companies and operated mainly on local banking markets (at the
exception of the largest ones, such as the Banco Ambrosiano, Banca
nazionale dell’Agricoltura…); supervision of those banks was the
responsibility of the Banca d’Italia.
A second segment included local and regional cooperative banks
– the Banche popolari and the Casse rurali ed artigiane. These banks
were prevalently local and addressed the needs of specific clienteles –
craftsmen, workers and small industry and commerce for the former,
small firms for the latter. Smaller cooperative banks have long
benefited from a benevolent attitude from the part of regulatory
authorities, both regarding their regulatory obligations (less stringent
than for other banking categories) and the regime governing their
creation and territorial expansion.
A third segment included “public” banks, which consisted in fact of
three distinct bank categories: savings banks, state-owned national
interest banks and public law banks. These three categories shared
the characteristic to be legally considered as public entities and to be
directly controlled by the government, which appointed executive
directors in savings banks, the whole board in the case of the other
two categories. “National interest banks” (“banche di interesse
nazionale”, or BIN) were the three former mixed banks that had been
acquired by the state through IRI (Comit, Credit, Banca di Roma)54.
Public law banks (“Istituti di credito di diritto pubblico”, or ICDPs)
were large banks deemed to fulfil public interest missions. They were:
Banco di Napoli, Banco di Sicilia, Banco di Sardegna, Banca Nazionale
del Lavoro, Monte Paschi di Siena, Istituto San Paolo di Torino.
54 The BIN category was created ad hoc in the 1936 law.
98
A fourth category included the so-called special credit institutions
(“Istituti di credito speciale”, or ICSs). Those institutions were the only
ones authorised to offer long-term financing. ICSs could take two forms.
First, they could be created within existing banks as autonomous
“sections” (sezioni), that is, business units – for instance, the BNL had
sections specialised in lending to the small and medium industrial
firms55, the movie industry and tourism. Other important sections
were those of the Banco di Napoli and of the Banco di Sicilia. ICSs could
also take the form of specialised financial firms. Those were, mainly,
the IMI (Istituto Mobiliare Italiano), Mediobanca, Efibanca, Interbanca,
Centrobanca and the IRI which, beyond owning the three BIN,
managed their former shareholdings in industrial firms and bondfinanced the big industry.
The fifth and final segment consisted of financial institutions created
by the state apart from the banking system to serve the needs of
specific territories or industries56: the Cassa per il Mezzogiorno (Cassa
per le opere straordinarie di pubblico interesse per il finanziamento
dello sviluppo del Mezzogiorno, or Casmez), created in 1950 to
manage the funds given by the International Bank for Reconstruction
and Development to foster economic development in the Southern
regions; the Mediocredito centrale, created in 1952 to finance small
and medium industrial firms, along with regional institutes; and the
web of regional and interregional institutes created by local and
regional banks and firms, supported by the state and financed in part
by the Mediocredito centrale and the Cassa per il Mezzogiorno. In the
southern regions, for instance, those were the IRFIS (Istituto regionale
per il finanziamento alle medie e piccolo industrie della Sicilia, created
in 1950), the CIS (Credito Industriale Sardo, created in 1953), and the
ISVEIMER (Istituto per lo sviluppo economico dell’Italia meridionale,
created in 1938).
55 The only such section in Italy to be a distinct legal entity from the founding bank.
56 The state-promoted creation of those institutions corresponded with the strong reluctance
of monetary authorities to have industrial investment financed by the banking sector.
99
The French banking system, in the post-war years, was similarly
segmented in four parts. The first segment included commercial banks
(deposit banks, medium and long-term credit banks, merchant banks)
and private financial institutions (stock-trading houses, credit
institutions…), who received an authorisation from the national credit
council (Conseil national du crédit, or CNC)57; were controlled by
the central bank; and monitored by the banks’ control committee
(Commission de contrôle des banques, or CCB).
The second segment of the French banking system consisted of banks
with specific legal statutes – mainly, networks of cooperative banks,
such as the Crédit populaire, the Crédit agricole mutuel, the Crédit
mutuel agricole et rural, the Crédit cooperatif, the Crédit mutuel,
the Banque Française du Commerce Extérieur. These banks, which
often had their own central financial institutions, were also endowed
by the state with public interest missions, and could distribute statesubsidised credit to their members. For this reason such banks were
not monitored by the central bank or by the CCB, but by various
Ministries, among them the Ministry of Finance, which delegated
their control to the Department of the Treasury.
The third segment of the banking system was composed of financial
institutions belonging to the public sector and, under the control of
the Treasury, were in charge of financing specific business sectors.
The Crédit national financed lending to industry; the Crédit foncier
and the Comptoir des entrepreneurs offered real estate and
mortgage lending; the Crédit Hôtelier lent to the tourism industry,
etc. These institutions were often private firms but because of their
public service missions, were controlled by the state who appointed
their executive directors.
Finally, the fourth segment of the post-war French banking system
included public institutions – mainly the Caisse des dépôts et
consignations (CDC) and its subsidiaries – that managed public
lending portfolios. The CDC was monitored by a parliamentary
committee and attached to the Treasury. Among its subsidiaries were
the Caisse d’aide aux collectivités locales, the Caisse de prêts aux
organismes d’habitations à loyer modéré…
57 Those banks were registered with the CNC and hence were also called “registered banks”.
100
The network of the savings banks, as well as the Postal savings banks
(the Caisse Nationale d’Epargne) were directly under the CDC’s authority.
Finally, the Post and Telecommunications administration managed the
postal checking accounts, under the supervision of the Treasury; and
the Treasury and the central bank itself managed deposits and were
therefore part of the public segment of the banking system.
As seen above, banking market segmentation in both countries was
the fruit both of historical evolution (with the creation of specialised
institutions along the years) and of the regulatory regime of the
1930s and its sequels – functional specialisation and the multiplicity
of legal statuses and categories. Such a structure survived until the
1980s in France and 1990s in Italy.
•
Tighter banking regulation
The second pillar of the 1930s reforms was tighter regulation.
The regulatory powers of existing regulatory agencies were increased;
and new regulatory agencies were created. In Italy, the 1936 law
reorganised the regulatory apparatus around three institutions: the
Committee of Ministers (and the Ministry of Industry), the Ispettorato
per la Difesa del Credito e del Risparmio (Ispectorate for the defence
of credit and savings), and the central bank. The law then gave
extensive and discretionary powers to those three institutions, which
reduced to a large extent the autonomy enjoyed until then by banks
and credit institutions. Banks’ information obligations were especially
increased, starting with the obligation to deliver accounting
documents twice a year to the central bank. The Ispectorate was
given the power to perform inspections and inquiries; that power was
transferred to the central bank after the war, when the whole
Ispectorate was re-located within the Banca d’Italia.
In France, the 1941 reforms instituted a banking license and submitted
banks to the monitoring powers of the Ministry of the Treasury.
These reforms were confirmed after the war, together with the
nationalisation of the central bank, the Banque de France, and of the
nation’s first four deposit banks. A 1945 law confirmed the segmented
structure of the banking system and delineated the principles of
banking regulation. Inspection powers were similarly assigned to the
central bank, and banks were submitted to information obligations.
101
•
The interventionist role of the state in credit allocation
The third pillar of the 1930s banking regulatory regime was, beyond
market segmentation and tighter banking regulation, the direct
intervention of the state within the allocation of credit. As seen above,
by the late 1930s a consistent part of the credit system was owned or
controlled (either indirectly or directly) by the state. Before the war,
state intervention took two forms: ownership of banks or financial
institutions on the one hand; and control of ad hoc credit instruments on
the other hand, directly linked to the government or to public agencies.
State intervention was not simply the outcome of authoritarian regimes
(fascism in Italy from 1922 on; in France, petainism since 1940). First of
all, many democracies (such as Great Britain or the United States)
simultaneously adopted similar policies or regulatory regimes – including
a stronger state intervention in the economy. Secondly, even in Italy
“fascist” creations were the continuation of the experience launched
before and during the First World War by a group of key political
players from various origins and ideological affiliations – such as
Francesco Saverio Nitti and Alberto Beneduce. These actors shared
the conviction that, to foster Italy’s industrialisation and modernisation,
one needed the work of a “visible hand” transforming savings into
productive investments; that such work request state intervention,
given savers’ low trust into medium and long term financial
endeavours; and that, finally (and crucially), this intervention should
have taken place outside of the administration’s traditional realm,
namely through ad hoc entities, in which Barca sees institutional
investors ante litteram (for a short review of the Nittian bases of Italy’s
postwar economic structure see Barca 1997). In sum, once functional
specialisation was in place Italy renounced to resort to banks for the
financing of industry.
These ideas, and the men behind them, therefore led to the creation
of public institutions specifically designed for collecting savings to
finance medium and long-term investments: the INA (Istituto
nazionale delle assicurazioni, or national insurance institute) in 1912,
the Consorzio per Sovvenzioni su Valori Industriali in 1914, the
Consorzio di credito per le spese pubbliche in 1919, the Istituto di
Credito per le Opere di Pubblica Utilità in 1924 and the Istituto di
credito navale in 1928.
102
With the crisis of the 1930s, and the collapse of the mixed bank
model, the fascist government accelerated the trend, as seen above,
through the creation, first, of the Istituto mobiliare italiano, or the IMI
in 1931; and, second, of the IRI in 1933 – which then took control of
the three national mixed banks. The IRI at first was conceived as a
kind of temporary bad assets management company, dedicated to
the ridding of those bad assets. Already in 193658, however, the IRI
became the owner of the entire capital of the three BINs and the
owner of their industrial shareholdings – which represented, by the
late 1930s, 21% of the capital of all joint-stock companies existing in
Italy. And in 1937 the IRI lost its temporary nature.
In addition the Italian government created or helped create a number
of special funds or financial institutions to help ailing industries.
These institutions were either owned or controlled by the state, who
also appointed board members in legally distinct entities such as the
Casse di risparmio (since 1936). Regulatory authorities in both countries
were, in addition, the places where the interventionist state would
direct credit allocation through specific regulations, specific incentives,
tax and legal loopholes. Such state intervention would be strengthened
by post-war “developmentalist” concerns.
4.1.3 State-led credit allocation in post-war France and Italy
The banking regulatory architecture put in place in the late 1930s in France
and in Italy was substantially left unchanged in the post-war years, even
as both countries changed the form of their government. Rather, policymakers in the 1940s and 1950s reinforced the interventionist role in the
credit system assigned to the state during the 1930s. In both countries,
indeed, reconstruction needs and political change helped put in place a
“developmentalist industrial policy” (Loriaux 1991) that relied on stateled credit allocation and an accommodating monetary policy.
58 With a decree of May 25, 1936 (n.1042).
103
•
France
Post-war industrial policy was characterised in France by subsidies,
credit controls, indicative planning and intervention in state-owned
industries. In 1945-46, successive governments nationalised several
large firms in key industries – among them the four largest deposit
banks: Crédit Lyonnais, Société Générale, Banque Nationale pour le
Commerce et l’Industrie, Comptoir d’Escompte de Paris. Industrial firms
that were nationalised included the car-maker Renault, the chemist
and pharmaceutical firm Rhone-Poulenc and utilities such as the
Compagnie Générale d’Electricité. Eventually, the state used its
ownership of those companies to direct (and fund) strategic
investment and production choices. To a large extent, the Fordist
accumulation regime – characterised by mass production of
standardised goods - that emerged out of the 1950s was a statesponsored one.
Indicative planning was the second key instrument of industrial policy,
starting with the Monnet Plan of the late 1940s and successive
five-year plans. Planning gave public priorities for investment research
and development, and set prices and interest rates. During the 1960s,
France’s industrial policy was still characterised by ambitious crosssector programmes, epitomised by the Fifth Plan (1965-1970), the
Convention État-sidérurgie in 1966 and the Plan Calcul in 1967.
When, during the late 1960s – 1970s, planning lost its importance,
state-owned firms became instrumental in directing investment and
production, mostly through ownership and financing of private
industrial firms. Public firms set up joint-ventures with private ones:
so did EDF-GDF with Thompson; Paribas with Elf-Aquitaine…
The last years of the De Gaulle presidency were marked by the state’s
will to help create national champions, namely large firms capable of
competing on the world markets. So the government participated
in the constitution of large industrial groups through mergers and
acquisitions: Saint-Gobain-Pont-à-Mousson, Rhône-Poulenc, PéchineyUgine-Kuhlman, Thomson-CSF… State-owned banks were associated
with such restructuring process, which concerned the banking sector
too – as with the merger in 1966 between the Banque Nationale pour
le Commerce et l’Industrie and the Comptoir d’Escompte de Paris,
resulting in the creation of the Banque Nationale de Paris.
104
During the 1970s, industrial policy shifted from supporting national
champions to supporting specific sectors or niches – telecommunications,
aircraft, electrical generators, and arms. In addition, the state multiplied
rescue operations towards ailing industries and firms, or “lame ducks”.
So the state created the Institut de Développement Industriel (Institute
for Industrial Development, or IDI), originally designed to take over
companies in difficulty and then return them to the private sector
profitable enterprises. In 1975, public support to private industry
reached 126 billion francs, or 9% of France’s GDP. Of this amount
4.1 billion francs in subsidies and 334 million francs in loans were for
targeted sectors, 149 million francs in subsidies and 8.6 billion francs
in loans went to restructuring (Bellon, 1980).
State-directed credit allocation, together with national industrial
planning and nationalised industries, constituted the cornerstone of
the post-war dirigisme rule. Subsidies were first and above all provided
through the Fund for Modernisation and Equipment (Fonds de
Modernisation et d’Equipement, or FME), which became in the late
1960s the Fund for Economic and Social Development (Fonds de
Développement Economique et Social, or FDES), financed directly
from the budget. The FME was originally created to manage the
funds received under the Marshall Plan, and was directed at financing
investment by large industrial firms. In 1949, the French state financed
41% of industrial investment (against 20% for self-financing,
26% for short-term bank loans, 6% for medium-term bank loans,
7% for bonds) (Hautcoeur, 2003). Such policy represented a rupture
from the pre-war pattern of state economic intervention since, as
Schmidt put it, “during the Third Republic, the state was more
focused on maintaining the balance among social groups and
protecting established interests than on promoting economic
growth” (Schmidt 1996).
However, this centralised system gave way to large fiscal deficits and
rising inflation. Hence the decision, in the early 1950s, to increasingly
rely on state and para-statal institutions, such as the Caisse des
Dépôts et consignations, within the Treasury circuit already evoked in
chapter 3. The “Treasury circuit” had been put in place since the
XIXth century, but it really acquired its centrality in French
developmentalism only in the post-war era. The circuit had been built
on the premise that the state was better able (than financial markets
and private banks) to (i) mobilise savings to finance long-term
investment and (ii) offer cheap money to investors.
105
The Treasury circuit built on three layers (Zerah, 1993). The first layer
consisted of a series of state and para-state financial institutions offering
low interest-bearing loans to specific sectors. Those institutions included
the Caisse des Dépots et Consignations (CDC), who financed local
governments; the Crédit National, specialised in industrial loans; and
the Crédit Foncier, which issued mortgage loans. All those state and
para-state institutions were required by law to deposit part of their
resources at the Treasury. The second layer of the Treasury circuit was
composed of the Post Office and the savings banks, which were
mainly collect institutions geared to collect savings from households.
The Post Office was required to deposit the collected funds at special
accounts at the Treasury; while the savings banks, as seen in Chapter
3, had to deposit the resources drawn from the Livret A accounts at
the CDC. The third layer of the circuit was made up of public and
private banks, which had to hold a part of their mandatory reserves
in Treasury bonds. In addition, banks could offer loans guaranteed by
the state at certain conditions.
At the centre of the circuit stood the Treasury, which could “draw on
multiple accounts to finance public spending without issuing bonds
or relying on deficit spending, transforming short-term deposits into
long-term loans and subsidies.” (Loriaux, 1991) Loriaux further notes
that, since the money borrowed by the Treasury from those institutions
to pay off the state’s creditors ultimately found its way back to the
banks, the post office or one of the financial institutions that
composed the Treasury circuit, “the Treasury had the unusual capacity
to feed its “reserves” with money of its own creation” (Loriaux 1991:
65-72). Therefore, the Treasury circuit offered policy-makers a tool
that they could use to redistribute money while avoiding the dangers
of inflationary financing as well as the political liabilities of increasing
state income through higher taxes (Patat and Lutfalla 1986: 140-41)
In the mid-1960s, De Gaulle government’s fiscal conservatism put heavy
constraints on the Treasury circuit, leading to the 1966-67 banking
reforms59. The reforms led to a disengagement of the Treasury from
industrial policy while keeping the interventionist logic of the Treasury
circuit.
59 The so-called “Debré decrees” of January 25, 1966; December 23, 1966 and September 1st,
1967.
106
In effect, the reforms shifted the responsibility of financial transformation
(of short-term capital into long-term loans) from the Treasury to banks
themselves – among whom, to a limited extent, savings banks (Patat
and Lutfalla 1986: 140-41). The reforms encouraged banks to lend at
medium-term to certain sectors by extending the eligibility of such
loans to rediscounting at the central bank. Simultaneously, however,
the state discouraged the banks from making other types of loans by
placing quantitative restrictions on the overall growth of credit –
mechanisms known as “l’encadrement du credit”. The State could
therefore direct lending to a sector by lifting credit restrictions on it.
In addition, the state could make medium-term loans to such sectors
eligible for discount at the central bank, thus reinforcing the
attractiveness of such sectors.
The banking reforms led to a gradual loosening of banking
segmentation. Deposit banks were authorised to receive deposits
with a maturity superior to two years, and merchant banks were
allowed to receive deposits. The Debré decrees similarly loosened the
conditions imposed on deposit banks’ shareholding in business firms.
Simultaneously, the regime of authorisation for the creation of bank
branches was loosened as well; the number of bank branches
doubled between 1967 and 1975.
•
Italy
In Italy, too, the immediate post-war era was dominated with
“developmentalist” concerns that drove much of fiscal, monetary and
industrial policy until the late 1980s. However, in contrast to France,
those concerns were continuously balanced with concerns for the
external and internal stability of the currency. Such views have been
associated with key figures in Italian post-war policy-making: Luigi
Einaudi (governor of the Central Bank, then Minister of the Treasury
in 1948), Donato Menichella (his successor at the head of the Bank of
Italy), Guido Carli (Menichella’s successor), the liberal party... As in
France, industrial policy in Italy relied on public subsidies, stateownership, credit controls and indicative planning (“programmazione
economica”). The latter took rise in the fifties with the “Schema
Vanoni” of 1954 and the 1952 law, both of which gave economic
policy the twin goal of modernising the economy and reaching full
employment. However, planning never achieved a prominent role in
economic policy-making – and its practical achievements are rare
(Graziani, 2000).
107
In Italy, state-led industrial development primarily relied on stateowned enterprises. The Italian state owned, in large part through the
public holding IRI60, controlling stakes in many large firms in key
sectors – such as Finsider in steel, Agip in oil and gas, Autostrade in
highways, SME in the agro-business… Another large public holding,
the Ente nazionale idrocarburi, or ENI, was created in 1953 to ensure
Italy’s full control over oil and gas production and compete with the
“seven sisters”, the seven major oil multinationals61. As seen in
previous sections, upon its creation the IRI was conceived as an
extraordinary, temporary instrument to rescue Italy’s ailing industries;
before the war, however, the IRI was made permanent. In the
immediate post-war, moreover, the IRI evolved into a large public
holding with the mission to promote Italy’s industrialisation.
Interestingly, therefore, in contrast to France, state-led industrial
development in Italy did not occur through nationalisations62, but
through the transformation (the institutionalisation) of rescue
instruments and temporary bailouts into stable instruments of state
control over the industry, and state financing of industry (Barca, 1997;
Barca and Trento, 1997). State-ownership was indeed conceived so as
to allow the allocation of cheap credit to public and private industry,
while giving managers of public firms a large margin for the
manoeuvring they might not have had with private owners (Barca and
Trento, 1997). Indeed, the IRI and ENI were public but autonomous
bodies (“enti pubblici”). In addition, as Barca and Trento argue, the
IRI’s central offices functioned more as a financial heart than as a
control centre. This peculiar configuration embodied the double
refusal that marked Italian post-war politics: the refusal of a pervasive
and direct control of the state on economic matters (a refusal
certainly fed by the rejection of the fascists’ authoritarian regime of
the previous decades) and the refusal to let national industry (and
credit) fall into the hands of the markets. On the one hand, market
mechanisms were rejected because of (a) the absence of financial
markets, (b) the historical reluctance of savers to finance industrial
investments and (c) for fear of conflicts of interests and of exposure
to conjonctural crises.
60 IRI was controlled by an ad hoc administrative board where the main economic ministries
were represented: the Ministry of Industry and the Ministry of the Treasury.
61 The ENI was created by law in February 1953 (law n.136 of February 10th, 1953).
62 Apart from the nationalisation of electricity in 1963 with the creation of the Ente nazionale
Energia Elettrica (ENEL), a public holding.
108
On the other hand, the public administration was rejected for its
perceived rigidity and inability to manage credit allocation – and since
in Italy, more than in France, “liberal” economists and politicians, such
as Luigi Einaudi or Donato Menichella, disposed of a strong policy
influence. That choice formed what Barca coins as an “extraordinary
compromise” (compromesso straordinario), which “avoiding both
statalism and hyper-liberalism, paved the way for the mobilisation of
savings and financial resources, entrusted to hands capable of
completing the industrialisation of the country” (Barca 1997: 12).
The path chosen was a half ground, although arguably closer to
state-led development patterns than market models. All political
forces agreed about the leading role the state should play in
favouring and supporting development and about the need to avoid
having the state bureaucracy manage those large firms that had
ended up within the public realm. This solution (relying on public but
autonomous entities financed by public or semi-public credit
institutions) was all the easier as the managers already in place were
known to be capable and dedicated to the modernisation of the
country - such as Enrico Mattei, the charismatic founder of ENI and
its first president; Donato Menichella (at IRI until 1946, successively at
the Bank of Italy); Oscar Sinigaglia (Finsider); Gian Lupo Osti (Terni)…
These characters often played a key role in establishing the post-war
compromise. Such “agreement”, although never, of course, formalised,
it took place within the Christian-Democracy, which became the locus
of the compromise (see Barca, 1997).
The credit system was designed to support Italy’s industrialisation
without putting savings at risk and, therefore, was within the
boundaries of the 1936 banking law. The first layer of the post-war
state-led credit allocation system was the IRI and ENI, through which
the state channelled funds to the firms they owned and controlled
(public firms) and the private firms with whom they had established
strong links. For instance, Comit, Credit and Banco di Roma held non
controlling but important stakes in Falck, Fiat, Montedison, Olivetti,
SNIA, Bastogi…(see Ferri and Trento, 1997). In addition, Mediobanca,
the private merchant bank created by the three BINs (and hence a
creature of public entities) played a major role in supporting the
emission of bonds by large private firms in the 1960s, 1970s and
1970s. As Barca notes, it is the staff of the IRI that, in the late-1940s,
drafted Italy’s official proposals to use US imports and Marshall funds.
109
In 1948-1949, the latter were prevalently used to acquire productive
machinery, through the intermediation of IMI and with the largest
industrial firms, such as Fiat, as main beneficiaries. Within a few years,
credit allocation and investment financing in strategic sectors such as
steel, oil, telecommunications, and highways, all fell within the sway of
those large public institutions – most of whom were the IRI and the ENI.
Beyond the IRI and ENI’s roles, state-led credit allocation took successive
forms, and two periods can be distinguished in the establishment of
the post-war credit system. At first, until 1948, national unity
governments63 insisted on the direct participation of both banks and
the state in the reconstruction process. On the state side, this policy
emphasised the role of subsidies. Various instruments were created
that were directly financed by the Treasury. A 1946 law64 made
available 13 billion lire to finance long-term investment needs in large
industrial firms. In 1947, a Fund for the financing of the mechanic
industry (Fondo per il finanziamento dell’industria meccanica, or FIM)
was created within the IMI (but liquidated three years later).
The second consequence of the credit policy implemented in the
immediate aftermath of the war was that, in order for banks to be
directly involved in reconstruction, the rule of functional specialisation
put in place by the 1936 law had to be loosened. Banks should be
allowed to finance industrial investments. Interestingly, however, that
policy decision did not lead to the abandonment of the 1936 law;
the political support for the banking regulatory regime inherited from
the fascist era was too strong to be overruled. Therefore the breach
of the 1936 law took the form of the autonomous “sections” founded
by individual banks (see previous section) and authorised by law.
Those sections were to lend on a long-term basis to industrial firms,
while being organically separate from the banks’ other businesses.
They benefited from a large state guarantee on the funds lent – around
70% on average; and the state paid part of the interests charged on
the loans. The state guarantees and interest contributions drew on
the Marshall Funds managed by the Treasury.
63 Governments with the participation of most political parties, including the Communist Party.
64 D.lgs 449 of May 8, 1946.
110
The first of these was the section for the funding of small and medium
industrial firms, created at the BNL in December 194765, which was
endowed with 2 billion lire paid by the Treasury; following the
sections created that same year within the Banco di Napoli (endowed
with 1 billion lire), the Banco di Sicilia (endowed with 2 billion lire) and
the Banco di Sardegna.
After 1948, however, and with the advent of a centre-right government
(still headed by De Gasperi) and the appointment of Luigi Einaudi
first, then Donato Menichella, as governors of the Banca d’Italia, the
state-led efforts to revamp the credit system changed direction.
The government’s monetary and credit policies were now explicitly
geared towards protecting savings and the financial rents of the
middle classes on the one hand, and maintaining the external stability
on the other. One pillar of the compromise was, indeed, the aim to
solidly anchor middle classes within the economic and political system,
drawing on the fascist experience (where disenfranchised middle
classes, ruined by the successive financial and economic classes
massively joined the ranks of the fascist party). Moreover, the stability
of the currency represented a way to maintain the country’s credibility
and rigour in the context of export-led growth and development.
The aim was to keep banks and industry separate (and thus return to
the spirit of the 1936 law), while allowing for an effective transfer of
resources to industry, small and large firms alike. At the same time,
there was a consensus both on the leading role the state should play
in the new organisation of the credit system and on the need to keep
credit allocation outside public administration. The solution that was
adopted then consisted in the creation of new financial institutions,
and the strengthening of existing ones that would serve as buffers
between deposit banks and industrial borrowers, and finance
their lending through bonds, state guarantees and subsidies, while
benefiting from special discounts at the central bank. Those institutions
operated at two levels: regional and national.
65 D.lgs 1419 of December 1947
111
At the regional level, one found the 11 regional credit institutes
(“Mediocrediti regionali”) and their central refinancing institution,
Mediocredito centrale, created in 1950 and 1952 – all operating in
the centre and northern regions; and the southern regional institutes,
namely IRFIS in Sicily, CIS in Sardegna; and ISVEIMER for the whole
south. The latter were autonomous from Mediocredito centrale:
they received public (state) funds and funds from the Cassa per il
Mezzogiorno, which was created in 1950 (Peluffo 1997).
At the national level stood the “special credit institutions” that had
been created outside the banking system in the 1930s and 1940s.
First among them was the IMI, created, as we have seen above,
in 1931. The IMI played an important role in managing specific funds
for industrial investment, such as the FIM. In addition, in 1950 the
government authorised the use of 10 billion lire from the European
recovery program (Marshall Plan) to finance productive investments
by small firms. This sum was managed by the IMI and another special
credit institution, Arar-Spei66. Besides the IMI, other special credit
institutions were created after the war, by banks or groups of banks
but with the support of the state: Mediobanca was founded in 1950
by the three national interest banks, together with the public
insurance companies INA, Generali and RAS, and Bastogi and the
Banca d’America e d’Italia. Efi, which then became Efibanca, was
created by the BNL and played an important role in financing export
lending. Centrobanca was founded by the Banche popolari and
Interbanca by ordinary banks.
As in France in the 1960s, the rise of developmental concerns in Italy
was accompanied by a gradual loosening of functional specialisation.
Credit segmentation had already been circumvented by banks’
practice in the 1960s (Monti 1983). Moreover regulatory authorities
themselves recognised the “mixed” nature of large deposit banks.
As early as 1944, a ministerial decree67 authorised public credit
institutions to finance long-term loans to industry. That same year,
savings banks were authorised by regulatory authorities to lend longterm, provided that they operated within statutory boundaries.
Savings banks were also authorised to offer medium-term liabilities,
which, after all, constituted their true raison d’être.
66 Law 258 of April 18, 1950.
67 Decree n.367, Nov. 1st, 1944.
112
In 1972, the Ministry of the Treasury authorised ordinary banks and
Banche Popolari to offer long-term lending for up to 8-10% of their
assets68; in 1975 the ceiling was raised to 15%69. In 1977, the
introduction of fidi bancari (bank guarantees) extended the range of
long-term operations by banks.
4.2
The crisis of the 1970s and the unraveling of state
administered credit systems
4.2.1 The underlying weaknesses of state-led credit allocation
systems: moral hazard in the overdraft economy
The first weakness of the French and Italian state-administered credit systems,
which appeared in the early 1970s, lies in the moral hazard created by the
“overdraft economy”. Indeed, French and Italian state-led development
policies had given rise to what French economists called an ‘économie
d’endettement’ or overdraft economy, according to which hikes in interest
rates had little or no impact on business demand for credit (see Loriaux,
1991, for an exhaustive analysis on France). Businesses, operating under
the policy-induced expectation of assured borrowing power (or other
financial support), responded to increases in the cost of credit simply by
asking for more credit (higher interest rates produced cash-flow problems
that firms addressed by borrowing more). This created a moral hazard.
The expectation of assured borrowing power impeded the government’s
efforts to use interest rate policy to slow monetary supply growth and
thus regulate the supply of money to currency markets.
In that sense, therefore, as Loriaux noted, and quite paradoxically
“the politics of easy credit did not breed a moral hazard. It is, rather, the
moral hazard that bred the politics of easy credit” (Loriaux, 1991). This is
a paradoxical view since a moral hazard could seem to be the outcome
of a state-led credit allocation system. In such system, indeed, as post-war
France and Italy had experienced, banks and markets did not have the
incentive to exert substantive monitoring on credit allocation; while
borrowers had the insurance of obtaining cheap money through state
guarantees and subsidised prices or interest rates.
68 Decree of March 23, 1972.
69 CICR Decision of May 27, 1975.
113
In fact, moral hazard led to a strengthening of state-administered credit,
since it became politically difficult, if not impossible, to allow for the
failure of indebted banks or firms. Therefore “the French state was
generous with its credit policy because it feared the political costs of
parsimony.” (Loriaux, 1991). Such a system could work insofar as the
main beneficiaries of state-led credit allocation – large firms – could
continue to grow and to improve their productivity. Once, however,
productivity slowed down and firms’ debt grew state-administered credit
would run into serious problems.
Moral hazard was aggravated by the multiplication of objectives assigned
to industrial policy in the 1960s – hence to state-led credit allocation:
rescuing ailing firms or sectors, investing in less developed sectors or
territories. In addition, in Italy “the assignment to state-owned
enterprises of objectives other than profit (…) made inevitable the mixing
between public firms and political parties” (Barca and Trento, 1997: 217)
The second weakness of state-administered credit originated in the
absence of the external constraint and the availability of monetary policy
as an adjustment tool. In France, as Loriaux has argued, the “overdraft
economy” of the post-war period, with its lax monetary policies linked to
the state-administered credit rationing system, had enabled firms to
prosper despite a high level of indebtedness by allowing high rates of
inflation that governments would periodically counter through aggressive
devaluations of the franc against the dollar, which in turn would give
French firms a comparative advantage (Loriaux, 1991). In addition,
while Italy and France both embarked on an export-led industrial
strategy during the 1960s (once reconstruction was over and European
currencies had been made convertible again), they suffered from
unfavourable specialisation within the international division of labour:
they produced low-capital intensive consumption goods and did not
produce the means for their production (machinery, tools), which they
imported from countries such as Germany. Such specialisation presented
a contradiction with the Fordist accumulation regime: while sustaining
internal demand required high wages, the two countries’ trade
specialisation demanded low wages so as to lower the prices of exported
goods. The only way out was to resort to devaluation, which alleviated
the pressure on wages while effectively lowering the price of French
and Italian export goods.
114
Devaluation was not new to France: successive governments often resorted
to devaluation during the 1950s and the 1960s. In addition, some of their
trading partners, notably Germany, chose to re-valuate their currencies.
Devaluations, however, have sustained effects only when used as a
temporary measure to save time (through a boost in exports) so as to
adjust industrial capacities in the meantime and, in the medium term, to
change a country’s trade specialisation (towards higher capital intensive
goods). This was the path chosen by Germany and Japan in the 1950s:
they chose an undervalued currency precisely as a way to shield their
exports during the re-qualification of their industrial apparatus. Such was
not the strategy behind the French devaluations. Most importantly, the
resort to devaluation was possible only insofar as exchange rates were
fixed and capital was not very mobile. In other words, the survival of
state-administered credit was dependent upon the functioning of the
Bretton-Woods system of fixed exchange rates.
The case of Italy was different in this respect: both the Bank of Italy and key
figures of economic policy-making made sure that the stability of the lira was
respected, even during the difficult years of 1963 and 1964. The stability
of the lira earned itself the title “Oscar of the currencies” in the late 1950s.
The third weakness of state-administered credit was its reliance on political
compromises that were dependent on stable industrial relations and
continuous growth without inflation. In France, that comprise involved
around (i) civil servants dedicated to developmentalism; (ii) the gaullists,
who were determined to strengthen the state’s capacity to steer the
economy; (iii) the Communist Party and unions who limited their claims
to a fair redistribution of the “fruits of growth”; (iv) business classes who
accepted increases in real wages in exchange for increases in productivity.
In Italy, the main components of the compromise – a “compromise without
reform” (Barca 1997) – were (i) the “Nittians”, or the elite followers of Nitti,
who believed in the unrivalled capacity of private managers of public
institutions to manage credit allocation and favour productive investments;
(ii) the free-market economists school, who rejected any form of state
intervention in the economy; (iii) the Communist Party, which made, as
early as 1945, a “developmentalist” choice (Barca speaks of a “productivist”
option) favouring reconstruction and industrialisation over more immediate
political gains that might have been earned through more aggressive, prolabour policies; (iv) Catholic politicians and intellectuals with social
leanings; (v) large and medium business interests, although divided on
many issues; (vi) what Barca calls the “Washington option” – the US
interests in a pacified and allied Italy.
115
The stability of such compromises was predicated upon a series of specific
external conditions. In particular, the views held by unions and the
Communist party on the one hand and by business and centre or rightwing political parties on the other, depended on continuous economic
growth and the smooth redistribution of the fruits of growth. Once growth
slowed down (as it did in the late 1960s) redistributive conflicts occurred,
leading to the unravelling of compromise. Moreover, the power held by
the Gaullists in France and the Nittians in Italy (both in administration and
political circles) was threatened by generational and ideological changes.
4.2.2 The twin crisis of the 1970s: the crisis of the Fordist model
and the collapse of the gold exchange standard
The early 1970s was characterised by a twin crisis that affected most
industrialised economies: an internal crisis – that of the Fordist accumulation
regime; and an external crisis, provoked by the collapse of the gold
exchange standard and the rise of exchange rate instability, along with
growing trade and financial interdependence (what in France is known as
the contrainte extérieure, or external constraint). This twin crisis adversely
affected state-administered credit in France and Italy by undermining the
fragile balance on which such a system was predicated.
•
The crisis of the Fordist regime of accumulation
The Fordist accumulation regime, experienced by the United States
since the 1920s, and in post-war Europe, was based on mass production
(and consumption) of standard goods and services by large firms and
unskilled workers, low unemployment, redistribution of productivity
gains to both labour and capital, and accommodating monetary and
fiscal policies. The crisis of the Fordist regime, which started in the late
1960s, was both an industrial and labour crisis (on the Fordist regime
and its crisis, see Aglietta 1976; Boyer et al. 1978 and Boyer, 1990,
for a synthesis). The industrial crisis was essentially a crisis of capital
over-accumulation. With the use of productive capacities at their
maximum, and the catching-up of real wages, capital in the late
1960s was increasingly unable to find productive outlets. The Fordist
crisis led, on the world market, to the shift of competitive advantage
from mass-production industries to manufacturers able to produce
specialised, high-quality goods, often in small, customised batches,
and to undertake continuous innovation and to target high valueadded market niches.
116
Not anticipating such a shift away from Fordist firms, capitalists (and
the state) in both France and Italy invested heavily in non-productive
segments and employment: services of course (hence the rapid
development of the tertiary sector in the late 1960s – early 1970s),
but also monitoring jobs in factories, where workers’ behaviour had
become openly defiant of existing working conditions and discipline.
Sales, health, building, and real estate were the favourite destinations of
domestic capital, feeding what was known in Italy as the “rent inflation”
(inflazione della rendita). In addition, in those years domestic capital
was increasingly attracted by profit opportunities abroad, giving rise
to what is known in Italy as the “fuga dei capitali”.
A successive strategy, tried out in France in the second half of the 1970s,
was to aggressively promote an outward-oriented industrial strategy
(acquisitions of foreign factories by French groups, for instance),
while encouraging dualism at home – i.e. the outsourcing of parts of
the production process to small firms staffed with unskilled labour,
often migrant workers. Such dualism was, however, defensive rather
than offensive and did not create the conditions for the emergence
of an alternative industrial structure (See Berger and Piore, 1982).
In Italy, for historical reasons small and medium firms had played a more
important part in the country’s development; and in the mid-1970s it
appeared clear that those firms were better able to sustain the new
external environment than large firms, to a large extent because of
small firms’ reliance on their own funds (in contrast to large firms’
high levels of indebtedness). The late 1970s saw, simultaneously, an
increased interest in small firms from scholars – this is when the
literature on industrial districts started to appear (see Beccattini,
1977; and Bagnasco, 1978). However, at that time the external
pressure was so strong, and public deficits so high that any large-scale
industrial restructuring strategy would have appeared too risky.
Beyond that crisis of over-accumulation, the second main component
of the crisis of the Fordist accumulation regime was the rapidly
deteriorating industrial relations. This deterioration had two origins:
on the one hand, unions had successfully capitalised on collective
wage bargaining during the 1960s, and reaped significant results in
terms of real wages (which caught up during that decade, bringing
an improvement in workers’ purchasing power); on the other hand,
with the slowdown of productivity in the late 1960s, firms put in
place new strategies to increase the output-per-worker, and workers
became less and less satisfied with working conditions.
117
Such dissatisfaction culminated in 1968 and the three following
years. It is estimated that on average, from 1967 to 1969 France lost
52 million working days per year because of strikes – against
1.8 million in 1965-1966. Italy, in 1969, lost 200 million working days
to strikes. 1969 marked the beginning of the so-called “hot Autumn”
– rising tensions in industrial relations (De Rosa 1990). Within a few
years, work stoppages increased sharply, and union membership rose
as well; as a consequence, product wages rose 13 and 10 percent
in 1970 and 1971, contributing to a severe profit squeeze in the
Italian industry.
The slowdown in productivity, the rise of unproductive capital uses
and labour unrest led to a sharp decline in economic growth during
the early 1970s. In 1973 industrial output in France and Italy was
actually lower than it had been the previous year. At the same time,
the rise in monetary wages led to an upsurge of inflation, fed by
a wage-price spiral. In Italy, successive labour agreements led to the
full indexation of wages on prices (the so called “scala mobile” and
“punto unico di contingenza”) Even before the oil shock (and its
dramatic consequences on domestic price levels), therefore, inflation
was on the rise. The crisis of the Fordist model undermined the
French and Italian state-administered credit systems: the moral hazard
generated by the overdraft economy was aggravated by the fall in
productivity, revenues, and inflationary pressures. Therefore, the debt
and productivity crisis in large firms threatened the very basis of
France’s and Italy’s development strategies. Secondly, state-led
Fordism (and credit allocation) relied on a political compromise (see
sections above) that depended on the stability of industrial relations
in large firms. In France the statist pattern of economic policy-making
relied on close relationships between top civil servants and top
managers at large businesses (Schmidt 1996). With the outbreak of
social tensions, the political compromise was in trouble: the Communist
Parties of both countries were outflanked by left-wing movements,
which in turn radicalised the Communists; and the financial and
industrial elites felt disenfranchised and embarked on a strategy that
openly broke away from the political compromise of the 1940s-1950s.
118
•
Balance of payment crises and the rise of the external constraint
The crisis of the Fordist accumulation regime at home coincided with
changes in “hegemonically structured international political economy”
abroad (Loriaux, 1991; 2003). Post-war exchange-rate stability relied
on the Bretton-Woods system of fixed but adjustable exchange rates.
That system, once the convertibility of European currencies was
re-established in the 1960s, depended in turn on the willingness of
the United States government to forbid internal adjustment through
the manipulation of the dollar’s external value. As Loriaux has noted,
American monetary and fiscal policy in the 1950s supported new,
post-war international trade and monetary arrangements that sought to
make Keynesian policy possible under free trade. But American policy
began to turn more “nationalist” (in Loriaux’s words) in the 1960s in
response to international and domestic conflict. Nationalism in
monetary affairs – refusal to address inflation in the key international
currency – brought down the Bretton Woods in 1971 (See Loriaux,
1991; and Helleiner, 1991). The demise of fixed exchanged rates
occurred within a context of rising cross-country capital flows.
Increased capital market interdependence, variable exchange rates
and the two oil shocks created high levels of exchange rate instability
throughout the seventies. The demise of fixed rates left the French
and Italian political economies in a difficult situation.
Indeed, French and Italian developmentalism had arisen within
the framework of a forgiving international monetary environment.
The possibility of multilateral ratification of change in fixed monetary
parities internationalised the inflation that developmentalism tended
to produce. But the post-1973 non-system of floating rates made
that kind of internationalisation impossible. The cost of price inflation
was borne entirely by the inflationary country’s balance of payments.
For trade dependent countries like France and Italy the cost was high.
Floating rates generated the threat of vicious circles of inflation and
currency depreciation. Inflation depleted the demand for French and
Italian exports. But the demand for certain imports, notably petroleum
and other raw materials bought in dollars, and proved insensitive to
price hikes occasioned by depreciation. Imported price hikes aggravated
inflation as they percolated through the economy, further sapping
market confidence in the currency.
119
As a consequence of exchange rate instability, trade balance rapidly
deteriorated during the early 1970s, while neither France or Italy
could attract enough foreign capital to repay their foreign debt.
This unbalance led to severe balance of payment crises during those
years. While the crisis of Fordism had put pressure on French and
Italian developmentalism (and state-led credit allocation) from the inside,
exchange rate instability put external pressures on both countries.
Of course, the balance of payment crisis was triggered by the 1973
oil shock, which followed a gradual rise in the price of natural
resources in the previous decades. The four-fold increase in oil prices
in the autumn of 1973 had a particularly strong impact on oildependent countries such as France and Italy, and created a huge
commercial deficit that was not compensated by capital inflows.
4.2.3 The first responses to the crisis: from monetary restriction
to strengthening the credit administered systems
The oil shock, the collapse of the Bretton Woods system in the early
seventies, along with the decline of the monetary hegemony exercised by
the United States made it impossible for France and Italy to continue
using inflationary growth strategies as they had done in the past, and, as
far as France is concerned, to use periodic aggressive devaluation to
adjust for inflation. The first policy response to the balance of payment
crisis was, therefore, was the resort to restrictive monetary policy in 1973.
That policy reversal did not last and was itself reversed as early as 1975.
It is not before the late 1970s and the early 1980s that restrictive
monetary policy made its come-back in both countries. The restrictive
monetary policy practiced in 1973-75 in both countries led to a
strengthening of state’s grip over credit allocation, giving birth to
“l’encadrement du credit”, or state-administered credit. This move
reflected the belief that further state control of credit and investment
could help shield the domestic economy from destabilising forces both
abroad and at home. Interestingly, state-administered credit did not
falter with the return to an expansionary monetary policy in 1975-76.
It survived its birth as a temporary adjustment tool, and actually came
to embody the paroxystic version of state-led credit allocation that had
been practiced since the late 1930s in both countries.
120
•
France
In France, the first reaction to the crisis was a restrictive monetary
policy. In late 1973, monetary market interest rates were raised to a
record 15%. The impact on French industry was dramatic: investment
in industry declined by 9.5% in 1975; that same year, bankruptcies
had increased by a fourth as compared to 1974. At the same time,
if inflation in 1975 was effectively lower than what it had been in
late 1973, it was still higher than France’s trade partners (notably
Germany). These results, together with the election of a new
president of the Republic in May 1974 (Valéry Giscard d’Estaing), put
an end to that short-lived restrictive monetary policy and led to a
Keynesian “relance”. Priorities were now set on revitalising domestic
demand, through an expansionary policy mix characterised by
(i) renewed public investments (and, therefore, rising fiscal deficits)
into industrial programs such as the nuclear power plant construction
program; and (ii) an expansionary monetary policy, with monetary
market interest rates falling from a maximum of 14% in 1974 to a
minimum of 6.5% in 1976.
Such a policy failed to improve a domestic demand that had been
durably affected by the uncertainties unleashed by high inflation rates
and exchange rate instability since the early 1970s. It did, however,
worsen the external balance. France’s trade balance deficits increased
in 1975, leading to the French franc’s exit from the “snake”70 and a
10% devaluation – which deepened the crisis by increasing inflation
without improving the trade balance. The deterioration of external
balance, together with a shift in internal politics (the demise of the
president’s Gaullist allies) led to another policy shift, this time towards
austerity, characterised by the Barre government’s decisions to remove
price controls in some sectors; provide tax incentives to encourage the
acquisition of shares (to stimulate the growth of financial markets and
decrease the dependence upon banks as a source of funding)71;
institute with large public firms development contracts that directly
tied state subsidies to market performance. Monetary policy was,
again, tightened to reach and maintain external balance.
70 The snake was the monetary system established in 1974 by members of the European
Community to shield their currencies from exchange rate instability. It consisted of a
loosely fixed exchange rate regime, where currencies were allowed to appreciate/
depreciate by a margin of 2.5%, then increased to 5%.
71 The “Monory package” of 1977-78, after the name of the Minister of the Economy.
121
The restrictive monetary policy of the early 1970s led to the
establishment of “l’encadrement du credit”, or administered credit,
which had its roots in the 1966-67 banking reforms (see previous
sections). In the previous years, traditional “developmental” policies
were seen to have met their limits, and French policy-makers renewed
the financing instruments at their disposal. First, the Pompidou
administration revived the Fonds de Développement Economique
et Social (FDES), whose importance had shrunk under De Gaulle
(Loriaux 1991). The Fund was mobilised to channel billions of francs
into key industries, such as steel and automobiles. Besides the FDES,
a series of new instruments were created in those years to channel funds
into ailing sectors or strategic firms: the Interministerial Committee for
Industrial Restructuring (Comité Interministériel pour les Restructurations
Industrielles, or CIRI), set up in 1974, whose mission was to help ailing
small and medium firms; the Interministerial Orientation Committee
for the Development of Strategic Industries (CODIS), which subsidised
investment in innovative technologies, especially at large firms;
the Institute for Industrial Development (Institut de Développement
Industriel, or IDI), whose mission was to help skill adjustment and job
transfers in declining industries; later, the Special Fund for Industrial
Adaptation (FSAI), set up in 1978 to support investment in regions
with high unemployment, which was particularly active in shipbuilding
and automobiles; the National Agency for the Promotion of Research
(ANVAR), whose mission was to support small and medium size firms
that invested in innovative products or technologies. Most of those
instruments were put to the service of an industrial policy that
had shifted from supporting national champions to creating and
sustaining “lame ducks”.
Secondly, administered credit took the form of administrative controls
and ceilings on the volume and price of credit. In other words,
through the various instruments mentioned above, the government
had in effect the power to set interest rates – and especially to set
favourable interest rates for the specific sectors or firms it aimed to
help or finance (the lame ducks). Moreover, the government imposed
a series of ceilings on the volume of credit to be offered by banks and
financial institutions; in effect, to support one sector it had only to lift
the restrictions imposed on lending to that sector. By the late 1970s,
therefore, banking and lending rates were mostly set by government
or government agencies. For instance, the interests earned by the
French savings banks on their savings deposits were set by decree
signed by the Minister of the Economy.
122
Industrial policy under De Gaulle involved the restructuring of large
firms through vertical integration and horizontal diversification.
Such policy was not limited to public firms; private firms were also
encouraged to grow through financial incentives: subsidies and loans
targeted to regional development, research, foreign exchange
guarantees… (Bellon 1980). In 1975, according to some estimates,
public support to business (including public purchases and direct aid)
amounted to 126 billion francs, 9% of French GDP (Bellon 1980).
In the seventies, the increasing reliance of the government on votes
of shopkeepers and small firms led to increased subsidies to small
firms. The Seventh Plan, for instance, set 816 million francs to be
allocated to SMEs.
The ultimate upturn of state-administered credit was the nationalisation,
in 1982, by the newly-appointed Socialist government, of 5 industrial
groups72, 39 banks73 and 2 financial firms (Compagnie financière
Paribas; Compagnie financière Suez). The 1982 law74 disposed the
nationalisation of all banks with deposits amounting to more than a
billion francs; in addition, the law suppressed private shareholdings
in state-owned banks (BNP, Société Générale, Crédit Lyonnais)75.
There had been a vivid debate, among Socialists, on the extent of
state control over the neo-nationalised firms (from 50 to 100%).
The 1982 nationalisations led, actually, to a variety of situations: some
firms were 100% controlled by the state; others were controlled by
the state, but with minority shareholders; yet other firms were
indirectly controlled by the state through other public firms (such as
the Banque Paribas, owned at 75% through the Compagnie
Financière de Paribas). As a whole, by the end of 1982, the public
banking sector included 146 banks and 157 financial firms (LacoueLabarthe, 2001). As a result of these nationalisations, by the end of
1982 89.7% of total deposits were held at state-owned banks; and
84.8% commercial lending and 82.5% of banking staff belonged
to the public sector (Lacoue-Labarthe 2001).
72 Compagnie générale d’électricité, Compagnie de Saint-Gobain, Péchiney Ugine-Kuhlmann,
Rhône-Poulenc SA, Thomson-Brandt.
73 Among those 39 banks stood merchant banks such as Banque Worms, Banque Rothschild,
Banque Hervet; large commercial banks such as Crédit du Nord, Crédit Commercial de
France (CCF), Crédit Industriel et commercial (CIC)…
74 Loi 82-155 of February 11, 1982.
75 Private shareholdings had been authorised by a 1973 law up to a 25% ceiling, for national
banks’ staff. The 1982 law led, therefore, to a re-nationalisation of national banks.
123
•
Italy
In Italy, a severe balance of payment crisis occurred in 1973, leading
to the signature, in early 1974, of a standby agreement between the
Italian government and the International Monetary Fund (IMF).
This agreement provided for a 1.2 billion dollar loan from the IMF to
Italy to solve its balance-of-payment crisis; in exchange, the Italian
government committed to limit the expansion of domestic lending
through the setting of a ceiling of 22,400 billion lire to the growth of
“total internal credit”76, a new target agreed upon by the IMF and
the Italian government. This agreement predictably led to an increase
in interest rates and a decrease in banks’ lending to firms; it also
– non incidentally – provoked the demise of the government that had
negotiated the agreement in March of 1974.
With the ceiling on total internal credit, the Bank of Italy, for the first
time since the 1950s, shifted its focus from interest rates to the
volume of lending in the economy; and it used a target for aggregate
lending to pursue a restrictive monetary policy. That landmark
change, however, did not last: in 1975, monetary policy turned
expansive again. Several factors explain this short-lived change in
monetary policy. First, new forms of shop-floor representation and
workers’ rights led to an overhaul of the scala mobile in 1975 and the
setting up of a Workers’ Statute, which indexed wages on inflation
for 90 % of workers. Plant-closure legislation was eliminated, and
firms’ ability to lay off workers for disciplinary reasons was virtually
abandoned. Labour activism led the central bank to expand credit by
the second half of 1970. According to Epstein and Schor, social
expenditures constituted a crucial link in the cycle of labour militancy
/ fiscal growth / monetary accommodation in the 1970s (Epstein and
Schor 1989). Secondly, the CTI target never represented the main
monetary instrument used by the Central Bank; the exchange rate
policy was that instrument. In those years, taking advantage of
the continuous devaluation of the dollar via-a-vis the deutchemark,
the Bank of Italy practiced a double-faced exchange rate policy:
devaluations vis-a-vis the deutschemark (the deutschemark area
represented Italy’s first export market) and stability, even slight
reevaluations with the dollar (the dollar area representing the
country’s primary import market).
76 Total internal credit was an aggregate measure that included private and public lending
to firms.
124
So, after one year of restrictive monetary policy, by 1975 monetary
policy became expansive again. However such expansion was entirely
absorbed by public finance needs, and did not alleviate lending
restrictions bearing on firms since the early 1970s. The opposite
happened: with the shift of objectives from stable interest rates to the
control over the volume of lending, rising public deficits automatically
led the central bank to increase constraints on lending (the
“massimale sugli impieghi”) and, therefore, reduce lending to large
firms. Interestingly, both the 1974 monetary restriction and the return
to monetary expansion worked towards the strengthening of
state-administered credit. Already in 1973 the Treasury circuit had
been strengthened with the twin imposition of ceilings on bank loans
and of portfolio constraints forcing banks to hold a percentage of
the increase in their deposits in fixed-rate securities77.
The portfolio constraint was at first set at 6% (at least) of funds
deposited in savings and current accounts; most of those funds were
supposed to go to bonds issued by IMI and IRI, but also those issued
by major public utilities (the state-owned electricity and oil concerns
– ENEL and ENI, respectively). The portfolio constraint was frequently
manipulated over the years: in 1975, 1976, 1978, 1979, 1980,
1981, 1982, the CICR regularly intervened to change the level and
the destination of constrained funds (see Fenucci, 1996: 102-106).
On average, more than a third of the increase of bank deposits was
destined to the acquisition of public securities. The destination varied
throughout the years; they included the IMI and IRI, CREDIOP, public
utilities, Treasury bonds, bonds issued by “special credit sections
for public works”, bonds issued to finance agricultural credit,
highways… Importantly, the Bank of Italy managed to have some
discretionary power over the distribution of securities. In effect, the
central bank acted as a merchant bank to the service of the Treasury.
The 1973 changes were aimed at insulating the bond market from
destabilising forces in the domestic and international economies.
They also led to a reorganisation of financial intermediation.
During the previous decade, the weight of banks in credit allocation
– especially ordinary banks – had markedly increased. Deposits as a
percentage of household financial savings rose from 27.9% in 1963 to
a peak of 55.4% in 1977 (Bank of Italy, Annual Report, various years).
77 CICR decision of June 18, 1973.
125
Increased banking intermediation was favoured by the central bank’s
supervision, which, especially in the late 1960s (under the governorship
of Guido Carli), loosely interpreted the law forbidding banks to engage
in medium-term lending (Nardozzi 1983). The portfolio constraint
reduced the interest differential between bonds and deposits, thereby
encouraging households to buy bank deposits. This created a kind of
“double intermediation” (Epstein and Schor 1989): banks collected
savings from households, and either invested those funds in public
bonds, or lent them to the Treasury and to special credit institutions,
who in turn funded firms’ financing needs. From 1972 to 1981 banks
supplied around 70% of the resources of special credit institutions.
The Italian Treasury circuit was thus markedly reinforced – and the
potential development of financial markets (where households and
firms could have exchanged bonds and other types of financial
instruments) was impaired.
The smooth working of the public overdraft economy (or, more
precisely, the continuous postponement of the crisis) was predicated
upon low interest rates and high inflation. The latter allowed
continuous nominal public deficits to be almost totally compensated
by the depreciation of the real value of financial assets (including
public bonds): although nominal public sector deficits remained high
during the late 1970s (they averaged –10% over the period 19751980), their real value became positive in 1976 and 1979, reaching +
2.3% of GDP in 1980 (against a nominal value of –8.6%)! Of course,
that same year the real value of households’ financial assets became
negative (at –0.7%), while their nominal value had been consistently
positive over the past decades. This paradoxical situation meant that
households were “penalised” for holding lending capacity, paying the
so-called “inflation tax” to borrowers. But not only did the inflation
tax not represent a sustainable solution to rising public deficits; it also
prevented solving the crisis of the Fordist production and
accumulation regime; and high inflation rates became a source of
concern for monetary authorities, who became more and more
sensitive to monetarist thinking.
Beyond these shifts in monetary policy, successive governments tried
in the second half of the 1970s to rationalise the industrial policy
framework, characterised by an overlap of subsidies and support
mechanisms and institutions. Renewed efforts were made to jumpstart industrial productivity.
126
A law passed in 1976 instituted a “Fondo nazionale per il credito
agevolato al settore industriale” (fund for facilitated credit to
industry), destined in priority to the Mezzogiorno78. That law integrated
existing mechanisms for “facilitated credit”. However, it borrowed
the traditional instruments for the management of subsidies: single
subsidies were decided by the Ministry of the Industry upon a
proposal by an ad hoc ministerial committee, then distributed
through special credit institutions.
In sum, the same vicious circle identified by Loriaux in France
(overdraft economy – moral hazard – administered credit – more
moral hazard) was at play in Italy. As De Cecco has argued, the 1970s
crisis increased even more the rigidity of the “Beneduce system”,
which “should have been declared obsolete ten years before.”,
adding that “the bailout of ailing industrial firms (did) weigh on the
financial system, as (did) the necessity to substitute private capitals
that had fled abroad with new loans guaranteed by the state so as to
avoid bankruptcy and unemployment. Inflation makes it convenient
for firms to grow debts and send their capital abroad; and the state
becomes indebted to maintain public and private employment”.
(De Cecco, 1997)
4.2.4 The deepening of the crisis and the definitive abandon
of administered credit
The macro and micro-economic situation in both France and Italy did
not improve during the 1970s. In 1975, the growth of the Italian
GDP became negative for the first time since the early 1940s: annual
growth rate that year reached -3.6%. In the successive years, economic
growth remained at low levels; industrial investment declined throughout
the 1970s, as did firms’ profitability. Inflation, in the meantime, kept
on rising – especially in Italy where it reached two-digit levels in the
late 1970s, substantially higher than other industrialised countries.
State-administered credit was clearly not a sustainable strategy.
78 D.P.R. n. 902, 1976.
127
Three other factors condemned state-administered credit as an adjustment
strategy in both France and Italy. First, the external pressure that had
appeared in the 1970s became a permanent threat to the two countries’
balance of payment, which significantly reduced monetary policy’s room
for manoeuvre. In the early 1980s, ‘reaganomics’ – i.e. the peculiar
combination of monetary rigor and deficit spending in the United States,
– raised interest rates globally79, together with the exchange value of the
dollar (which was still the currency of choice in international transactions).
Such trends reinforced the external pressures on French and Italian policy.
An expansive policy mix pursued in isolation had become almost impossible,
as the French learned in 1982: then the neo-Keynesian policy put in place
by the neo-elected Socialist president, Francois Mitterrand, was defeated
by world stagnation and capital outflows. According to Loriaux,
indeed, the external pressure had a decisive role in the dismantling of
administered credit systems: “because credit activism was abandoned almost
simultaneously in five such dissimilar countries (France, Japan, SouthKorea, Mexico, Spain) one can reasonably infer that the force driving the
process was common to all of them and must have had roots in the
evolution of the broader global political economy”(Loriaux, 1998a: 1).
This overemphasis of the external source of domestic crisis has been
criticised, especially, in France, by economists belonging to the regulatory
school (see Boyer, 1978; and Lipietz, 1984). According to them, inflation
and low growth were structurally produced by the crisis of the Fordist
accumulation regime (mentioned above), characterised by a crisis of
productivity, a shift in industrial relations and a shift in the industrial
structures of each country. These were not the result of an excess demand
and therefore could not be effectively addressed with the sole use of the
interest rate as an adjustment tool. These two explanations are not
exclusive one of the other; rather, it seems that the external and internal
causes worked together to the demise of state-administered credit.
A third factor behind the definitive abandon of administered credit was
the growing importance of financial markets. In particular, fixed interest
rates became increasingly unsustainable in the face of market conditions
characterised by the offer of variable rates financial instruments; and, in a
context of high inflation, the need from public financial institutions (Treasury,
banks, special credit institutions in Italy) to finance their loans with (rising)
variable rates. As a consequence, in Italy fixed rates led to shorter maturities
on loans offered by SCIs (since they could not commit themselves to the
long-term), and further weakened the financial situation of indebted firms.
79 Since the US were a large and powerful economy with a sound financial reputation,
reaganomics created a high level of demand for money to the world’s markets, which led
other industrial countries to increase interest rates.
128
4.3
Shifts in regulatory regimes and the end of
credit activism
The limitations of early state-led responses to the crisis (the strengthening of
state-administered credit), led to the consider consideration of alternative
solutions – and in particular the dismantling of state credit. The new
strategy was implemented in the 1980s: it entailed radical shifts in the
macroeconomic as well as the industrial policy regimes. These shifts were
radical and systemic: they concerned all aspects of economic policy.
4.3.1 The transformation of industrial policy
•
France
As seen above, under Valéry Giscard D’Estaing’s presidency, industrial
policy was given sensibly different goals than those that had prevailed
in the previous decades. The priority was, especially after 1977 and
the failure of Keynesian demand-led policies, to encourage national
champions only in certain segments (créneaux) where they were
already competitive; and to re-deploy resources towards stronger
groups. With the Socialists’ arrival in power in 1981, and until the
return of a right-wing government in 1986, the state shifted from
“promoting rising sectors and leaving declining sectors to the market,
to rescuing the declining sectors and leaving rising sectors to the
market” (Schmidt 1996; p.85). The first Socialist government relied on
direct state intervention to fulfil their goals – with the nationalisation
of all large banks and industrial firms. At that time indeed, French
firms were both highly indebted and not profitable; therefore, credit
policy could not be mobilised to push for the structural adjustments
that were needed – hence the resort to share ownership by the state.
But nationalisation did not mean that the State should assume the
strategic direction of large firms; its intervention was circumscribed to
re-capitalisation and protection from market forces. In particular, the
state reduced firm debt and funded industrial restructuring programs
that lowered production and operating costs (see Hancké, 2002).
Moreover, nationalised firms did not remain within the orbit of the
public sector for a long time. In 1986, the right-wing government
that won the elections launched an ambitious privatisation program.
129
The first privatisation law80 listed 65 firms to be privatised within a
5-year period. That list included all banks (with the exception of the
Banque de France) and insurance companies that had been
nationalised in 1945 and 1982. Half of those firms were effectively
privatised before the fall of the centre-right government after the 1988
general elections: three large industrial firms (Saint-Gobain, CGE-Alcatel,
Matra); two small banks and six large banking groups (Paribas,
Sogénal, Société Générale, the Crédit Commercial de France, Suez,
CNCA – see next chapter for more details).
Loriaux, among others, claims that these shifts in industrial policy were
all inspired by the same developmentalist ideology, still widespread in
policy circles (see Loriaux, 1991; also Schmidt, 1996). What changed
in those years was not the ultimate goals but the instruments of
developmentalism: from budget-funded subsidies in the 1960s to bankbased credit controls in the 1970s to state ownership in the 1980s.
As Loriaux further argued, “the instrumental change we observe
must be weighed against the permanence of a developmentalist
culture and the strength of representation of that culture at centres
of economic and political decision-making” (Loriaux, 2002). Even the
Barre government’s apparent pro-market policies did not mark the
end of interventionism, just a different form of interventionism.
•
Italy
In Italy, a first attempt at rationalising the fragmented industrial
policy-making institutional framework took place in 1977 with the
law n.675, which set up the CIPI (Committee for the Coordination of
Industrial Policy), whose mission was to plan and coordinate the
state’s policies towards industry. That attempt failed for many
reasons, two of which have to do with the CIPI’s weak administrative
influence (being located at the weak Budget Ministry) and its “low
insulation from politics” (Ferrara 1989) especially from parliamentary
politics. State incapacity to design and implement a reform of
industrial policy contrasted with public enterprises’ determination to
lead the restructuring process throughout the 1980s. Privatisation took
off in 1983, the year in which, for the first time since the war, the
purchase of enterprises by the IRI holding group was inferior in
volume to the sale of enterprises (the ratio was 1 to 20).
80 The law of July 2, 1986; followed by a law of August 6th, 1986.
130
By the mid-1980s, policy-makers shared the concerns of top-managers
of public companies towards restoring profitability to large firms
through restructuring. As a report presented in the Italian Senate put
it, “economic development cannot be pursued through demand-led
policies, with industrial policy taking the back seat to ensure the
satisfaction of demand. Now industrial policy must take the driver’s
seat [in the absence of demand-led policies]”81. The emphasis was
put on a supply-side industrial policy. In 2000, the IRI was finally
liquidated, and its remaining shareholdings (in the national carrier,
Alitalia; the public TV holding, Rai; and the manufacturing firm,
Finmeccanica) were passed on to the Treasury.
4.3.2 The transformation of monetary policy
During the 1980s, in both countries, a profound transformation occurred
in the realm of monetary policy. There are different interpretations of
such change. According to Epstein and Schor, foreign exchange crises
represented “convenient” opportunities for the central bank to engage
in restrictive policies (Epstein and Schor), in contrast to the structural
thesis developed by Loriaux et al (1997). What is not discussed, however, is
that the aims of monetary policy changed dramatically during that time.
Between 1979 and 1980, both countries entered the European Monetary
System, which had been conceived as a looser and smaller Bretton-Woods
regime anchored on the deutschemark (beyond the ECU). Both France
and Italy adhered, it seems, to impose external discipline on domestic
actors (firms and policy-makers).
The transformation of the aims of monetary policy was simultaneous to
a change in the institutional framework of policy-making. The latter
consisted first and foremost in the emancipation of the Central bank
from the sway of the Treasury; and in the subsequent redistribution of
regulatory powers with the creation of autonomous regulatory
authorities. The latter were inextricably linked to the content of monetary
policy since, as Epstein and Schor have shown, independent central
banks pursue more restrictive policies and are associated with lower rates
of inflation – since they are disenfranchised from the interests of labour
unions and labour parties and more prone to be dominated by bankers
and investors (Epstein and Schor 1986).
81 Cited in De Rosa (1988).
131
•
France
To combat the vicious circles associated with the overdraft economy,
French authorities started, by 1974, assigning a high priority to
stabilising the currency. France’s 1979 decision to join the European
Monetary System was motivated by the government’s new monetary
policy objective: to reduce inflation by pegging the franc to the Deutsche
Mark. As argued by Loriaux and others, for France to regain control
over its economy, it had paradoxically to relinquish its independence
in monetary policy. The French consolidated their commitment to
currency strength in the early 1980s following three devaluations
(within the European Monetary System). The shift of emphasis in
monetary policy brought reform to French finances. In the mid-1980s,
under a Socialist government, France implemented far-reaching
liberalising reforms in order, first, to wean business off state-controlled
bank credit and direct it to the market for stocks and bonds and to
international lenders, and, second, to make the French economy
attractive to foreign capital so that foreign investment might compensate
for the reduction in state-sponsored or supplied funds. As Loriaux put
it, “France (and other nations) multiplied liberalising reforms to make
its economy more appealing to – and better able to compete for –
international capital.” (Loriaux 2003) The radical character of the
reforms reflects the perceived need to eradicate moral hazard
through the alteration of expectations by economic agents.
Such changes in strategy entailed change in instruments. Up until the
early1980s, monetary policy instruments, such as interest rate policy,
were mobilised to sustain the state’s industrial policy. With the increased
pressures associated with the “external constraint”, in 1982-83, interest
rate policy was assigned to the defence of the exchange rate of the
French franc – with the “franc fort” policy, in other words the alignment
of the franc on the Deutsche Mark. The nascent money market became
the principal locus of central bank efforts to control interest rates.
Institutional changes accompanied this new policy, with the central
bank gradually leaving the orbit of the Treasury, which had, until 1990,
“legislative power” over monetary affairs. The Banque de France gained
independence in 199382 and, simultaneously, control over monetary
policy – which had for long been abandoned as an autonomous
policy instrument. In 2000 most of the Banque de France’s monetary
powers were surrendered to the European Central Bank.
82 With the law of August 4th, 1993.
132
As for industrial policy, it has been argued that the adoption of a
restrictive policy-mix, first under Giscard, then under Mitterrand,
was less a conversion to supply-side macroeconomics than the
attempt to restore state control over the economy, in a dirigiste spirit
(Schmidt, 2001). What matters here, however, is the outcome of such
a strategic shift: a profound change in the instrumental and
institutional nature of monetary policy in France.
•
Italy
In Italy, the institutional features of monetary policy-making were
changed, too. The major change occurred in 1981 with the
emancipation of the Bank of Italy from the Treasury, the so-called
“divorce”. Until then, the central bank was statutorily obligated to
finance all fiscal deficits; the 1981 reform lifted that obligation.
During the 1950s and 1960s, under the governorship of Guido Carli,
the Bank of Italy had been able to accommodate credit demands
without risking excessive inflation and real wage increases – since, as
Epstein and Schor argue, the working class was in a weak position
during those years. The Bank did this by pegging the interest rate on
government securities until 1969, after which it targeted monetary
and credit aggregates. The central bank had for long voiced its desire
for independence. Two important steps had already been taken in
that direction: in 1969, the Bank of Italy was freed from unlimited
fixed-rate financing of the Treasury. More precisely, the central bank
remained the residual acquirer of unsold BOTs; but it was freed from
selling and acquiring, on the secondary market, those bills which
were above the required reserve level for banks. Treasury bills, in other
words, lost their assimilation to the monetary basis.
The second step took root in the failure of the 1969 decision to create
an effective market for Treasury bills. Thus a ministerial decree of April
1975, acting on the advice of the CICR (Interministerial Committee
for Credit and Savings) of the same year, changed the rules of auction
in tendering Treasury bills. From then on, access to auction was extended
to non-bank financial intermediaries; the central bank, while remaining
the residual acquirer of tendered bills, could compete with other
auction members; finally, the price set by decree would become
merely indicative, in effect giving the Bank of Italy the power to set
the auction price.
133
The 1975 reform was a major step both towards central bank
independence and towards the revamp of the Italian financial system.
The creation of a private market in Treasury securities provided a
mechanism for bond-financing of government deficits; at the same
time, it paved the way for the growing influence of non-bank actors
on financial intermediation.
These steps were, however, not enough, from the central bank’s
viewpoint. Indeed, in its view, “excessive” public expenditures led
to money growth and, under monetarist assumptions, to inflation.
Government deficits averaged 12.5% of GDP in the 1970s, against
5.8% in the 1960s; in 1981, they reached 11.8%, compared to an
OECD average of 2.2% (Monti et al., 1983). Government spending
did not only create inflationary pressures. It also drowned out private
investment: in 1978, public sector borrowing absorbed 70% of total
domestic credit (Monti et al., 1983). Deficits were consistently criticised
by the Bank of Italy (voiced in its successive Annual Reports) and led
to a renewed claim for independence from its part. A few months
before the divorce, Governor Ciampi pointed out that “the
dimensions reached by public deficits set fiscal policy on a collision
course with monetary policy […]; the broad possibility, for the
Treasury, to access the [central bank]’s financing increases […] the risk
that the control of monetary aggregates might lose its effectiveness
in the short run83.” Similar views were expressed by the Monti
commission, which was set up in 1981 by the Treasury to study the
credit and financial system.
However, Epstein and Schor convincingly demonstrate the weakness
of those arguments. First, after 1975 bond-financing substituted
monetisation of the deficit – and central banks public debt holdings
decreased. Secondly, private investment was not much crowded out
– as a growing share of increased expenditure, after 1974, went to
investment in firms, through subsidies and public financing (for a
similar argument, see Giannola and Imbriani, 1992). Finally, the
burden created by debt servicing was balanced by inflation, which led
to negative real interest payments to bond-holders during the 1970s.
This represented, as Epstein and Schor argue, hidden taxation on
holders of government securities (Epstein and Schor 1989).
83 Carlo Azeglio Ciampi, “Tra mercato e controlli: aspetti operativi della politica monetaria”,
Intervention by the Governor of the central bank at the banks’ association, Central
institute of banks and bankers, Rome, 1981 – quoted in Monti and Onado (1989).
134
A more important factor leading to the divorce was related to
financial – and in particular banking - intermediation. As mentioned
above, the imposition of portfolio constraints and ceilings on bank
loans led to the subjection of banks to state financing needs.
This, according to Epstein and Schor, was equivalent to financial
disintermediation – reflected in the sharp fall of bank loans to deposit
ratios (Epstein and Schor 1989). This interpretation is questionable.
First of all, quantitatively the share of bank deposits in households’
financial portfolio was still higher in 1980 (at 45% of total assets)
than its level of 1970 (36%)? its 1965 level (30%). Secondly, as seen
above, banks still fulfiled a critical intermediation function (at least
until the late 1970s – early 1980s), although reduced when compared
with the previous decade: instead of transforming household savings
into lending to firms, banks channelled the former to the Treasury.
Rather than disintermediation, this trend could be termed “dependent”
or “state-led” intermediation – a reinforcement of the Italian Treasury
circuit. In fact, during the 1970s the banking sector was solicited by
the central bank to compensate for the collapse of the bond market;
during that decade banks became almost the sole collectors of
savings in the country.
However, that interpretation was widespread among the Bank of
Italy, the Monti Commission and large commercial and savings banks
by 1981. And it became more realistic after that, when deposits started
losing their dominant position in household financial portfolios.
Yet deposit disintermediation, owed more to the start-up growth of the
bond market (unleashed by the 1975 decision mentioned above) than
to the strengthening of the Treasury circuit. Deposit disintermediation
was, in fact, the direct outcome of a consistent policy aimed at
sustaining the growth of the bond and, later on, the stock market.
Disintermediation was assumed to erode banks’ profitability. In 1980,
the Bank of Italy noted in its annual report that “the circumstances
that led to the widening of the interest rate spread might not recur.
If they do not, the decline in intermediation will have adverse effects
on banks’ profits” (Bank o Italy 1980: 97). However, during the 1970s
banks had refrained from raising interests paid on deposits, keeping
a profitable interest margin.
135
Perhaps more importantly, as Epstein and Schor point out, the decline
in intermediation might be circumscribed to a handful of large,
powerful banks, leaving aggregate profitability levels unchanged
(Epstein and Schor 1989). As the 1980 Bank of Italy annual report
noted, “the decline in intermediation affected most of all the three
major commercial banks and the two largest savings banks” (Bank of
Italy 1980: 102). From the central bank’s point of view, banking
disintermediation was a complex issue: on the one hand, it led to the
weakening of its main constituency and eroded its power of control
over a sizeable part of the credit system; on the other hand, the
marketisation of government deficits was seen as a powerful
incentive to curb excessive public spending, and therefore to free
monetary policy from it subjection to the Treasury’s will. In any case,
both elements pleaded in favour of the divorce – and, in the medium
term, the ending of the dismantlement of the Treasury circuit. It is
important to note, however, that the Bank of Italy’s ambiguous
attitude towards banking disintermediation has persisted until today.
With the 1981 divorce, the Bank of Italy was freed from the obligation
to provide unlimited financing. Two elements, nonetheless, limited
that independence. First, the Treasury’s ability to set floor prices on
the bills it issued, constrained the Bank of Italy’s interest-rate policy
and allowed de facto the Treasury to continue re-financing its debt
(Locke ). Secondly, the Treasury could still force monetary financing
through authorised overdraft of its account at the central bank84.
However, the divorce effectively put an end to automatic monetary
financing of government deficits. In addition, the divorce marked a
return to the use of interest rates as an adjustment tool, this time in
a market context. In fact, the divorce was linked to a broader strategy
aimed at increasing the market’s role in the functioning of the credit
system. As the director of the central bank, Lamberto Dini, said in
1980: “the full re-appropriation of monetary basis as an instrument
for indirect credit control will allow the dismantlement of administrative
constraints now imposed on the credit system”85.
84 Overdraft was authorised up to 14 percent of each year’s government expenditures;
additional overdraft may be granted by the Parliament (Epstein and Schor 1989).
85 L. Dini, “Politica monetaria, disavanzo pubblico e fenomeni di ‘crowding out’” in Bancaria,
1980, n.12, p.1242.
136
The changes in monetary policy actually accelerated the crisis of the
public overdraft economy – which was certainly one of the
motivations behind monetary policy-makers’ determination to pursue
an autonomous interest rate policy. While nominal public sector
borrowing needs were consistently high during the1980s (fluctuating
between 11% and 13.5%), their real value mechanically rose with
disinflation and rising real interest rates: from -1.6% of GDP in 1981,
it reached -2.6% in 1982, -4.3% in 1983, -6.4% in 1984, -6.6% in
1985, to a maximum of -8.5% of GDP in 1986 – while private firms
real borrowing needs reached a maximum in 1985 at -3.5% of
GDP86, and nominal values started decreasing in 1981.
4.3.3 Changes in financial regulation
•
Changes in banking regulation
In both countries, together with monetary and industrial policy, the
financial regulatory regime underwent dramatic changes during the
1980s. State-administered credit was definitely abandoned as a
permanent feature of financial regulation87. Loan ceilings were
abolished, portfolio constrains were lifted and functioning financial
markets were established with the support of the state.
In Italy, during the 1980s, Treasury bills and state bonds gradually
crowded out bank deposits in households’ financial portfolios: the
latter represented, in 1975, 50% of households’ total financial assets
(other liquid assets accounted for a further 20%); that number
decreased to 45% in 1980; 34% in 1985; 26% in 1990; 25% in
1995; and less than 18% in 2000. In the meantime, Treasury bills (BOT)
rose from 0% in 1975 to 9% in 1980 and 13% in 1985 and 12.5% in
1990. They lost their attractiveness in the 1990s, with the competition
of stocks and shares. Treasury and public bonds rose in the late
1980s: they represented 13% of households’ total financial assets in
1975; 7% in 198088; 17% in 1985; 18% in 1990; 20% in 1995.
86 Source: Bank of Italy, Annual Report, various years.
87 As a top manager at the French central bank said in 1985, “l’encadrement du credit”
could retain its use solely as a temporary instrument.
88 The 1975-1980 period marked a flexion in state bonds’ attractiveness for reasons
explained above, i.e. high inflation and negative interest rates; the same period saw, as a
response by the state, a more frequent resort to Treasury bills (BOT).
137
In France, the 1982 nationalisations wave, mentioned above,
represented the last offshoot of developmentalist industrial policies –
especially in the field of credit and banking. However, two aspects of
the nationalisation process and its outcome seem to point to the
opposite consideration: namely, and quite paradoxically, the 1982
nationalisation wave constituted the first step towards the
dismantling of both state-administered credit and state-led industrial
policies. First of all, the continuation of restrictive monetary policies
severely constrained the extent to which the state could use its newly
acquired banks to lend cheap money. Secondly, as Lacoue-Labarthe
argues, there was no fully-fledged nationalisation of credit:
In 1986, the former Minister of the Economy, Pierre Bérégovoy wrote
in the foreword of the “White Book” on the reform of financing
of the economy (Livre blanc sur le financement de l’économie) that:
“money must be mobile; then its cost is lowered, with the elimination
of rents. Therefore, it becomes possible to clarify the role of the state
by re-focusing its intervention on true priorities and by circumscribing
its regulatory intervention to the general organisation and monitoring
of capital markets”.
•
State-supported rise of capital markets
In France, the state had to intervene repetitively to encourage the use
of market investment instruments, such as mutual funds (in French,
fonds communs de placement, or FCP) and investment funds (in
French, société d’investissement à capital variable, or SICAV). FCPs
and SICAVs were created in 195789 as a by-product of a reform aimed
at fostering workers’ participation in firms’ benefits. They were not
yet available until a 1963 decree90. It was not, however, until the late
1970s that FCPs and SICAVs became widely diffused, thanks to a
favourable fiscal regime put in place by the government under
Minister Monory91.
89 Law of June 26, 1957.
90 Decree of September 20, 1963.
91 Law of July 13, 1979; and decree of september 27, 1979.
138
4.4
Discussion
The dismantlement of state-administered credit lasted several years. It began
in the late 1970s with the definitive adoption of restrictive monetary
policies in both countries and the increased reliance on financial market
instruments to coordinate credit allocation, and lasted until the mid-1980s,
with the lift of price and volume controls and the de-segmentation of
banking. Such a change in the broad institutional environment of savings
banks led to a profound transformation of the sets (or matrixes) of
constraints and incentives facing savings banks and, therefore, shaped
banks’ behaviour.
The French and Italian state-administered credit systems created two sets
of constraints and incentives: one general (common to all banks and
banking categories) and one specific to savings banks. The general matrix
of constraints and incentives consisted of four elements. First, functional
specialisation led banks to focus much more on liabilities than on assets;
even if restrictions on medium and long-term lending were loosened
throughout the years, they did not allow banks to expand their lending
business in a significant way. Secondly, functional specialisation, state
support (state funding, subsidies, guarantees) and accommodating
monetary policies discouraged the development of risk-management
capabilities. This is the meaning of moral hazard: banks had the certainty
of being refinanced or rescued by state institutions, and therefore did
not have to pay particular attention to the risk of their endeavours.
Third, functional specialisation and market segmentation constrained and
discouraged competitive behaviour. Both on a territorial and a sector
basis, banks or groups of banks relied on captive clienteles and did not,
with rare exceptions, face the competitive pressures inherent to markets.
Fourth, price and volume controls and fixed rates dis-incentivised profitmaximisation strategies and de-emphasised risk-management.
In addition to this general set of constraints and incentives, French and
Italian savings banks faced specific constraints and incentives. First, because
of their institutionalised role as stabilisers of the banking system (through
their high number of depositors) and of specific incentives (fiscal privileges
on savings accounts), savings banks were even less focused on assets and
more on liabilities than other types of banks. State-centralised or controlled
intermediation meant that savings banks did not have to care much about
the use of funds they were collecting. Secondly, the state and political
control (direct or indirect) over savings banks considerably restricted the
latter’s margin for managerial manoeuvre.
139
This is especially true when comparing savings banks with other banks,
even with those commercial banks in the orbit of the public sector (such as
the commercial banks nationalised in 1982 in France). Importantly, these
specific constraints and incentives created by savings banks’ broad
institutional environment were reinforced by savings banks’ own history,
characterised by cautious asset management and not-for profit business
goals (see previous chapter).
The dismantling of state-administered credit in both France and Italy led
to a complete upheaval of those matrixes of constraints and incentives.
In the early 1980s, savings banks in both countries faced a completely
transformed set of constraints and incentives that irrevocably altered
their future expectations and – this is the argument developed in the
next chapter – had a profound impact on savings banks’ strategies.
Three elements stand out for their importance. First, the abandonment of
accommodating monetary policies and the lift of price and volume
controls created incentives for banks to develop risk-management
capabilities. The shift in monetary policy put an end to moral hazard;
banks lost the certainty of being refinanced and rescued by the state for
having engaged in risky activities. Banks became responsible for setting
the price and volume of their products and services, which could do
nothing but change their way of doing business. Secondly, the shift from
structural to prudential regulation put greater emphasis on banks’
solvability and patrimonial ratios. As a consequence, banks (and banking
regulators) started to pay much closer attention to their levels of equity
and their exposure to risk on the one hand; and to the issue of ownership
and the sources of re-capitalisation on the other hand. Third, market
de-segmentation and functional de-specialisation led to a rapid increase
of competitive pressures affecting banks, and questioned the passive
strategies followed in the past, which had been predicated upon stable
market shares and captive clientele.
Importantly, these changes in the general matrix of constraints and incentives
occurred prior to changes in the specific constraints and incentives facing
savings banks. The next chapter will show how savings banks adjusted to
those changes in their macro and micro environment by provoking
regulatory change and trying to shape its outcome in a way favourable to
their long-term strategies.
140
5. THE REGULATORY
‘NORMALISATION’
OF SAVINGS BANKS
5.1
Introduction
In the late 1970s – early 1980s, French and Italian savings banks were still
regulated by laws from the 1930s and 1940s – laws that had been
enacted with the specific purpose of avoiding a repetition of the crisis of
the 1920s and 1930s.
The 1980s and 1990s, by contrast, are characterised by “paradigmatic
shifts”92 in banking regulation in both countries –in that period the
existing regulatory paradigm (market segmentation, credit ceilings,
importance of public banks) was replaced by a new one (based on market
de-segmentation, lift of administrative controls, introduction of
prudential regulation, privatisation of public banks) (see Moran, 1991 for
an overview). In that sense the reforms of savings banks93 have to be
linked with the quasi-simultaneous reforms of the banking sector as a
whole: in France, the two important periods of reform of savings banks
were 198394 and 199995, while the laws of 198496, 199197 and 199698
changed the regulatory regime of the whole banking sector. In Italy, the
key reforms of the savings banks sub-sector occurred in 199099 and
1998, while in 1993 and 1994 new laws were enacted concerning the
banking system as a whole.
92 According to Peter Hall’s classic distinction between the three orders of policy change
(Hall 1986).
93 Here savings banks are not taken as a simple proxy of the banking system as a whole, but
as an analytical tool to understand the evolution of the two systems.
94 Loi n.83-557 du 1er Juillet 1983, “Loi portant réforme des caisses d’épargne et de prévoyance”.
95 Loi n.99-352 du 25 Juin 1999, “Loi relative à l’épargne et à la sécurité financière”.
96 Loi n.84-46 du 24 Janvier 1984, “Loi relative à l’activité et au contrôle des établissements
de crédit”.
97 Loi n.91-716 du 26 Juillet 1991.
98 Loi n.96-597 du 2 Juillet 1996, “Loi de modernisation des activités financières”.
99 Legge Delega n.30 Luglio 1990, followed by the decree of November 1990.
141
More importantly, the shift in savings banks’ regulatory regimes occurred
against the twin background of the dismantling of state-administered
credit, analysed in chapter 4; and of savings banks’ growing demand for
change, mentioned in chapter 3. The present chapter will focus on
regulatory reform to address the main research questions laid out in
chapter 2100. First, this chapter will compare savings banks’ regulatory
reform process and outcomes in France and Italy. The research will seek
to establish whether similar shifts in the macroeconomic environment,
occurring in similar policy regimes (state-administered credit) lead to
similar policy outcomes. Secondly, the chapter will assess whether
potential differences in regulatory outcomes can be attributed to
institutional differences. If regulatory changes simply translate or reflect
changes in macroeconomic policy, then cross-country differences in
regulatory outcome must be attributed to institutional rigidities. If, by
contrast, regulatory changes incorporate actors’ strategies, then different
outcomes might be linked to different strategies as well.
Findings have been regrouped under two headings. The first part
analyses the regulatory changes and their broader meaning for the two
countries’ banking system. Three main changes have been analysed:
changes in savings banks’ legal status, changes in the structure of the
savings banks sector, and changes in the operational scope of savings
banks. The second part analyses the causes of such changes. The third
part discusses the findings.
100 This chapter will focus on changes in the legal regime of savings banks, paying thus less
attention to other types of regulatory changes – mainly, individual and general decisions
taken by regulatory authorities such as the central banks and the regulatory bodies
specialised in banking regulation . Legal changes are emphasised for three reasons: (i) the
1983 and 1999 legal reforms in France, and the 1990 and 1998 legal reforms in Italy
did represent landmark changes in the regulatory environment of savings banks – in
particular with regard to their legal definition, their status and ownership, and the scope
of their operations; (ii) these reforms constituted, along with general banking reforms
which accompanied or preceded them, the first large-scale regulatory change at the
legislative level since the 30s and 40s; (iii) as legislative reforms, they gave rise to an
important public debate, which makes it easier for the observer to understand the
dynamics of the reform and the stakes at play. Of course sub-legal regulatory changes will
also be addressed – since some of them had an importance of their own (such as the
“Piano Sportelli” decision of the Italian Governmental Committee for Credit and Savings in
1978, or the various decisions on the “status-type” of savings banks taken by the French
regulatory bodies during the 1970s), and interacted with legal reforms in ways that are
relevant to the present study. But for reasons of space they will not be covered exhaustively.
142
5.2
Changes in the regulatory regime
The changes brought about in the 1980s and the 1990s by law-makers
to the regulatory regimes of savings banks touched on all aspects of
regulation. In both countries, however, three elements of change stand
out: the transformation of savings banks’ legal status, the re-organisation
of the sector and the (further) de-segmentation of the banking market.
5.2.1 Statutory ‘normalisation’
The outset of the reform period – the early 1980s in France, the mid-1980s
in Italy – was characterised by a profusion of legal categories of banks on the
one hand, and the great number of statutory public banks, on the other.
In France, by the early 1980s there were many categories of banks (from
savings banks to cooperatives, to the Crédit Agricole, which had a status
of its own, and to the banques d’affaires) legally recognised. In Italy two
broad categories (commercial banks and special credit institutions)
included in fact more than two dozen sub-categories, which entailed
different governance and ownership structures. Commercial banks
included: savings banks; public credit institutions (or Istituti di credito di
diritto pubblico, which included several of the largest Italian banks: Banco
di Napoli, Banco di Sicilia, Banca Nazionale del Lavoro, Istituto San Paolo di
Torino, Monte dei Paschi di Siena, Banco di Sardegna)101; national interest
banks (Banche di interesse nazionale, or BIN, including Banca commerciale
italiana, Banco di Roma, Credito italiano)102; the Banche Popolari103;
the Casse rurali e artigiane104; the Monti di credito su pegno105; and the
commercial banks stricto sensu (private firms). Special credit institutions
included: the Istituto Mobiliare Italiano, or IMI; Mediobanca106;
Interbanca and Efibanca; Centrobanca107; and the IRI as well, which
performed some credit functions.
101 These banks were public entities (Foundations), owned by the government and managed
by directors appointed by the Treasury.
102 As seen in chapter 4, the BIN were owned by the Istituto per la Ricostruzione Industriale,
or IRI, the giant public holding created in the 1930s, which managed state shareholdings.
The BIN were above all used to finance the hundreds of firms in which IRI was present.
103 The Banche Popolari were cooperative banks with a peculiarity: although, as with other
cooperatives, equity was unlimited, they had limited liability.
104 Cooperative banks.
105 Credit institutions which used to specialise in pawn-broking and small scale lending
against mobile guarantees.
106 Mediobanca is considered to have been Italy’s sole true merchant bank up until the 1990s.
107 A kind of giro institution for the cooperative banks.
143
Among these banks the biggest (in terms of assets) were either public in
status or belonged to the public sector largo sensu (being controlled
directly or indirectly by the State or para-statal institutions such as the IRI).
Savings banks held a special position, in that they were independent
entities covered by public laws. But the biggest among them (Cassa di
Risparmio delle Provincie Lombarde, Cassa di Risparmio di Venezia, Cassa
di Risparmio di Torino) were controlled by political parties, especially the
Christian Democrats (through the representatives of local governments
on their boards, and the director and vice-director appointed by the
Treasury). In France the government had launched in 1982 the second
largest nationalisation wave in the country’s history, after that of the
immediate post-war. Several dozens of firms went under state control,
representing 11% of the country’s GDP108. Among them were 5 large
banks and credit institutions (see introduction).
The regulatory reforms of 1983 in France and 1990 in Italy were first
aimed at streamlining banking statuses and legal categories, which were
a prerequisite for the restructuring of the whole sector (both in terms of
the legal impediments to restructuring posed by the variety of legal
categories, and of the various ownership structures embodied in those
statuses). They led to a “normalisation” of the statuses of savings banks
and a progressive reduction of the number of legal categories of banks.
•
France
In the French case, the first thing the 1983 law did was to re-formulate
the statutory identity of savings banks in order to bring it closer to
commercial banks’. For the first time, article 1 of the law defined the
Caisses d’Épargne as ‘établissements de crédit’109. This concept was
of course the French translation of the ‘credit institutions’ introduced
by the EC’ First Banking Directive of 1977.
108 See Loriaux (1991).
109 “Les caisses d'épargne et de prévoyance sont des établissements de crédit à but non
lucratif. Elles ont pour objet la promotion et la collecte de l'épargne ainsi que le
développement de la prévoyance pour satisfaire notamment les besoins collectifs et
familiaux. A cet effet, elles sont habilitées à recevoir des dépôts, à consentir des crédits et
à faire des opérations de banque au profit des personnes physiques, ainsi que des
organismes n'exerçant pas, à titre principal, une activité industrielle ou commerciale.
Elles sont habilitées à consentir des prêts, notamment aux collectivités et établissements
publics, ainsi qu'aux organismes bénéficiant de leur garantie.” (Article 1, Loi 83-557)
144
Importantly, the 1984 banking law then extended the name to all
banks, and thus completed the ‘normalisation’ of legal categories
initiated in 1983110.
The mere definition of savings banks as credit institutions raised a
number of issues, however. First, did it mean that savings banks
would be submitted to standard credit regulations (especially in terms
of credit ceilings then in vigor)? Secondly, were their banking
operations to be submitted to the banking regulatory authority, the
Commission de contrôle des banques like other credit institutions?
Those questions were left unanswered in the design of the law111,
which reflected the ambiguity of the government’s view about the
role and function of savings banks within the French credit system.
In particular, the issue of whether savings banks belonged to the
public or private sphere was not solved – in fact it was not even raised
during the debates over the law.
The issue was not solved until 1999, when a second major reform
transformed French savings banks into a cooperative network – thus
submitting their governance to the legal status of cooperatives112,
while most aspects pertaining to banking activities fell under
commercial law113. The cooperative status seemed to stem directly
from their fulfiling national interest missions114. But some observers
and actors of the banking regime disagreed. For instance, Senator
Marini voiced his preference for listing savings banks’ stocks, like their
Italian counterparts115; and Jacques Mayoux, a French banker, said
that privatisation would have been a better solution, since it would
have allowed mergers with commercial banks and equity financing on
the market116.
110 However, de Juvigny argued that the 1984 banking law achieved only “moderate
universality” – since it did not apply to the CDC or the postal financial services, and since
certain categories of banks (mainly the cooperative ones) did not fall under the regulatory
authorities for access to ownership (de Juvigny, 1990).
111 See also Cluzel (1984), p.120, for similar remarks.
112 which is the Loi 47-1775 du 10 septembre 1947.
113 Loi 66-537 du 24 juillet 1966 sur les sociétés commerciales.
114 Article 1 of the law read: “Le réseau des caisses d'épargne remplit des missions d'intérêt
général”
115 See “Caisses d’Épargne: une réforme insuffisante”, in Option Finance, July 5th, 1999.
116 See Option Finance, january 18, 1999.
145
•
Italy
In the Italian case, the statutory issue was even more salient. The 1990
law transformed the Casse di Risparmio in joint-stock companies, whose
activities fell under the regulatory regime in vigor for commercial
banks (and integrated in the 1993 Testo unico). However, they were
100% owned by a new entity set up by the law, the Fondazioni.
These were public, non-profit entities owned by a variety of actors,
among whom local and regional governments who had representatives
on their board. Thus there was a certain ambiguity, which fed an
intense academic and political debate on the public or private nature
of the Fondazioni / Casse di risparmio entities. A closer look at the
literature, however, reveals that those discussions revolved almost
exclusively around the Fondazioni, not the Casse di Risparmio.
The issue was not whether the Casse di risparmio would remain
within the (public) orbit of the Fondazioni, but rather when were they
to be privatised. This was a clear objective for policy-makers. As one
Italian interviewee put it,
Two operations were necessary: make banks become private in
ownership; and make banks become private in behaviour.117
And in assessing the impact of the 1990 law twelve years later,
another actor of the reform said:
The process has worked, since banks have become subject to
markets, to market rules.118
Besides, it is important to note that the 1990 law concerned savings
banks as well as Istituti di credito pubblico, mentioned above – which
clearly gave a sign as to where the law-makers situated the savings
banks: in the group previously within the public domain, but that was
to pass to the private one.
117 The same interviewee added, however, that these two operations were to be assumed by
two distinct authorities: on the one hand, the government (through the Law Amato
Carli); on the other hand, the central bank (through, in particular, the shift from activity
regulation and regulation at entry with prudential regulation). (Interview, June 2002).
118 Interview, September 2002.
146
The Italian situation was thus both clearer and more obscure than the
French one. It was clearer because savings banks had the status of
commercial banks. It was more obscure in the sense that their
ownership was still public. But this issue was intertwined with the
pending re-organisation of the sector, which was pushed forward by
subsequent reforms.
5.2.2 The re-organisation of the sector
The statutory reform was important symbolically; it was also instrumental
in facilitating the re-organisation of the banking sector, the second core
element of regulatory reform in both countries.
•
Italy
In Italy, the separation of ownership and control (law Amato-Carli)
and the transformation of ownership rights into shares that could be
sold (in the future) on the market was a clear first step in that
direction. At first, the Fondazioni were to hold their 100% stake in
savings banks. But this “neutrality” was the outcome of a political
agreement passed in Parliament; originally the government’s idea was
to keep open the possibility for the Fondazioni to sell shares
whenever they wanted119. Law-makers could not, however, move
towards a real privatisation of savings banks120. As one of the key
actors of the reform said121, another idea that circulated before the
reform was the attribution of all shareholdings of the savings banks
to the Treasury. But this solution was constitutionally difficult, and
politically impossible, as we will see in the next part.
The status-quo did not last long: a law passed in 1994 lifted the ban
on the sale of the savings banks’ shares owned by the Fondazioni,
and a directive enacted a few months later by the Minister of the
Treasury, Lamberto Dini (who had been one of the vice-governors of
the Banca d’Italia in the previous years), from then on called the “Dini
directive”122, created fiscal incentives for divestiture.
119 Hence the difference between the original design of law as presented in Parliament in
October 1988, and the final text as passed by the Parliament in July 1990.
120 Interview with policy-makers, May 2002.
121 Interview, May 2002.
122 Direttiva n. Ottobre 18, 1994.
147
In particular, it exempted from capital gain taxation123 those
Foundations that accepted to give up a controlling stake (50% of
shares) in Casse di Risparmio.
The 1998 Ciampi-Visco law then institutionalised these incentives but
put a time limit on them: they would hold for another four years after
the law was enacted, but would decrease over the next three years
(article 4a). After seven years the specific fiscal regime would be
ended. Importantly, the 1998 law created fiscal sanctions as well: if
the controlling stake was not given up within seven years, the
Foundations would lose their non-commercial status (which entailed
a favourable fiscal regime, reaffirmed in article 3a of the law) (art.4b).
Thus the reforms of the 1990s showed consistency in pursuing the
restructuring of the sector, but also showed a gradual shift from
neutrality and incentives to sanctions, which reflected the slow
moving of the Fondazioni in selling their shares in the savings banks
(as we will see in the next chapter).
•
France
In France, re-organising the sector was also an important item on the
reform agenda. But it took a different direction: the French law-makers
wanted to push for endogenous restructuring, meaning mergers and
acquisitions among savings banks themselves rather than between
savings and other banks. Thus the 1983 law did not clarify ownership
as the 1990 law in Italy did. Rather, it emphasised the re-organisation
of the savings banks sector, with the strengthening of a “tête de
réseau” (network head) embodied in the Centre National des Caisses
d’Épargne et de Prévoyance (CENCEP – which later became the Caisse
Nationale des Caisses d’Épargne, or CNCE). The 1983 reform also created
regional re-financing centres, the Sociétés Régionales de Financement
(or SOREFI). This marked the beginning of the rationalisation of the
network. A further step was taken with the decree of June 20,
1985124, which organised the “financial de-centralisation” of savings
banks125: indeed, about 200 billion FF coming from “banalised”
financial products were transferred from the Caisse des dépôts to
the SOREFI created in 1983.
123 The capital gains tax was introduced by the law n.102 of 1991 – one year after capital
liberalisation, and amounted at first to 25% of plusvalues.
124 Décret n. du 20 juin 1985.
125 According to Antoine Moster (2000, p.48).
148
But the strongest encouragement for restructuring came with a law
of 1991 which dissolved the SOREFI and gave fiscal incentives to those
savings banks who decided to merge. As will be shown in the next
chapter, the 1991 reform was a decisive step in the re-organisation of
the sector. Within a few years, the number of savings banks shrunk
from 450 to a little more than 40 (today they are 33).
Again, if the purpose of reform was similar in the two countries, the
changes actually took a different direction: in Italy, the Amato Carli
law and its sequels were clearly aimed at transforming the major
savings banks into the backbone of a re-organised banking system;
in France, it was aimed at strengthening the sector itself.
5.2.3 Market de-segmentation and the path towards
operational parity
The statutory normalisation of savings banks and the sectoral re-organisation
went hand in hand with a third major regulatory change: the
enlargement of savings banks’ operational scope. This was, again, a
common element to both countries. The only difference was in the
degree of change, and this can be attributed to different starting
situations: in France savings banks were as of 1983 still very limited in the
number of credit operations they could undertake, and the types of
clientele whose needs they were authorised to address. By contrast, the
limitations put on Italian savings banks’ operations (in particular the ban
on medium and long-term lending) were common to all “commercial
banks”, and there was no restriction attached to savings banks in terms
of authorised business.
•
France
In France, the 1983 reform authorised savings banks to pursue three
basic banking services identified by law-makers: receiving deposits,
lending, and providing means of payment126. However the very first
article of the law restricted the scope of savings banks to collecting
savings, and specified that they were non-profit organisations.
126 Articles 1, 2, 3 and 4 of Loi 84-46.
149
Interestingly, this limitation, far from vanishing in the following years,
was instead reinforced by the legislators127. But a few years later, with
the June 17th, 1987 law128, the Caisses d’épargne were authorised
to lend to small and medium enterprises. At the beginning, a ceiling
was put on the amount savings banks could lend (equal to 30% of
total assets) to private firms. The ceiling was set for a transitory period
of three years129 but was renewed in 1991130.
These limitations might be interpreted as a compromise between
savings banks top managers and regulators; they guaranteed that
most of the lending would go to public entities or to individual
households, while giving time to savings banks to prepare for being
competitive in the new markets. In fact, the 1983 parliamentary
proceedings reveal that the crust of the debate revolved around these
two issues: namely, allowing savings banks to operate on several
markets, and to propose several new products; and at the same time
guaranteeing the permanence of lending to local governments within
the Minjoz contingents. The proceedings clearly show this tension
between normalisation and particularism131. Diverging positions on
these two issues also constitute the main differences between the
wordings of the text of the law as voted by the Parliament and
the wording of the law proposal132, introduced a year earlier.
127 In 1991 the following paragraph was added to the initial wordings of Article 1: “[les caisses
d’épargne] utilisent leurs ressources relevant de l'activité bancaire et commerciale du
réseau au profit notamment du financement de l'économie locale et sociale en appui aux
collectivités territoriales.” (Art. 1&2, Loi 91-635 du 11 Juillet 1991).
128 Loi 87-416 du 17 Juin 1987.
129 Art.50,Loi 87-416 du 17 Juin 1987.
130 Art.2, Loi 91-635 du 11 Juillet 1991. It is interesting to note that the Parliamentary
majority which voted the text in 1987 was different from the one who approved the 1983
reform and, further, that it had won the elections on a pro-business agenda.
131 In his report to the Assemblée Nationale, Mr. Taddei noted that the article 2 aimed at
normalising savings banks as well: “il s’agit de donner au réseau une pleine capacité
financière débouchant sur une banalisation relative et progressive des règles de tutelle et
de contrôle pour une partie de la collecte de fonds et des emplois qui en résultent”
(rapport Assemblée Nationale, n.1021, pp.22.)
132 Under the French Constitution, the law-making initiative belongs both to the Government
(projets de loi) and to members of Parliament (propositions de loi). The practice, however,
has shown a domination of laws initiated by the Government. Interestingly, in the present
case the law originated in a proposal presented by Mr. Taddei, MP belonging to the
governmental majority. It is likely, however, in this case as in many others, that the
government simply aimed at reinforcing its legitimacy within the Parliament and thus
“let” an MP introduce a government-promoted initiative. This is the interpretation of
Cluzel (1984) as well.
150
As per the enlargement of activities, the initial proposal set out to
limit deposits to individuals and non-profit entities; and lending to
their depositors and to local governments and entities guaranteed by
them. During the first discussion at the Senate Finance Committee,
Senators expressed their concern towards what they saw as overly
strict limits on two counts: on the deposits side, they saw the risks of
excluding important potential depositors – such as the entities in
charge of social housing (Sociétés anonymes de HLM). These risks
were underlined in the report written by Senator Cluzel133, whose
conclusions are synthesised in Cluzel (1984). The Senate thus proposed
to enlarge the group of potential depositors (replacing “non-profit
entities” by “entities not mainly involved in industry and trade”),
which the government accepted134.
Regarding the Minjoz contingent, the 1983 law opted for the status
quo. As Cluzel himself says, the last section of Article 1 (regarding
this very issue) was the embodiment of such a critical mission135.
The discussion of the public mission fulfiled by savings banks extended
to the issue of definition as well: it explains why, for instance, during
the first discussion of the law proposal in full session (séance
publique) of the Senate, two amendments proposed by Senators
belonging to different parties (one from the right-wing opposition,
the other from the left-wing governmental coalition), attempted at
including those dimensions in the very definition of the savings banks
as in Article 1136.
133 Rapport à la Commission des Finances du Sénat, n.342.
134 Interestingly, after accepting the changes to the original wordings the Minister precised
that the formula proposed by the Senate would not include private firms, even though
the latter’s borrowings could be guaranteed by local governments since a law passed in
1982 – another evidence that savings banks were to remain within the public realm.
The warning to exclude private firms from savings banks’ clients was repeated several
time by the government’s representative.
135 Article 1, “bien que non indispensable, permettait cependant de confirmer la vocation
traditionnelle et la mission première des caisses d’épargne dont les prêts sont destinés
notamment aux collectivités publiques et aux organismes bénéficiant de leur garantie.”
(Cluzel 1984, p.119)
136 Amendment n.58 suggested to define savings banks as “établissement à but non lucratif
reconnu d’utilité publique”; and amendment n.44 added to the original definition the
words “investis d’une mission de service public”. The juridical consequences of such
changes were minor.
151
Thus two important notions coexisted in the 1983 law: first, savings
banks were (finally) to be recognised operational parity with other
banks, with less limitations than before regarding products or markets.
Secondly, savings banks were still conceived as a peculiar kind of
credit institutions, given their non-profit nature, their ‘historical
mission’, and their functional role within the credit system. In the
following years the regulatory authorities did put these principles into
practice: authorisation to offer checking accounts (1983), to propose
credit cards (1986) and to lift the ban to lend to firms (1991).
The 1999 law built on the 1983 reform, confirming the specificities of
savings banks business scope, and further detailing the specific
missions assigned to them, in particular financing social housing and
local economic development137. The specificity of the Livret A was
re-asserted as well. In addition, the first article specified that savings
banks fulfil the general interest. The specific scope of the savings
banks (referred to in the text of the 1999 law as a single network,
rather than a group of individual banks as was the case in the
previous legislative texts) is enforced through the mandatory138
funding of local development projects (called in the law ‘projets
d’économie locale et sociale’, henceforth PELS), to which a part of the
benefits goes. This amount should not be less than a third of the total
benefits after tax. Simultaneously, though, the ceilings previously put
on lending to private firms had disappeared from the law.
137 “Il contribue à la protection de l'épargne populaire, à la collecte des fonds destinés au
financement du logement social, à l'amélioration du développement économique local et
régional, particulièrement dans le domaine de l'emploi et de la formation, et à la lutte
contre l'exclusion bancaire et financière de tous les acteurs de la vie économique, sociale
et environnementale grâce en particulier aux fonds collectés sur le livret A dont la
spécificité est maintenue.” (art.1, Loi 99-352 du 25 Juin 1999).
138 “Les missions définies à l'article 1er de la présente loi ainsi que les projets d'économie
locale et sociale doivent présenter à la fois un intérêt en termes de développement local
ou d'aménagement du territoire ou de protection de l'environnement et un intérêt en
termes de développement social ou d'emploi. Chaque caisse d'épargne et de prévoyance
tient compte des orientations définies par la Fédération nationale des caisses d'épargne
et de prévoyance pour le choix des projets d'économie locale et sociale sur son ressort
territorial ou pour apporter sa contribution à des actions régionales ou nationales
entreprises par le réseau. Les projets d'économie locale et sociale financés par les caisses
d'épargne et de prévoyance font l'objet d'une annexe détaillée au rapport annuel de la
Caisse nationale des caisses d'épargne et de prévoyance.” (art.6, Loi 99-352)
152
•
Italy
De-segmentation was less of a concern in the 1990 reform in Italy –
but then savings banks were already on operational parity with
commercial banks, as mentioned above. The existing regulatory
segmentation, which distinguished short-term versus medium and
long-term lending, and lending to large firms versus lending to
households and SMEs, had been loosened in regulatory practice
(see previous chapter) and did not discriminate savings banks from
other banking institutions. The de-segmentation that followed
(especially in 1993 with the Testo unico, which allowed all banks to
lend both short and medium term) concerned all banks as well, and
did not distinguish legal categories. Article 10 of the 1993 Testo
Unico was straightforward, in that regard: it defined banks as firms
(“a bank has the character of a firm”), whose scope is to collect
deposits and lend money139.
5.3
The process of change: the role of ideas, interests
and institutions
In both countries, a single process of change can be identified; despite
shifts, turns, persisting ambiguities and contradictions, the 1999 and the
1983 reforms in France and the 1990 and 1998 reforms in Italy show an
underlying, consistent idea of what savings banks should be. But the
concrete “policy outcomes” were variable and incremental, and the
origins of change were overlapping. In order to trace the causes of
regulatory change, it is therefore necessary to decompose the process of
change and analyse its different layers separately140. To do so it is possible
to identify (i) the broader context that emphasised the need for
adjustment; (ii) the debates surrounding the reform and (iii) the policy
and institutional context which shaped the reform pattern.
139 “La raccolta di risparmio tra il pubblico e l'esercizio del credito costituiscono l'attività
bancaria. Essa ha carattere d'impresa.” ($1, art.10, Decr.Leg. September 1st, 1983, n.385)
140 A few scholars have recently put renewed emphasis on theorising process of change: see
Blyth, 2002 and Pierson, 2000.
153
The hypotheses explored here are the following (see also chapter 2):
(i) faced with external pressures to adjust, savings banks’ top management
in both countries transformed this necessity into an opportunity for
pushing their own agenda through regulatory reforms; (ii) the divergent
policy outcomes arise less from the “rigidity” of political institutions than
to the peculiar socio-economic inheritance of savings banks that constrained
their managers’ modernisation designs.
5.3.1 The role of exogenous shocks and of persisting
market failures
As argued in chapter 4, the macroeconomic shocks of the 1970s and
the failure of administered credit to mitigate their impact on the financial
and real sectors dramatically altered the “matrix of constraints and
incentives" faced by banks in both France and Italy (and, arguably, other
European countries). At the outset of the 1980s, both economies were
characterised by: (i) rising inflation and unemployment (stagflation);
(ii) severe balance of payment problems; (iii) external constraint on
economic policy – especially capital flows and speculative attacks on
the French Franc and the Italian Lira. As seen in the previous chapter,
the macroeconomic policy framework was radically transformed during
the 1970s. First, monetary policy shifted from an accommodating tool
targeting monetary growth to an autonomous, restrictive policy aimed at
bringing inflation down through higher interest rates. Simultaneously,
expansionary fiscal policies were progressively abandoned, given both the
external constraint and rising public debt, which, in the context of
positive (high) real interest rates, made public spending very costly.
In summary, strong and persistent exogenous shocks141 durably modified
the macroeconomic policies of France and Italy and, simultaneously, led first
to a strengthening, then to the gradual dismantling of state-administered
credit. By 1982 in France, and 1982-84 in Italy (with the successive Piani
Sportelli), it became clear that credit market de-segmentation would
continue. Together with positive real interest rates, the increased role
given to the stock-market in allocating credit, the diminution of inflation,
and the diffusion of technological innovations led bankers to change
their expectations concerning, in particular, future competition in the
various segments of the banking market.
141 Of course, as emphasised in chapter 4, exogenous shocks were partly the results of endogenous
contradictions in the post-war accumulation regime, as regulationists have observed.
154
Similar shifts in expectations were brought about by regulatory reform at
the European level. As seen in the previous sections, the First Banking
Directive, in 1977, first laid out the alternative foundations for banking
regulations in Europe: shift from structural to prudential regulation,
market de-segmentation, liberalisation of entry (especially for European
banks desirous to operate in other countries than their country of origin),
homogeneisation of legal categories. Those principles formed the pillar of
banking regulatory reform throughout Europe in the 1980s.
Together with those changes in their macro and policy environment,
French and Italian savings banks suffered from problems of their own,
which increased the emphasis on the need to change. French savings banks
were small, mono-product institutions, plagued with labour-management
conflicts (1979 and 1980 saw a record number of strikes in the sector;
and a well-publicised essay, in 1978, identified the “privileged” status of
savings banks staff as one of the “scandals” of “corporatist France”)142.
When it became clear that the State would not replenish savings banks’
equity, savings banks’ under-capitalisation became problematic in the
prospective of greater competition and prudential regulation143.
Italian savings banks suffered comparable problems: insufficient equity
levels, blurred ownership and governance, and a segmented market.
The size of equity was indeed often used in public debates on Italian
banking, and the argument went well beyond the necessity to comply
with international prudential regulation, in particular the ratios set up by
the Bank for International Settlements144. Size was seen as a prerequisite
to face greater competition. This was a point repeated by interviewees as
well. As one of them said, “it was a question of life or death”145.
The variety of banking categories was not perceived to be a problem per se.
Interestingly, neither was, at first, the efficiency of savings banks. In many
instances Governor Ciampi opposed the simplistic view that Italian banks
were less efficient than their European counterparts146. Efficiency did
become a problem later on (after the Amato-Carli law was passed).
142 De Clozets, 1978.
143 Prudential regulation building, as mentioned earlier, on patrimonial ratios to measure the
solidity of single banks and, therefore, their capacity to operate certain business activities.
144 With the 1988 Basel agreement.
145 Interview, November 2002.
146 See in particular Ciampi (1982b), where the governor refers to a OECD study to relativise
claims on the inefficiency of Italian banks.
155
In fact, several observers note that the failure of the 1994 Dini directive
to encourage a sale of banking shares by the Fondazioni was due to the
low market value of savings banks as compared with their accounting
value147. It was not a fiscal problem, but an economic one: the low
market value reflected the low profitability of CR148. But one interviewee
turned the argument on its head: the Fondazioni did not sell their shares
because the markets were low and there were no potential buyers…
Whatever the interpretation, in this case, efficiency was seen as instrumental
for the privatisation of banks, not as a problem per se.
This combination of pressures – exogenous shocks, shifts in macroeconomic
policy, European regulatory reforms, and internal problems – formed
the backdrop of regulatory reform in both countries. In fact most
interviewees, both in France and in Italy, underlined the “naturalness” of
the reforms. That is, in their view the legal reforms brought a solution
to the “problems” of savings banks (low equity, blurred property rights)
in line with savings banks’ “tradition”. This harmonious reconstruction of
past events should be taken with caution. First, interviewees often show
a tendency to offer re-collections that fit their actual positions/ideas.
In this particular case, respondents at the head of savings banks or within
regulatory positions at the time of the reform might simply want to give
the impression that they did nothing wrong – in fact, did nothing but
stick to the natural “course of history”. Secondly, we all have tendencies
to retain the outcome of the process as the logical or natural one –
forgetting all the twists and turns that occurred all along the process.
More importantly, the nature of the specific problems faced by savings
banks, as well as the peculiar context that made them salient do not
explain, by themselves, the outcome of the reform or the reform process.
How do we understand, for instance, that new ownership took the form,
in Italy, of privatisation and in France of the creation of a cooperative
group? To get a more comprehensive understanding of the reform
process and outcome, it is necessary, therefore, to pay attention to the
formation of a policy consensus and to the political dynamics that led to
the 1983 law in France and the 1990 law in Italy.
147 This point was also made during the parliamentary debates around the Ciampi-Visco reform.
148 See GU n.322, 1990
156
5.3.2 The resistible rise of a consensus about banking
and state intervention
Before addressing the causal role played by ideas in the process of
regulatory change, it is important to understand what those ideas were
at the core of the reform in both countries and where they came from.
Of course, such important reforms contained or made explicit a full range
of ideas of all sorts. We can distinguish two sets of ideas related to two
major issues: the role of the state in the economy and the nature of the
banking firm. I am arguing here that the regulatory shifts of the 1980s
and 1990s in the French and Italian savings banks sectors reflected a
previous transformation of these two core ideas within the policy circles.
These core ideas are themselves surrounded by several policy ideas:
privatisation, de-regulation on the “state” side, and statutory normalisation,
market de-segmentation on the “bank” side. It is necessary to distinguish
between these two strands of ideas (primary and secondary) because, if
the latter were still hotly debated during the 1980s (witness the debate
in Italy around the issue of the public or private nature of the Fondazioni),
the former were already soundly established and rooted in the academic
and regulatory circles.
As emphasised in the first part, the 1983 law in France was still ambiguous
as to where the savings banks should fit in terms of ownership: public or
private, the issue was still open during most of the 1980s. Indeed, the
critical issue spurring from the 1983 law and from the surrounding
parliamentary debates was that of the adjustment of the Caisses to an
evolving economic reality while not questioning the historical ‘mission’
and, above all, the role played by the Caisses in providing credit to local
governments. But this ambiguity did rely on a growing consensus on
what savings banks should be allowed to do as banks. Several times
during the debate the assertion was made that “banks were firms like all
others” despite the specific additional characteristics inherited by savings
banks from their past. This was the sense of the intervention of the
Minister for Finance (Jacques Delors) at the Senate in December 1982149.
It was also re-iterated several times by the government representative
at the meetings of the Senate Finance Committee, as well as by the
Rapporteurs at the Senate and the National Assembly.
149 See JO des Assemblées, n.2454.
157
These orientations were shared by senior staff at savings banks as well.
Those ideas stood at the heart of the “Ancian Report”150, which was
written by a working group set up jointly by the Union Nationale des
Caisses d’Épargne de France (UNCEF) and the Caisse des Dépôts et
Consignations. Interestingly, the report, while stressing the peculiarities
and the crucial role of savings banks in “directing the country’s savings
towards priority objectives”151, also asked the permission for savings
banks to operate fully as “family banks” – in essence, the members of
the Ancian working group pledged for the lift of the ban on many of the
deposit and lending instruments available to commercial banks, and on
the means of payment as well. So both the Ancian working group and
the 1983 law-makers seemed to share the same normative view on
banks: namely, that they were doing a business inherently private, and
that they should compete with each other.
This should not come as a surprise, since the first part of the 1983 law
got its inspiration mainly from the Ancian Report. This was confirmed
by interviews with the main actors behind the policy change. In summary,
all interviewees who were working in the savings banks in the early
eighties confirmed that they saw as “inevitable” the shift towards fullyfledged banks operating within a competitive market. The same view was
held by policy-makers.
As for the ideas on the role of the State, evidence is more ambiguous.
In 1981 a Socialist party-led majority won the Parliamentary elections,
with an agenda centred on the “break” with capitalism. During the first
100 days in power, the new majority indeed launched a number of
reforms that ended up in considerably extending the State’s reach on the
economy (in particular through a wave of nationalisations). But two years
later, after the famous U-turn operated by President Mitterrand, the
policy direction radically changed. It is in this context that the 1983
reform of savings banks took shape, reflecting the ambiguous direction.
In Italy, the idea of the bank as a firm was not popular among politicians, at
least until the mid-1980s. In 1982, the then central bank governor, Carlo
Azeglio Ciampi, argued publicly that Italian banks were not that inefficient
compared to other systems. In fact, he argued, quoting a comparison
by the OECD, while spreads in Italy might be large, the margin of
intermediation was lower in Italy than in the UK, but higher than Germany.
150 UNCEF/CDC, Pour un redéploiement du réseau Caisse d’Épargne – Caisse des Dépôts et
consignations, December 1981.
151 Ibidem, p.2
158
In the late 1970s, all banks underwent a compression of their revenues
because of growing competition by public bonds and quantitative limits
on credit expansion (“il massimale”).
The private-public debate stood at the core of three law proposals
presented to the Parliament by various political groups in the late 1970s.
A first one, presented in February 1977 by several MPs belonging to the
Partito Socialista Italiano152, aimed at giving local governments power
over savings banks direction and management. This was a clear attempt
at rooting savings banks in the public realm, in a definitive fashion153.
That proposal was “re-proposed” a year later, before the Senate, with the
same success (it was never debated)154. A second law proposal was
presented in the Parliament in 1981, this time from MPs belonging to the
Communist Party155. This proposal, too, aimed at creating strong organic
links between savings banks and local governments, even though it
maintained most of the existing governance mechanisms (in contrast to
the previous proposal)156. A third proposal, contemporary to the first one,
was presented by deputies belonging to the Christian Democrats Party
in 1977157. This proposal differed from the other two in that it concerned
all “public” banks (that is, savings banks, BIN and Istituti di Credito
Pubblico), and tackled another issue: that of the ‘politicisation’ of those
banks – which was quite ironical given Christian-Democrats’ presence in
credit institutions. The goal set out in the proposal was to de-politicise
public banks through the strengthening of monitoring and supervision
mechanisms (with, for instance, the creation of an ‘elders’council’).
152 Proposta di legge Signorile, Colucci e altri presentata nella seduta del 24 febbraio 1977,
recante Modifiche all’ordinamento delle Casse di Risparmio e dei Monti di credito su
pegno di 1a categoria, Camera dei Deputati, Legislatura VII, Atti Parlamentari, Documenti
– Disegni di Legge – Relazioni n.1205.
153 According to Clarich (1984), this proposal bore the risk of putting an end to savings
banks’ autonomy as well. In that sense, the proposal shows a strange filiation with the
law proposal presented by Giulio Tremonti twenty five years later for the Fondazioni…
154 Disegno di legge Cipellini, Scevarolli e altri comunicato alla Presidenza il 22 novembre
1979, recante Modifiche all’ordinamento delle Casse di Risparmio e dei Monti di credito
su pegno di 1a categoria, Senato della Repubblica, Legislatura VIII, Atti parlamentari,
Disegni di Legge – Relazioni – Documenti, n.503.
155 Proposta di legge D’Alema, Alinovi e altri presentata nella seduta del 14 luglio 1981,
recante Nuove norme concernenti l’ordinamento e le funzioni delle Casse di Risparmio e
dei Monti di Credito su Pegno di prima categoria, Camera dei Deputati, Legislatura VIII,
Atti Parlamentari, Disegni di Legge – Relazioni – Documenti, n.2712.
156 Clarich (1984) emphasised the difficulty to reconcile the principle of linking savings banks
and local government with the goal of giving a major operational flexibility to savings
banks (Clarich, 1984, p.134).
157 Disegno di legge Grassini, Bartolomei e altri comunicato alla Presidenza il 4 ottobre 1977, sulla
Amministrazione degli Istituti di Credito di Diritto Pubblico e nomine relative, Senato della
Repubblica, Legislatura VII, Atti parlamentari, Disegni di legge – Relazioni – Documenti, n.91.
159
A common feature to all three proposals was the emphasis given to
governance mechanisms in reaching the reform’s objectives. More
interestingly, though, is the fact that none of those proposals foresaw the
privatisation of public banks – or even, at least, the possibility of opening
up public banks to private interests and purposes. But the failure of these
proposals to gather consensus and eventually become law testifies the
difficulty to reform public banks in the other direction as well. In other
words, politically, the situation was stalled, and the predominance of
“public” conceptions of banks did not translate into legal reforms.
At least, however, those proposals succeeded in encouraging savings
banks to elaborate a common position. The opening statement at the
twelfth national congress in Bologna in 1977 was a direct reply to the
socialist proposal: savings banks firmly opposed any organic linkages
between them and local governments. Instead, savings banks re-affirmed
their claim to be put on operational parity with commercial banks158.
The public horizon of savings banks remained, in their eyes, justified, but
only as a correction to the “excesses that a market economy can lead to,
so as to ensure the balance between […] the security of deposits and the
support to those subjects enduring inflation159.”
This clear position expressed by savings banks gave rise, according
to Clarich, to the “second phase” of the debate about public banks, as
the same author calls it (Clarich, 1984), in which the central bank played
an important role. Indeed, the conception of banks as private firms took
root at Banca d’Italia in the 1970s, under the last years of Guido Carli’s
governorship. The yearly reports of the central bank give a good overview
of these changes in the institution’s thoughts about banks and the
banking market during that period. In the 1971 annual report, for
instance, Governor Carli insisted on the public nature of the banking
system160. In the 1973 and 1974 reports, the focus had shifted to the
efficiency of the banking system as a whole. Later on, the governorship
of Carlo Azeglio Ciampi (the actual President of the Republic) was
marked by the same emphasis on efficiency of the banking sector, which
implicitly relied on the idea that banks were to operate as private firms.
158 According to Clarich (1984), this means that “The acceptance of the challenge of the
market and of competition justifies the call for a revision of the existing regime, where it
either favours or impedes the category.” (Clarich, 1984, p.137)
159 Final motion to the XIIth national congress, cited by Clarich (1984, p.137).
160 “Considerazioni finali”, in Banca d’Italia (1971), Relazione annuale.
160
But this did not entail any plea for the reform of the system from the part
of the Central Bank. The Governor made this point repeatedly over the
years: in 1980, for instance, he wrote that “public and private banks are
a given in our credit system, which chose the firm as a model for the exercise
of banking activities”161. Two years later, in a conference on savings banks,
he made this eloquent remark: “in savings banks publicness is where it is”162.
Again, in the 1982 annual report of Banca d’Italia, the Governor repeated
the same notion163. The official position of the regulatory body was thus
to re-assert that banks were above all banking firms, and should operate
as firms; but this should not entail a break from the actual system.
Two White Books on public banks were released by the Central Bank in
1981164 and 1988165, which synthesised this view and translated it into
broad policy ideas. The 1981 White Book began with an analysis of the
banking situation that emphasised its “private firm-like” aspects, in particular
the facts that on the operational side there were fewer and fewer
differences between public and private banks, that there was no specific
banking activity that could be linked to the public nature of banks166, that
non-banking purposes were doomed to disappear167. As a consequence, the
Banca d’Italia clearly set the stage for the pursuit, from the part of public
banks, of business goals similar to those of private, commercial banks168.
Furthermore, the 1981 White Book suggested that the most appropriate
form of organisation for banks was the joint-stock company169. The diagnosis
offered by the central bank was, therefore, unambiguous; this was not the
case of the prognosis, in which most of the previous discussion was left aside.
161 “Considerazioni finali”, in Banca d’Italia (1980), Relazione annuale.
162 “Non si ha da far distinzione tra enti pubblici e enti privati ma piuttosto tra aspetti
pubblici e aspetti privati, relativamente al medesimo ente. Nelle CR la pubblicità c’è dove
c’è: essa non s’addice alla loro attività di impresa che per sua natura neutra ed
assoggettata al diritto privato.” (Ciampi, 1982b, p.33)
163 “La redditività e l’efficienza sono comunque criteri fondamentali validi anche per questi
intermediari, in quanto connaturati all’attività commerciale intrapresa, pur nell’ambito di
uno scopo non identificato in via immediata nel lucro” (Ciampi, 1982b, p.31).
164 Banca d’Italia (1981), Ordinamenti degli enti pubblici creditizi; Analisi e prospettive,
Roma: Banca d’Italia.
165 Banca d’Italia (1988),
166 “non potendosi individuare un nesso di strumentalità delle operazioni bancarie con speficiche
e contingenti finalità pubbliche perseguite dall’ente.” (Ibid., p.7) And, later on, “l’attività
bancaria di un ente pubblico è del tutto identica a quella di una banca privata” (Ibid., p.7).
167 “Le finalità extra bancarie sono oggi venute meno o perché direttamente perseguite dallo
Stato quali funzioni sociali o perché assorbite dalla tutela del risparmio, che è affidata
all’ordinamento bancario nel suo insieme” (Ibid., p.6).
168 “L’organizzazione degli enti pubblici creditizi deve consentire e anzi favorire lo svilupparsi
della logica della redditività nell’agire degli organi e nei rapporti tra i medesemi.” (Ibid.,p.7).
169 “Il modello organizzativo più appropriato alle attività imprenditoriali è, nel nostro ordinamento,
quello della società di capitali, e la stessa identità d’azione della banca pubblica e della
banca privata rende opportuno riferire la struttura a un medesimo modello.” (Ibid., p.8)
161
The authors of the 1981 White Book focused, instead, on the problem
of the low levels of equity among public banks and how to solve them.
As Revell (1994b) rightly points out, additional capital can come from
only two sources: retained earnings added to reserves and fresh capital
injections raised on capital markets (or by owners). The authors of the
White Book proposed, for those banks which had not been incorporated
(and thus for savings banks), to create, alongside the banks’ equity
(fondo di dotazione), an additional fund formed with the subscription of
special shares issued by the banks (azioni di risparmio), which would not
bear any claim on the banks’ management. Even more obscure is the part
dedicated to changes in banks’ governance mechanisms, which were
conceived to give more room to new stakeholders. After reviewing
alternative solutions (among them a strict separation between ownership
and management, which was to come back with the 1990 law), the
authors recommended170 to keep the ‘firms’ as they were, with minority
shares eventually given to financial institutions. That configuration
would, according to the authors, ensure banks’ corporate development
without running the risks of being too exposed to market forces171.
As we can see, the central bank did not come up with a clear roadmap,
despite a seemingly unambiguous diagnosis and the recognition that
public banks were in all aspects similar to commercial banks. The 1981
White Book was, nevertheless, important in that it was to be the official
position of Bankitalia for the successive years (until the 1988 White
Book). It was important also because it faithfully reflected the views held
by the Banca d’Italia’s top executives. In fact, it was written by the
Governor’s closest collaborators. Why this ‘timidity’ (or lack of
imagination) in the prognosis? One interviewee, who was at Banca
d’Italia at that time, said that the White Book, and the subsequent
inaction of Banca d’Italia towards the reform of public banks, simply
reflected the Governor’s political shrewdness; in other words, it fit the
strategy then pursued by the Governor, who did not want to appear to
take sides in a political contest.
170 This option was presented as the one best preserving the local characteristic of public
banks, or “la caratteristica e i limiti di organismi legati forse troppo rigidamente all’ambito
territoriale originario.” (ibid., p.12).
171 Dall’instaurarsi di questi rapporti potrebbero derivare più ampie possibilità di
diversificazione degli impieghi e dei rischi, contribuendo anche per questa via alla solidità
complessiva del sistema.” (p.12).
162
The 1988 White Book was very different from its predecessor. But it was
made public at the time when discussions over the reform, between
savings banks and the Minister of Treasury (Giuliano Amato), were
already under way. Analysing the motives behind Banca d’Italia’s cautious
behaviour is beyond the scope of this chapter. Suffice to say here that the
two White Books both revealed the fact that top central bank officials
were convinced of the “private business” nature of banking at least as
early as 1981; and that, at the same time, they would not be among the
forces of change to put those ideas into practice.
Later on, the reception of the 1990 law was quite positive, as shown by
the introductory remarks by several directors of savings banks at the 65th
world savings day. This reaction marked a clear change from the past.
Until the late 1980s, privatisation was not only out of question, it was a
“non problem”, as Cariplo’s president (and president of the ACRI) then
declared (Ferrari, 1985). We can also use here a counterfactual: the mere
fact that the savings banks did not oppose the 1990 reform through legal
means is indicative. Indeed, by contrast, the Fondazioni did not hesitate
to resort to the administrative courts in 1994, against the Dini directive,
and more recently, in 2002, against the reform designed by Minister
Tremonti. The “welcome” given to the Amato Law in 1990 was also
emphasised by Clarich (1998).
By the time the reform process started, in both countries there was a
broad consensus about the future of savings banks on the one hand, and
the role of the state as a regulator on the other hand. But ideas do not
have the power to impose by themselves. Why did the ideas pushed
forward by regulators and savings banks’ top management in France and
Italy become law? To understand this last aspect of regulatory change,
one should consider the political dynamics at play in both countries at the
time of the reform.
5.3.3 Seizing the political window of opportunity
Regulatory change took place, in the two countries, at a time of profound
and rapid political change. As mentioned above, the context of the 1983
reform in France was very peculiar. The Socialist government went to
power in 1981 on a left-wing platform, characterised by ambitious plans
to reform the economy.
163
The first year of the Mitterrand presidency was characterised by a wave
of nationalisations – especially nationalisations of banks - unprecedented
since the immediate post-war period172; reforms of the labour market;
and two devaluations. However, the policy alternative was quickly
defeated by the exchange rate crisis and the failure of the ‘reliance’ in an
international context of economic stagnation. Reforms were put to a halt
by those within the elite bureaucracy and the Socialist party who
convinced Mitterrand that the financial situation was not allowed to
continue along the path chosen in 1981. Both the 1981 alternance and
its reversal in 1982-83 provided a window of opportunity used by some
of savings banks’ top executives. In fact, the Ancian working group was
set up in June 1981, just a few months after the election. Both the timing
and the explicit mandate of the working group were clearly aimed at
influencing the new government, at a time when expectations for reform
were high.
In Italy, by contrast, until the early 1990s there was no real change in the
political balance of power that opposed, since the postwar period, the
Christian Democrats (in power) and the Communist Party (in the
opposition). Bettino Craxi’s Socialist government, in 1985-86, did seem to
represent a political alternative, but its existence relied on tacit support by
the Christian Democrats – and the experience did not last long. Its most
tangible effect, however, was to bring to power a team of reformists from
the North. Only the collapse of the Christian Democrats, triggered by
fiscal crisis and the “clean hands” anti-corruption trials of 1992-1993
put an end to the previous political regime and opened the way to regime
change. Again, change was brought about through an alliance between
key bureaucrats, policy-makers and savings banks officials. Minister Amato
set up in 1988 an expert committee composed mainly of academics who
had been involved in drafting the central bank’s second white book and
linked to the savings banks world.
Here the comparison is enlightening. It tells us that in both cases
the regulatory reform occurred at a time when a broad alternative
macroeconomic policy had been tried and had come to a halt.
Both political alternance and its shortcomings constituted the window
of opportunity through which the reform could succeed.
172 loi no 82-155 du 11 février 1982 de nationalisation.
164
5.4
Discussion
5.4.1 Convergence and divergence in the regulatory reform
of the savings banks sector in France and Italy
As set out in the introduction to this chapter, when discussing recent trends
in national capitalisms most scholars agree on a descriptive hypothesis:
that is, there is a certain level of regulatory convergence between national
regulatory regimes. The evidence presented here does provide support
for this hypothesis, with two important caveats however. First, the data
show that if convergence is undoubtedly occurring, divergence is occurring
as well and simultaneously. Put differently, convergence is not the only
force at play in the regulatory evolution experienced by France and Italy
over the past twenty years. It is interesting to note how the public-private
equilibrium in savings banks was solved in radically different manners,
but at the level of the banking system these two opposite solutions in fact
fit within a very similar, if not identical trend.
The other two hypotheses presented in the introduction to this chapter
deal with the causes of convergence and divergence. Several scholars
claim that while convergence is the outcome of mostly external pressures,
namely globalisation and europeanisation, divergence, on the opposite,
is the product of the resistence of national institutions to such pressures.
Whether convergence wins over divergence, or vice-versa, depends on
the relative strength of such institutions – and the sustainability of the
situation. In any case the two are elements of the same ‘dialectical
movement’: external pressures versus national mobilisation of resources.
The findings presented here do not support that view. They do not deny
the role of either globalisation or europeanisation pressures. Rather, those
played at most as the “trigger” of change, and at least as a “catalyst” for
change, giving an institutional justification to the deep reforms
undertaken by governments in both countries. This is exactly the reverse
of the thesis that ideas are pure justification of political reactions to
exogenous change. Again, I am not claiming here that ideas – especially
academic ones - have it all. Far from it. As Lee said, “As a working
hypothesis, one might suppose that some modicum of conceptual gloss
(or, alternatively, some veneer of empirical verisimilitude) made an idea
more attractive to policy-makers than it would otherwise have been”
(Lee, 1989, p.144).
165
Moreover, regulatory change was neither the direct translation of business
groups’ demands for re-regulation (as claimed, among others, by Soskice
1999), nor the automatic reflection of international pressures, nor the
sole expression of insulated elites’ reformist projects. Regulation should
not be understood as a functional part of the system; neither should it be
viewed as a pure autonomous force.
Mostly, reform resulted from the intertwining of political change, change
in economic conditions, and the maturing of specific ideas regarding the
nature of banking firms and the role of the state in the economy. This mix
of factors bears some resemblance to the Spanish financial reforms
analysed by Sofia Perez. According to that author the success of financial
reform in Spain depended on the presence of at least three factors: (i) the
way identities, networks and conflict among state elites are configured
over time; (ii) the extent to which economic change interacted with
domestic political conditions to alter the influence of different groups of
policy-makers; (iii) the nature of the relationship between the financial
sector and non-financial firms. In Spain, regulatory reforms were domestically
rooted: “political struggles within the state served as the impetus for
regulatory change, changing economic conditions as a facilitating factor, and
accommodation with the banking sector as a constant” (Perez, 1997: 43).
A second hypothesis mentioned in the previous chapter is that convergence
primarily resides in a change of path, while divergence results from path
dependence. But, again, the two cases under study point to a different
conclusion. Against path-dependence stands the fact that savings banks
in France did not originate in the cooperative movement of the late XIXth
century, and never had a similar governance structure to that created in
the 1999 law. In fact, many interviewees within the French savings banks
(both at the national and local level) pointed to the novelty of such a
structure, and to the necessity for them to “learn” how to make it work.
Some interviewees also pointed to the Crédit Agricole to show the
contrast between the two establishments – the Crédit Agricole being
born out of the cooperative governance structure.
Similarly, the creation of Fondazioni in Italy was also a “break” from the
“path”, in the sense that for the first time the banking function and the socioeconomic redistributive function were clearly separated. Although the
Fondazioni were referred to by their creators (and by the savings banks
themselves) as a “natural” development, they represented a clear departure
from the century-long historical path followed by savings banks in that
they asserted the necessity to separate these two functions.
166
5.4.2 Firms-led adjustment?
The evidence presented above shows how savings banks in both
countries have been at the origin of regulatory reform and have tried to
shape the policy outcome, both through setting the agenda and seizing
the window of opportunity offered to them by the changing political
environment. Those findings are in line with other works on adjustment
processes in France and Italy during the 1980s. Hancké (2002) shows how,
after the failure of government-led industrial reforms in the early 1980s,
French large firms took the initiative, building on the changing labour and
financial environment secured by the state. In that way, large firms could
shape their own adjustment pattern. Similarly, Bianchi et al. (1989), dealing
with privatisations in Italy, argue that in that country the privatisation
process was not driven by political or government programs, but by public
enterprises and agencies in order to reorganise and regain autonomy.
Companies to be privatised were selected by the state holding management
at the IRI, ENI, EFIM – a prerogative recognised by the Parliament.
Those processes were initiated with changes in top management at
the IRI and ENI in 1982, the new managers being less disposed than in
the past to undertake the variety of “public goals” (rescue of ailing firms,
investments in strategic resources, employment protection, development
of the Southern regions) that had been assigned to the state holdings
and led to a multi-purpose industrial policy. These cases underline the
second characteristic of this firm-driven adjustment process: the key role
played by top management in the process. In particular, in the case of
France and Italy, top managers’ pursuit of managerial autonomy (from
state and political directions) drove the process of regulatory change.
Top managers, who were a minority in savings banks staff in both
countries, built on both the exogenous shocks and the political window
of opportunity to impose their views on all other stakeholders: regulators,
policy-makers, savings banks employees.
Once the reform was passed, savings banks’ top management could
go ahead with their adjustment strategy, and proceed to build strong
banking groups able to compete in a de-segmented banking market.
167
168
6. THE CHANGING BOUNDARIES
OF COORDINATION:
SAVINGS BANKS’ CORPORATE
RESTRUCTURING AND
SECTOR ORGANISATION
6.1
Introduction
As seen in chapter 5, the policy reforms of the early 1980s in France and
early 1990s in Italy aimed, in part, at re-organising the savings banks
sector in both countries, so as to respond more adequately to a rapidly
changing environment. Chapter 5 showed how similar concerns, in
similar situations, led to diverse adjustment paths, from a policy point of
view. It showed, moreover, that such diversity has more to do with
peculiar dynamics and long-run historical legacies than to political or
institutional path-dependence. This chapter will build on the previous one
by looking at the post-reform restructuring path followed by the savings
banks sector in the two countries. Then, again, the question addressed
by this chapter is twofold: first, is there a diversity; secondly, can one
attribute these differences to the distinct paths taken by policy reform
evoked in the previous chapter? In other words, does the outcome of the
restructuring process, fifteen years or so after the reforms, mirror the
outcome of policy reforms? Or are there other factors at play?
This chapter focuses on two related aspects of savings banks transformation
during the 1980s and 1990s: the re-structuring of savings banks through
(mainly) mergers and acquisitions and the transformation of savings
banks’ sector organisation. These two elements could be labelled,
respectively, as the “external boundaries” and the “internal density” of
savings banks sectors.
169
6.2
Shifts in savings banks’ corporate boundaries
6.2.1 Mergers and acquisitions in the savings banks sector
Both French and Italian savings banks have seen their numbers drop in
the eighties and nineties. In France, there were 451 Caisses d’épargne in
1980, a number reduced to 33 by June 2003. In Italy, a same trend
towards a drop in numbers can be observed, albeit considerably less
pronounced: there were 90 Casse di risparmio in 1980, 65 in 2002173.
Although they belong to different scales, which we will analyse later on,
changes do follow the same decreasing trend. This trend is continuous
over the years; it concerns, moreover, and perhaps more importantly, all
categories of banks. The total number of French credit institutions fell
from 1975 in 1980 to 879 in 2003; the total number of banks stricto
senso174 from 1025 to 479. Similarly, the total number of Italian banks fell
from 1250 in 1980 to 841 in 2000. All sectors were affected: commercial
banks, cooperatives and savings banks. This is a strong indication that
same dynamics were at play in all segments of banking.
Moreover, such a drop in numbers (the IEF 1999 report calls it “natural
attrition”) occurred in other European countries as well: the number of
Spanish savings banks fell from 81 in 1984 to 51 in 1996; in Austria, the
number decreased from 131 to 74 over the same period; and in Norway,
there were 133 savings banks in 1996 against 227 in 1984175.
The decreasing number of banks in both countries reveals an intense process
of change in ‘corporate boundaries’ through mergers and acquisitions.
And this is, again, true for all types of banks176. In France, although
similar data is not available, almost 95% of the drop in numbers of
savings banks can be attributed to mergers and acquisitions177.
173 Those are the numbers of legal entities, and do not reflect the fact that a) many Italian
savings banks belong to banking groups and b) all French savings banks are parts of a
single group. Those aspects will be addressed below.
174 Credit institutions include banks and other types of financial intermediaries: investment
firms, specialised credit institutions (leasing or factoring firms), and so on.
175 All numbers cited in that paragraph are extracted from the IEF 1999 report.
176 Although it has slowed in the past few years, this trend has not stopped. For instance,
the French Banques populaires group recently announced further mergers among its
member banks in Alsace, thus bringing the number of Banques populaires to 20 by the
end of 2003 (down from 42 in 1970). See “Banques Populaires: le Haut-Rhin va fusionner
avec Strasbourg”, in Les Échos, February 2003.
177 According to Lacoue-Labarthe, 2001.
170
This restructuring wave was not the work of, say, an aggressive group of
investors desirous of building financial groups. First, mergers were more
important than acquisitions178. Secondly, most banking acquisitions that
occurred during that period were “friendly” acquisitions179. Thus, one
can say that this restructuring wave was the expression of a shared view,
at least among banks executives180.
Given the evolution common to all kinds of banks, it is, therefore,
possible to accept one hypothesis widely held in the current literature on
banking181: that M&As were motivated first and foremost by the felt
necessity to increase individual banks size in front of the seemingly
irresistible de-segmentation of the banking markets. Other motives are
the cession of certain activities by groups willing to specialise in some
activities; the strengthening of their presence in “métiers de base”
(traditional activities) through acquisitions; internal restructuring to simplify/
adapt internal structures to the evolution of the market/clientele.
As the then future president of the savings banks group, Charles Milhaud,
said in 1989:
“We are going to witness, all around the world, the emergence of
large groups with specialised branches. Indeed it is not possible for a
bank providing, for instance, cashier services, to be competitive, in
terms of the financial offer, with a bank that does not provide such
service and does not bear network costs.182”
Milhaud added, two years later:
“Such restructuring aims at providing the network’s firms – this term
of “firm” is important – with a sufficient size, especially in terms of
own funds. This would allow them to ensure the full management of
their balance sheet and adjust to the market’s new conditions.183”
178 A merger is an agreement between two legally autonomous economic units that decide to
become one; acquisitions, by contrast, denominate the absorption of one firm by another one.
179 Hostile acquisitions, or takeovers, often occur on a market where a firm’s shares can be
bought and sold easily. Acquisitions of non-publicly listed firms (which was the case for
the majority of Italian banks in the early 1990s) cannot proceed without the decision by
equity share holders to actually sell those shares.
180 This is an important restriction, as will be shown below.
181 This is also conformed by recent moves by Banques Populaires, officially motivated by the
“need to get out of isolation”. See the previously cited article.
182 Milhaud interviewed by Professions du Sud-Est, September 1989.
183 Charles Milhaud interviewed in Le Méridional, February 27th, 1991.
171
As noted by the Institute of European Finance in its 1993 report, “the
bulk of M&A activity in banking to date has been domestic and defensive”
(Institute of European Finance, 1993, p.9). In fact, this motivation
emerges from interviews with savings banks actors as well. All interviewees
having played a direct role in the M&A wave of the 1980s – 1990s
(12 interviewees in the two countries) emphasised the “irresistible”
character of such moves. As one of the top officials of the Cassa di
Risparmio di Roma at that time said:
During that period the liberalisation of bank windows was looming,
and I realised one thing: the CR Roma would have become the object
of attacks from other banks willing to settle in Rome. Since we could
not protect ourselves, we had to expand. I had the idea to make a
bank that would have become strong in the Lazio region. The merger
with the Banco dello Santo Spirito allowed the CR Roma to strengthen
its market shares in Italy184.
But the numbers reported above do not tell the whole story about the
restructuring process at work in the two countries. First of all, mergers
and acquisitions are but one particular way to restructure business. Other
restructuring options (less easy to document) were undertaken by many
banks in both France and Italy, two of which can be emphasised: strategic
partnerships or alliances and banking groups. In the present cases,
mergers and acquisitions were just part of a wider aggregation process
that took place within the banking system as a whole. Secondly, not all
banks participated into this restructuring or aggregation process: many
local banks, especially in Italy, remained at the end of the 1990s both
economically and legally independent.
This is not the case of savings banks. In both countries, all savings banks
did participate in the aggregation process at play in the banking industry.
In other words, all savings banks shifted their corporate boundaries,
either in a radical and definitive way (through mergers and acquisitions)
or in a softer, looser way (partnerships and alliances). All savings banks,
therefore, participated in the emergence of banking groups.
184 Interview, 30.05.03.
172
6.2.2 The constitution of vertically integrated banking groups
•
France
All France’s (remaining) savings banks are now part of a single
banking group. This group is the outcome of a double aggregation
process consisting of, on the one hand, mergers between and among
local savings banks – resulting in the existence of 33 regional savings
banks, legally autonomous entities; and, on the other hand, the
tightening of operational and organisational bonds among these
33 regional savings banks. The group includes, besides regional
savings banks themselves, several subsidiaries and partly owned
specialised financial firms. Figure 6.4 shows the shareholdings of the
Groupe Caisse d’Épargne, as of early 2004185.
The aggregation that gave rise to the Groupe Caisse d’Épargne is not
dissimilar to the restructuring process followed by other groups, such
as the Crédit Agricole, the Crédit Mutuel, and the Banques Populaires
group. All these groups are, similarly, cooperative banking groups,
which consist of a limited number of regional banks (between 20 and
40) and a group of national, specialised subsidiaries. Such “federal”
groups differ from the vertically integrated banking groups that have
risen around former public banks that were privatised in the late
1980s –early 1990s – BNP-Paribas, Société Générale. But all these
banking groups share the characteristic of being a group – and this
has been a strong trend across most segments of the banking system
during the 1980s and 1990s.
•
Italy
The Italian case is slightly different. There, too, has there been a clear
tendency towards the constitution of large banking groups. But various
groups, of varying nature, coexist and compete. Within the savings bank
sector itself, one can distinguish three different aggregation patterns,
which ended up producing three different kinds of banking groups.
185 This web of shareholdings is of course doomed to change over time. For instance, in
September 2003 the CDC and CNCE announced that they had reached an agreement
on a re-shuffling of ownership and control of former CDC subsidiaries, mainly CDC – Ixis.
173
The first pattern characterises the constitution of national banking
groups, building on the alliance between a large savings bank and
one of Italy’s former large public banks. This pattern corresponds with
the emergence of Italy’s four most important banking groups:
IntesaBCI, San Paolo IMI, Unicredito and Capitalia. To these four one
might add two large banks: Monte Paschi di Siena (the oldest Italian
bank, which has been legally associated with the savings banks
category since the late XIXth century) and Banca Nazionale del Lavoro
(a former public bank, where the Treasury has kept a small stake).
All of these groups were created through a strikingly similar aggregation
process, in which we can identify four distinct phases: a first phase in
which a leading savings bank absorbs a smaller one; a second phase
in which the resulting groups create specialised subsidiaries; a third
phase in which the whole group associates itself with another major
former public bank; and a fourth phase in which this alliance
transforms itself into a new integrated banking group.
This pattern, which one could call the “national universal bank”
pattern, appears clearly in the case of the formation of the Banca
Intesa group, Italy’s leading banking group (in terms of assets). Banca
Intesa’s short history starts with the Cassa di Risparmio delle Provincie
Lombarde (Cariplo), historically the strongest and largest of Italy’s
savings banks. In the 1990s, after the Amato law, Cariplo first
acquired shares in a variety of local (Northeastern) Casse di risparmio,
namely the CR della Provincia di Viterbo, the CR di Parma e Piacenza,
the CR di Ascoli e Piceno, the CR di Biella e Vercelli, the CR di Citta’ di
Castello, the CR di Foligno, the CR di Rieti and the CR di Spoleto.
A following step was the merger, in 1998, of Cariplo with the Banco
Ambrosiano Veneto (Ambroveneto), a commercial bank, to form
the Banca Intesa Group. In September 1999, the group acquired
Banca Commerciale Italiana (Comit), one of the main public banks
previously owned by the state-owned holding IRI. In December 2000,
the group incorporated Cariplo, Ambroveneto and Mediocredito
lombardo – and one year later it incorporated Comit, becoming
“Banca Intesa BCI”, renamed “Banca Intesa SpA” in 2002.
174
Another clear example of that pattern is the constitution of the
Capitalia Group. The latter is the outcome of an alliance between a
former Cassa di Risparmio (CR di Roma) and a large former public
bank. The aggregation process started, again, in the late 1980s –
early 1990s. In 1989-1991, the Cassa di Risparmio di Roma, which
had first absorbed the Monte di Pietà di Roma in 1985, acquired the
Banco di Santo Spirito (a commercial bank). In 1991 the CR Roma
merged with the Banco di Roma to form the Banca di Roma group
(officially created in August 1992). In 1997 the Banca di Roma group
acquired shares from the Treasury in Mediocredito centrale (Credit),
the other large long-term bank owned by IRI alongside with Comit,
to form the Capitalia Group. In the same year, Mediocredito centrale
acquired shares of the Banco di Sicilia, Sicily’s large former public
bank. Two years later, the Banco di Sicilia was entirely absorbed by
the new entity. The last move was the acquisition of shares into the
Bipop-Carire group, itself the outcome of a merger between the
Banca Popolare di Brescia (Bipop) and the Cassa di Risparmio di
Reggio-Emilia (Carire). The Capitalia Group was officially formed in
January 2002 with the integration of Banca di Roma, Bipop-Carire,
Mediocredito Centrale and Banco di Sicilia. Both the Intesa and
Capitalia Groups are vertically integrated but maintain the identity of
the three main components.
A second aggregation pattern characterises the formation of regional
banking groups with a strong territorial basis and often alliances with
the Banche popolari, a form of cooperative bank – which one could
call, therefore, the “regional group” pattern. The territorial element
is fundamental within this pattern: the aim of such aggregation is to
strengthen savings banks’ retail market positions through specialised
joint-ventures – while keeping the local clientele networks and
organisational flexibility. This pattern is common to several groupings
among cooperative banks – mainly, small Banche popolari and the
Banche di credito cooperativo. A good example of such a pattern is
the Carige Group, which formed around the Banca Cassa di Risparmio di
Genova SpA (Carige). The group was created in 1992 and included,
besides Carige, Credito Fondiario della Liguria and Mediocredito
Ligure (both specialised in medium and long-term lending); Columbus
Leasing SpA, Columbus Factoring SpA and Columbus Domestic SpA
(all were specialised subsidiaries offering para-banking services, created
by the CR Genova in the late 1980s – early 1990s).
175
At first a multifunction group, in 1993 the Carige Group became a
universal bank, with the merger between Banca Carige SpA on the
one hand and the above mentioned entities on the other. In 1997-98,
the Group grew with the acquisition of controlling stakes in the CR di
Savona and the Banca del Monte di Lucca.
Other examples of such intra-sector, regional groupings include the
Gruppo Bancario Banca delle Marche (resulting from the merger
between the CR di Jesi, the CR di Pesaro and the CR di Macerata in
1994, and the acquisition of a controlling stake into the CR di Loreto
in 1998) and the Gruppo Bancario Cassa di Risparmio di Firenze
(which includes, at its head, the CR di Firenze, and the CR di
Civitavecchia, the CR di Pistoia e Pescia, the CR di Mirandola and the
CR di Orvieto).
A third pattern characterises those (small) savings banks that have
remained independent, or formed a group on their own. These banks,
or mono-banking groups are characterised by circumscribed territorial
rooting and almost exclusive reliance on the retail market.
Out of 76 remaining savings banks186 in 2002, 16 followed the
independent or small group pattern; 30 were owned, controlled by or
headed a regional group; and 30 belonged to or were controlled by
national universal banking groups.
6.2.3 Factors of divergence: the variety of aggregation patterns
The above two sections clearly show a similar tendency at play both within
and across the Italian and French banking sector: a tendency characterised
by shifts in corporate boundaries (mainly, but not only, through mergers and
acquisitions) and the constitution of large banking groups. However, they
also show strong elements of differentiation in both cases, again both
within and across the two banking systems.
There are, first of all, a variety of aggregation patterns within countries.
This is clearer in Italy than in France. In the latter, federal cooperative groups
have risen to compete with national universal banks, and it is not clear
whether these groups will move, or not, towards forming universal banks.
186 That is, remaining legal entities.
176
In the case of the French savings banks group, the growing centralisation
that has come with autonomy from the CDC certainly points towards
that direction. That is a view shared by all interviewees, whether they
think it is necessary, inevitable, or regrettable (or all three together).
For instance, the price and product policies have been so centralised that
it has become impossible for single savings banks to choose another way.
As an interviewee from a local Caisse said,
There are caisses who do not sell some products from the catalogue;
but the opposite does not happen. To create a specific product is
nearly impossible, for at least two reasons: (i) IT groupings are very
difficult; (ii) you need the agreement from the Caisse nationale187.
And according to another interviewee (a top official at the FNCE):
Personally, I think that after a while the Caisses d’Épargne will lose
their autonomy and become simple bank windows for the financial
products designed and developed by the group’s specialised
subsidiaries. All that for economies of scale188.
The same difficulty exists in the Italian case, albeit less evident. As analysed
above, savings banks have followed roughly three different aggregation
patterns (more precisely, two aggregation patterns and one nonaggregation pattern). But is it possible to draw a conclusion at this point
in time? In other words, have aggregation patterns stabilised, or, on the
contrary, do they continue changing? In the latter case, it is possible to
imagine that some regional banking groups that have emerged from the
cross-provincial alliance between savings banks and Banche Popolari will
further merge into or become controlled by the four or five major
universal banking groups.
This is already the case for several such regional groups, which constituted
preliminary steps in the formation of integrated national banking groups:
the Cardine Group, which was created through strategic alliances and
cross-shareholdings between savings banks from Padova, Bologna, Venezia,
Udine and Gorizia ended up within SanPaolo IMI.
187 Interview, 27.06.02.
188 Interview, 24.04.02.
177
The southern Carime group, which emerged out of a 1998 merger between
the Cassa di Risparmio Salernitana, the Cassa di Risparmio di Calabria e
Lucania, and Cassa di Risparmio di Puglia was similarly absorbed by
SanPaolo IMI. Another example is Rolo Banca 1473, formed in 1996 by
the alliance between the Credito Romagnolo and Carimonte, itself the
outcome of a merger between the CR di Modena and the Banca del Monte
di Bologna and Ravenna. Rolo Banca was acquired and incorporated
within the Unicredito Group in 2002. There is no way to be sure that the
Gruppo Banca delle Marche, or the Gruppo Bancario Unibanca, which
are the outspurts of small savings banks, will not ultimately take the same
path (a similar argument is made in Messori et al. 2003).
The uncertainty about the durability of this pattern variety can be partly
balanced by looking at other segments of the banking system. Regional
groupings represent a sizeable feature of the whole system – around 95
banking groups are identified by the ABI, among which two thirds are
regional retail groupings. The regionalisation trend is especially strong
among Banche Popolari, which have in many cases formed alliances with
local or regional savings banks. Finally, the Italian banking system is still
characterised by a high number of small cooperative banks, many of
whom have formed local alliances.
A second interesting aspect of change – and a second element of
differentiation - is the sector dynamics of banking aggregation patterns.
In other words, shifts in firm boundaries have occurred mostly within
bank categories: commercial banks with commercial banks, savings banks
with other savings banks… Such intra-sector dynamics were stronger in
France than in Italy where, as we just saw, the biggest savings banks
choose to form groups by forging alliances with non-savings banks189.
As a central bank official said,
Speaking of savings banks in Italy does not make sense any more.
Because the Casse di risparmio are a very heterogeneous type of banks.
Some of them are still very rooted, linked to the territory190.
189 Of course, it can be argued that the partners chosen by savings banks for these large
deals were former public banks – and since savings banks were considered as quasi-public
banks, there is a ‘sectoral’ flavour to the aggregation patterns that brought these banks
together.
190 Interview, 19.02.02.
178
In the Italian case, differentiation occurred within the broad category of
savings banks. The 1999 IEF report rightly points out that “at present it is
hard to identify a single strategy for the Italian savings banks sector”,
adding that “to some extent, strategies seem to be related strictly to size,
which is very heterogeneous”. (IEF 1999, p.125.) The latter is a crucial issue:
territory, or “localism” (that is, the extent to which banks or banking groups
are rooted in a particular territory) is clearly a discriminatory variable
between Italy and France. Several studies document the specific pattern
of aggregation followed by most small and medium-sized Italian savings
banks, which reveals a strong ‘sector character’ (Locatelli, 1998) consisting
in a deep rooting (and continued investment) into the territory of origin.
In France, M&As occurred strictly within the category. They happened,
furthermore, in an orderly territorial way: at the departmental, crossdepartmental, and then regional level191, suggesting a very ordered
re-structuring process (no cross-regional or cross-sector merger). In fact,
sector institutions played a key role in encouraging mergers and shaping
the emergence of integrated regional banks. In late 1989, the CENCEP
commissioned a report from a consulting firm about the network’s future
restructuring needs and ‘optimum’ size. The report’s conclusions were
presented in May 1990, and the restructuring scheme was adopted by
the CENCEP General Assembly in June 1990, where the director of Caisse
des dépôts, Robert Lion, announced, obviously in agreement with the
CENCEP, the plan to re-group the 187 existing savings banks into 50 units
that should be “strong, autonomous and accountable”192. This decision had
been long expected at the CENCEP, but any proposal to further re-organise
the sector had previously met with strong reluctance from the unions,
and was a bone of contention between the Caisse des dépôts and the
CENCEP. Indeed, the former was keen on keeping a hand on financial
links between savings banks and SOREFI. One month later, Raymond
Douyère gave his own report to the Government. In July 1991, the new
reform was passed, which institutionalised the re-organisation of the
network. In 1991-92, following both CENCEP’s decision and the 1991
reform, savings banks underwent the most radical wave of mergers in their
history: in a few months, the number of savings banks fell from 187 to
34 – a further reduction compared to the 1990 consulting firm report.
191 It should be noted, however, that the regional boundaries of the actual 33 savings banks
do not exactly match regions’ administrative boundaries.
192 On that crucial date for the future organisation of the sector, see Le Monde, June 30,
1990 (“Les caisses d’épargne accélèrent leur restructuration”); and Moster (2000), p.52.
179
Interestingly, this process was largely driven by the group’s top executives:
the chronology of events clearly points to the legislator playing a follower’s
role in the 1991 transformation. In a special issue of La Lettre de
l’Association pour l’Histoire des Caisses d’Épargne (n.5, December 2001),
one can even read “The size of changes undertaken by savings banks led
the legislator to modify the 1983 law to harmonise the legislation with
the new organisation”.
6.3
Sector coordination
At the outset of the 1980s, French and Italian savings banks belonged to
legally recognised and economically specific categories within the
broader banking system. Both the legal and organisational characteristics
of the “savings banks category” underwent tremendous changes in the
subsequent decades, in seemingly different directions for the two countries.
These changes in sector boundaries mirror and complement, in many
ways, the changes in savings banks’ corporate boundaries just described.
6.3.1 The logic of vertical integration and the diverging fates
of the sectoral banks
•
France
In France, the centripetal dynamic that characterises savings banks’
aggregation patterns over the years goes hand in hand with an
increased centralisation of financial flows within the group, through
the emergence of a “sector central bank”.
At the outset of the 1980s, savings banks were part of a financial circuit
essentially directed by the Caisse des Dépôts et Consignations (CDC).
Figure 6.5 represents that circuit. The CDC managed administered
savings resources collected by the savings banks, and gave back part
of those resources to the banks for the use of financing local
governments’ housing investment needs (the famous ‘Minjoz
contingents’, which will be further explored in chapter 8)193.
193 From 1950 to 1971, savings banks were only authorised to present (support) loan
requests to be funded by the CDC on their share of the Minjoz contingent; in 1971 they
were authorised to directly fund those loans from the Minjoz funds provided by the CDC.
180
Such a circuit deprived savings banks of autonomy in the management
of their financial resources and in the choices to be made in the use of
those resources; denied their nature of intermediary; and maintained
the unbalance between their large presence in the collect side and
their marginal role in lending. A first change had been brought to the
system in the late 1960s with the creation of the Groupements
Régionaux d’Épargne Prévoyance (regional savings groups, or GREP).
The GREP’s mission was to manage part of the new resources allowed
to savings banks (among which the Livrets d’Épargne Logement and
the bons d’épargne logement) and redistribute them to the Caisses so
as to be used in loans to local governments. The GREP, jointly owned
by the banks and the CDC, were a first step in delegating to the
“savings banks world”194 part of the financial management until
then entirely centralised at the CDC. However, the creation of the
GREP did not fundamentally alter the structure of the circuit – and, in
particular, savings banks’ subordination to the CDC and absent
financial autonomy.
The 1983 law substantially modified this structure, by organising a
real financial network among savings banks195. First, it replaced the
GREP with Sociétés Régionales de Financement (regional financing firms,
or SOREFI), entrusted with substantially the same role. However the
SOREFI, in contrast to the GREP, had a direct responsibility on the
resource side; in addition, their role was extended to all resources
collected by savings banks, except the Livret A (and part of the CODEVI);
and the SOREFI could directly use some of the resources to finance
loans, limited by law to institutions specialised in industrial investment,
backed by public entities. In sum, SOREFI were true regional banks
operating like the Giro banks for the German savings banks.
A second, major change driven by the 1983 reform was the creation
of a “network head”, the Centre National des Caisses d’Épargne et
de Prévoyance (Savings banks national centre, or CENCEP). Finally,
two funds were created by the 1983 law, which laid the base for
group-level risk management: the Fonds de solidarité et de
modernisation (solidarity and modernisation fund) and the Fonds
commun de réserve et de garantie (common reserve and insurance
fund). Both were managed by the CENCEP.
194 Since the GREP were distinct from the savings banks, but at the same time linked to them.
195 Duet sees in the 1983 law an unambiguous step towards the “re-conquest of [savings
banks]’ independence” (Duet 2001: 72).
181
Following Duet, one can interpret the 1983 law as creating two
parallel, but distinct, financial or intermediation circuits: a first one,
public, based on the Livret A, regulated and headed by the CDC;
a second one, private, based on all other resources, from then on
managed within the network (by the SOREFI). The twin intermediation
circuits created by the 1983 law are represented in Figure 6.6.
The 1991 law brought further substantial modifications to this
architecture. First, it abolished the SOREFI, and simultaneously
transferred balance sheet management to savings banks themselves.
Within one year after the law was passed, SOREFI’s assets and
liabilities were transferred to the newly formed regional savings
banks, while their own funds were transferred to the CDC.
Simultaneously, the law abolished the Minjoz contingent, allowing
savings banks to finance their loans to local governments from
‘banalised’ resources (i.e. non administered savings resources), further
distinguishing the public intermediation circuit (Livret A resources
were to be entirely managed and used by the CDC) and the private
one, described above. These were crucial changes, since they gave
savings banks full autonomy in the management of their balance
sheet.
In addition, the law created two national financial institutions,
fulfiling the functions of a central cashier: the Société centrale de
trésorerie (central treasury institute), which held regional banks’
current accounts; centralised excess of liquidity; and ensured interbanking payments between the network and other credit institutions
(including the central bank and the CDC); and the Société centrale
d’émission et de crédit (central credit and lending institute),
predominantly owned by the CE, which managed emissions for the
whole network, ensured regional banks’ refinancing and organised
national lending pools. This structuring was supposed to evolve
towards the creation of a fully-fledged central cashier196. And in fact,
in 1995, the two institutes were merged into a Caisse Centrale des
Caisses d’Épargne et de Prévoyance (savings banks central cashier,
CCCEP). To take, again, the German system as a comparison, the CCCEP
was conceived as a Girozentralbank.
196 According to the CENCEP in La Caisse d’Épargne: une mutation réussie, Paris: October 1991.
182
The latest step in French savings banks’ road towards autonomy was
the 1999 reform, which merged the CENCEP and the CCCEP
together, into the Caisse Nationale des Caisses d’Épargne (savings
banks national cashier, or CNCE) – the ‘associational’ components of
the CENCEP being spun off to create the Fédération Nationale des
Caisses d’Épargne (savings banks national federation, or FNCE), which
will be analysed in the next section. In addition to centralising
financial flows within the network, the CNCE also inherited all the
specialised subsidiaries that, from 1988, were controlled by the CNCE
through the holding Écureuil Participations (see Figure 6.4).
Strengthened coordination and reinforced autonomy were the twin
outcomes of this process. As one of the French interviewees stated:
The reform allowed us to maintain the group’s cohesion, in contrast
to what happened in Italy, with one single group, and one single
bank operating on a single territory197.
However, coordination was subsumed into centralisation. The rise of
the savings banks national cashier parallels, indeed, the radical shift
of savings banks’ corporate boundaries during the 1980s and early
1990s, gave rise to a ‘federal’ banking group, where products were
designed at the central level (through specialised subsidiaries), not at
the regional one (see previous section). An additional relevant tendency
related to the growing ‘merger’ between IT systems and the growing
interconnection, promoted by the CNCE. There were 14 regional IT
centres in 1990, down to 3 different platforms in 2003.
Similarly, one should note the pooling of communication resources
through the birth of the “Précoce” network in 1987 (Précoce stood
for “Premier Réseau de Communications des Caisses d’épargne”).
197 Interview, 24/04/02
183
•
Italy
At this level of analysis, the Italian case displays fundamental differences
to the French one. Starting situations were altogether different: first
of all, at the outset of the period under study, Italian savings banks
were fully-fledged banks, which had kept full autonomy over their
balance sheets since their creation. Secondly, since 1919 Italian
savings banks’ intermediation built on the guarantees and services
provided by the Istituto di Credito delle Casse di Risparmio Italiane
(Italian savings banks credit institute, or ICCRI).
Along the years, ICCRI increased its role from a risk-management tool
to a fully-fledged credit institution at the service of savings banks,
providing mainly treasury services, merchant bank services (for bonds)
and ‘circular checks’, a typical network externality first experienced
within the savings banks network – allowing customers to cash in
checks at savings banks other than their own. The role played by the
ICCRI was very similar, in that sense, to the one played by Girobanken
in Germany. In the 1950s, a Fondo di Solidarietà e Sviluppo (solidarity
and development fund) was created, together with Fondi di garanzia
federali (federal guarantee funds) at the regional level. Beyond
centralised financial services, such funds, together with the ICCRI,
ensured the possibility of sector-wide investments – such as those
in IT, whose costs were too high for the smallest savings banks198.
In 1979, the ICCRI launched STACRI, an ambitious IT program that
incorporated the payment system and systematised the circulation
and sharing of data and information among savings banks.
A crucial change occurred in 1986 when all payments systems, including
STACRI, were unified into an electronic Rete nazionale interbancaria
(inter-bank national network). In addition, the ICCRI became, along
with a few other specialised institutions, one of the operators of the
network. This change was an important step towards the constitution
of a unified banking market in Italy (what economists would call ‘a
level playing field’), and formally marked the end of the ICCRI as a
purely ‘savings bank’ actor. The second major change was brought
about in 1993, with the transformation of the ICCRI into a joint-stock
company, whose shares were then held by several major Foundations.
The ICCRI was therefore privatised along savings banks – although its
ownership still remained within the former savings banks sector.
198 As emphasised in Acciaro et al. (1985).
184
In November 1999, the Banca Popolare di Lodi, one of Italy’s largest
cooperative groups, acquired a majority stake in the ICCRI –followed
a few months later by a wave of acquisitions of savings banks.
In January 2000, the ICCRI acquired the control of the CR di Imola;
In 2000-2001, the BPL completed the merger between the ICCRI and
the Casse di Tirreno SpA, head of the homonymous holding group,
which in turn controlled the Cassa di Risparmio di Lucca, the Cassa di
Risparmio di Pisa and the Cassa di Risparmio di Livorno. In addition,
between 1999 and 2001 BPL made acquisitions or alliances with
merchant banks and institutions specialised in credit services, thus
building up on the ICCRI’s historical assets.
Thus, in contrast to what happened in the Banche Popolari sector
(where the Istituto Centrale delle Banche Popolari fulfils missions to
the exclusive benefit of banks belonging to the category), the Italian
equivalent of CNCE soon disappeared as a sector central bank,
mirroring the heterogeneous destiny of savings banks themselves.
6.3.2 The diminishing power of sector associations
The existence of strong sector associations has long characterised savings
banks in Germany, Spain, and the Netherlands. In those countries such
organisations play a key role in representing savings banks’ interests,
steering exchanges between category members, and maintaining the
cohesion of the whole sector. They generally are responsible for all issues
pertaining to contacts with regulatory authorities, common strategies,
and lobbying. Their organisation mirrors that of the political institutions
with whom they are dealing (Deeg, 1999). France and Italy show, from
this point of view, two contrasting histories.
•
France
French savings banks did not create a formal sector organisation until
the late 1960s. They did, however, participate in an institutionalised
forum, called Conférence générale des Caisses d’Épargne (general
conference of savings banks), which consisted in regular, national
meetings of all savings banks. The general conference was replicated
at the regional level through regional conferences.
185
The general conference fulfiled representation and proposition functions:
in 1947, for instance, it was within its framework that the proposal
leading to the Minjoz law was discussed and then presented to the
government (see Duet 2001: 59). However, the General conference
did not evolve into an organisation until 1969, much later, therefore,
than the Italian savings banks. The reasons for this un-organisation
probably lies in (a) the fragmentation of savings banks and their
embeddedness in local political and economic networks, and (b) their
‘functional dependence’ from the Caisse des Dépôts.
In 1969, French savings banks set up the Union nationale des caisses
d’épargne de France (French savings banks national union, or UNCEF),
which was the first formal organisation (with its own staff and a legal
status) to represent savings banks’ interests. UNCEF, with the 1983
law, disappeared and its activities were transferred to the CENCEP –
which was, however, more than an association representing savings
banks. As seen above, the CENCEP was conceived as the head of the
savings banks network.
A true savings banks association did re-emerge two decades later, at
the term of a process that saw the birth of an integrated banking group
(see sections above). The Fédération Nationale des Caisses d’Épargne
(national savings banks federation, or FNCE) was formally instituted
by the June 25, 1999 law (articles 1, 6 and 15), and was created on
September 29th, 1999. It has a “law 1901 status” – that is, it had
the legal status of an association – but its name, “Fédération”, reveals
higher ambitions: its core mission was indeed, to federate the 34 Caisses
d’Épargne. In particular, the law gave four missions to the FNCE:
-
-
-
186
to coordinate the relations between the Caisses d’Épargne and
their owners, the sociétaires, and organise training for the latter,
especially their representatives elected at the Sociétés locales
d’épargne (SLE, see next chapter) and the Conseils d’orientation
et de surveillance (COS, see next chapter);
to participate in the definition of the Group’s “strategic
orientations”;
to set national goals for the “general interest missions” defined
by Art.1 of the 1999 law, and especially the projets d’économie
locale et sociale (PELS, see chapter 6);
to represent interests common to savings banks and their owners,
especially vis-a-vis regulatory authorities.
The Fédération represents both savings banks and their owners.
Indeed, it is owned entirely by the 34 Caisses d’Épargne (in contrast
to the Caisse nationale, partly owned by the Caisse des dépôts), and its
general assembly, the purposeful organ of the Fédération, is composed
of the 34 savings banks represented each by three individuals:
the President and one member of the COS, and the President of the
Directoire. The General Assembly, which meets every year, appoints
the 18 members-board of the Fédération, which is composed of
12 Presidents of COS and 6 Presidents of Directoire. The chairman of
the board is a COS President.
This evolution, and in particular its ultimate twist in 1999, indicates
the reinforcing of the group’s bank at the expense of the association.
This is not clear in the formal institutional mechanisms, by which the
FNCE seems to have gained in power as compared to CENCEP – in
particular, its roles of coordination with and training owners seem to
give it a strong leverage over the Group’s governance. This is not so
in reality, as the next chapter will show. Finally, and perhaps more
importantly, there is a strong perception by savings banks staff (both
at the central and local level) that they are part of a banking group
more so than a cooperative organisation. This element arose
repeatedly in the interviews.
To sum up, the gradual increase of sector centralisation throughout
the 1980s and 1990s, culminating in the current organisation,
paradoxically did not play in favour of strengthening the particular
identity of savings banks, but to an assertion of the savings banks as
a “normal” banking group intended to compete with other banking
groups – and not only the Crédit Agricole199. This trend is reflected in
the new organisation of the Group, but above all in the real balance
of power between the two national institutions, the CNCE and the
FNCE. However, and this is an important point, there is no reason to
say that the current balance cannot change.
199 In a revealing speech delivered at the FNCE in March 2000 and aimed at giving some
indications to the FNCE on how to proceed to develop the “cooperative status”, an
outside guest said “focusing on statuses, elections, is running the risk of emphasising too
much issues of power and representation. [The Federation should] draw the attention out of
the General Assembly and on to more open, useful and comfortable issues for managers
and employees at the Caisses d’Épargne.” Speech reproduced in the first “Compendium”
(Textes choisis et commentés par la Fédération Nationale des Caisses d’Épargne) published
by the FNCE in 2001 (10,000 issues disseminated within the network).
187
Institutional features do not force one way or another. In fact, if the
1999 reform, which formally opened new ways to re-assert the
savings banks’ particularities through the cooperative status and the
creation of the Fédération, was bended by reality in another direction,
future developments might well bend it backwards. This is all that is
at stake with ownership (see next chapter).
•
Italy
The Italian situation differs from the French one in two aspects: first,
the Italian savings banks’ sector association has historically been more
powerful than its French counterpart; secondly, in the early 1980s
savings banks belonged both to the category’s association and to the
commercial banks’ association.
The Italian savings banks’ sector association has been, historically,
more powerful than its various French counterparts. It was founded
in 1911, at a period when the Casse di Risparmio were undergoing
strong competitive pressures from other groups of banks – when, that
is, creating a unified body was felt necessary to lobby the government
for protection (De Rosa, 2003: pp.130-9). Twenty years before, savings
banks had met in a first national congress to organise themselves in
the wake of a forthcoming law on the subject. The Associazione
fra le Casse di Risparmio Italiane (Italian savings banks association,
or ACRI) operated continuously ever since 1911, except during the
fascist period, when it was replaced by a “Fascist federation of
savings banks”200. In the postwar period, the ACRI asserted itself as a
powerful banking lobby, linked with top officials at Banca d’Italia201.
Associational links between savings banks were very strong until the
mid-1980s, through the ACRI, but also through national congresses
organised every three years, and thematic meetings organised by
single savings banks almost every year, without mentioning
workshops and the annual celebration of the “world’s savings day”,
which is still today organised by the ACRI and in which top officials
from both the Central Bank and the government participate (in
general, the governor and the Minister of the Treasury).
200 From 1938 to 1944. On that period, see De Rosa (2003), pp.380-9.
201 The central bank governor, from then on, became the official godfather of the ‘world
savings day’ celebrated every year at ACRI. In addition, starting with governor Menichella,
top officials at Banca d’Italia started to frequent regularly the savings banks annual
congresses and other conferences organised by ACRI.
188
As an observer noted in the early 1980s, the strong associational
linkages between savings banks were all the more remarkable in that
they formed a very heterogeneous category, both in legal (see chapter
3) and dimensional terms (Pin, 1984). A former president of the ACRI
(and CEO of Cariplo) called the association a “sociality leitmotiv”
(Ferrari, 1985). The same emphasised how the links and exchanges
between savings banks top officials operated “as if we were a single,
large firm” (Ferrari, 1985, p.1038).
In addition to these associational linkages, moreover, most savings
banks belonged to a regional or cross-regional Federation. But in the
mid-1980s, doubts regarding Federations’ role rose, culminating in the
disappearance of that particular level of association (Ferrari, 1985).
The ACRI did not, however, have the monopoly of savings banks
associational linkages. Since the postwar period, the ACRI was
“subordinated” to the Italian banks association, ABI, for all matters
pertaining to inter-bank operations and self-regulation. Indeed, as
mentioned above, the Casse di Risparmio were simultaneously members
of the ACRI and of ABI. A fact that, according to one observer,
“should not be surprising […] since savings banks are true and proper
commercial banks” (Pin, 1984).
During the 1980s and 1990s, savings banks’ ACRI membership lost
relevance, to the benefit of ABI. First, in 1985, the ACRI allowed
national labour contracts to be negotiated directly at an ABI level.
This was an important change since savings banks employees benefited
from a particular status which included many advantages in terms of
working hours, salary and union activities. It is also interesting to
note that the ACRI’s decline started with losing its prerogatives on
collective labour negotiation, before the Amato Law. The latter did
indeed bring a major blow to the ACRI, since, by transforming the
savings banks into joint-stock companies, it allowed them to become
full members of ABI. In fact, this allowed a broad convergence in
banking labour regulation, through the negotiations around the 1994
collective contract between ABI and the unions. Finally, since January
2000, the function of tutela (guarantee) of the Casse di Risparmio
was transferred to ABI. In the words of a top official at the ACRI,
the Association is now “supporting” ABI in his new function.
189
But ‘losing’ savings banks did not put an end to the ACRI’s existence,
since it ‘gained’ new members in the person of Foundations, the new
ex-owners of savings banks (see next chapter). Since the 1990 Amato
Law, the ACRI has represented the Foundations. The legislator further
institutionalised the ACRI’s role towards Foundations, in particular
with a 1991 law202 on voluntary activities (which recognises the role
Foundations play in financing voluntary associations) and a 1999
decree203, which confirms the ACRI as the official interlocutor of
regulatory authorities for all matters pertaining to Foundations’
organisation and functioning.
6.4
Discussion
6.4.1 Shifts in boundaries and shifts in coordination modes:
variation within and across countries
What both the French and Italian cases show is a shift from sector to
group coordination. This is clearer in Italy, where, as we have seen, the
category of savings banks as such ceased to exist in the early 1990s – and
where the category’s association shifted its focus from savings banks to
Foundations. The simultaneous emergence of large banking groups
(a shift in savings banks’ corporate boundaries) completed this shift in
sector boundaries. In France, the evolution has been similar despite the
apparence. The category has been strengthened so much as to become
a group – and lose the coordination characteristics of a sector category.
External boundaries (both of banks and sectors) are reinforced by shifts
in ‘associational density’, or group cohesion.
Again, this double shift (shift in sector boundaries and in sector cohesion)
signals a change in the mode of coordination. This change, moreover,
has been common to all categories of banks: savings banks, but also,
cooperative banks (and Banche Popolari in Italy), and commercial banks.
However, both the processes of change and its outcomes vary across and
within countries. As seen above, the strengthening of a ‘central cashier’
within the French savings banks network, and the spin-off of
associational functions from the head of the network (itself merged with
the central cashier) have had strong centripetal effects.
202 Art.15 Law 266/91
203 Art.10 Legislative Decree n.153/99
190
In Italy, in contrast, the network’s central credit institution, ICCRI, was
privatised, while the savings banks’ association turned its focus away
from savings banks to Foundations. In effect, the category exploded into
several sub-groups, each following a different path of aggregation.
Changes have also produced variety within each country. This is clear in
the Italian case, where savings banks have followed several divergent
aggregation patterns, while the sector ceased to exist. As seen above, at
least three subgroups of savings banks can be identified: a first one includes
savings banks who have been absorbed, or who are now controlled, by
large banking groups; a second group consists of savings banks who have
re-grouped in regional alliances, either within the category or with
banche popolari; and a third one is made up of those savings banks that
have remained independent or formed a group on their own.
As Figure 6.8 shows, group centralisation has increased in both countries,
while sector cohesion has increased in France and decreased in Italy.
Again, however, part of the divergence can be explained by the differing
systemic relational properties of the units of observation (savings banks).
In other words, the evolution analysed above reveals that French and
Italian savings banks fundamentally differ in one critical property: their
relation to the system. Therefore, one needs to take a systemic view to
verify the validity of the comparison: have other Italian banks fulfiled a
role that is functionally equivalent to the French savings banks? It does
not seem so. Cooperative banks, be they Popolari or simple cooperatives,
have not aggregated into a national federal banking group. These two
categories are also, as the Italian savings banks sector, characterised by
strong internal differences.
A final “test” of the validity of the analysis results exposed misgivings on
whether the Italian case lags the French one. In other words, the trends
shown by the Italian case might well be temporary and, in the long run,
converge on the French model (full integration of all banks into national,
federal banking groups). Again, however, this objection does not resists
a counter-objection: the actual patterns of aggregation already exhibited
by Italian banks differ from those followed by French banks in fundamental
ways, the first one being the territorial variable. The regional level in
aggregation processes in Italy has played a much more important
role than in France, where the mergers of small local savings banks into
large regional savings banks have been accompanied by strengthened
group centralisation.
191
6.4.2 The historical- institutional roots of sector coordination
The second issue to be addressed here is the role institutions played in the
changes analysed above. Since we are dealing here with the rules of the
coordination game, the only prior or superior institutions are regulatory
ones. Two kinds of institutions may be identified: static, boundary-definition
institutions on the one hand; and dynamic, boundary-redefinition institutions
on the other. The first category consists of all regulations pertaining to
the definition of firm’s environmental boundaries. In particular, they are
those regulations defining sectors, categories, and the ways in which
they differ (corresponding to the ‘top-down’ sector characteristics in
Hollingsworth, 1994); and the extension of the banking market.
The second category refers to all rules that induce (or constrain) firms,
in the present case banks, to redefine boundaries on their own.
Characteristic of this category are fiscal incentives for mergers and
acquisitions, for instance.
‘Boundary definition’ institutions have undergone tremendous changes
in both countries. As shown in chapter 3, the very legal definition of the
savings banks category (or sector) has changed. In the French case, from
a sui generis category, the savings banks sector was assimilated to a
cooperative banking group in 1999; in Italy, the category effectively
ceased to exist with the legally mandatory transformation of savings
banks into joint-stock companies in 1990. Moreover, the first article of
the 1990 law was dedicated to mergers. Indeed, it explicitly provided that
public credit entities “can merge with other credit institutions of any
nature, even in the case in which they would become joint-stock
companies”. At a broader level, in both countries legal boundaries were
re-drawn for all sectors in the 1980s and the 1990s, leading to the official
recognition of two main categories: cooperative and commercial banks.
‘Boundary re-definition’ institutions also underwent profound changes
during the period under study, in both countries. In Italy, those
institutions took two forms: on the one hand, legal and regulatory
incentives for mergers and aggregation. These incentives, according to
Zazzaro (2003), played a key role in pushing for aggregation during the
1990s. It is especially striking to see the acceleration of mergers and
acquisitions after 1994, i.e. after the government took more decisive
measures to encourage especially share sell-offs from savings banks
owners, one key element in the process (see next chapter). On the other
hand, the steering role played by the central bank might be seen as a key
‘re-definitional’ institution.
192
As said in chapter 3, the 1990 antitrust law confirmed Banca d’Italia’s
power to authorise mergers and acquisitions among banks. This process
might be paralleled with what happened in the previous large-scale
aggregation process in the banking sector, i.e. in the 1930s. In 1927204,
the government forced small savings banks to merge, and the gathering
of remaining savings banks in local Federations. As reported in the ACRI’s
first report on banking foundations, the Minister of the Economy then
invoked the need to avoid “a remarkable waste of energy” and to facilitate
monitoring by the government, “through a smaller number of Casse di
risparmio with a broader range and less subject to local issues”205.
That move brought to a rapid fall in the number of savings banks: from
200 in 1926 to 91 in 1938, and 81 in 1939206.
So regulatory institutions did change, as well as coordination. But did
institutional change cause change in coordination? Here we have to build
on the findings reported in the previous chapter, especially on the
proactive role savings banks actors played in defining the substance of
regulatory reforms. The emergence of powerful banking groups, and the
positioning of savings banks within the group structure, reflects not a
choice by savings banks actors of a strategy fitting the new (given)
environment, but a choice by several key groups of actors to transform
those very ‘institutions’. A multi-layered consensus (in Italy, between the
Fondazioni and the political power, between top managers at savings
banks and at the Fondazioni, among political forces, between regulatory
actors) permitted the realisation of this radical institutional shift in the
Italian and French banking sector.
To sum up, in France, the 1980s and 1990s saw the strengthening of a
banking network, increasingly centralised around the Caisse nationale
des caisses d’épargne207, itself slowly acquiring more autonomy from the
Caisse des Dépôts. In Italy, the national level was never strong and was
abandoned after it became clear that the former savings banks would
become the backbone of the new banking system of the 1990s. But at
the same time, one can see a very clear pattern of “endogenous”
aggregation between and among savings banks before aggregation with
other categories of banks.
204 Decreto legislativo of February 10th, 1927, n.269.
205 Cited in ACRI (1996), p.11.
206 That subsequent decrease in the number of savings was due to another legislative move
that disposed mandatory fusion of some savings banks with Monti di credito su pegno
(Law of December 14th, 1939, n.1922).
207 As said in Chapter 3, the CNCE was created with the 1999 law, but it retained some of
the missions previously exerted (in a looser way) by the CENCEP.
193
In other words, the emergence of major banking groups in Italy was an
orderly (although fragmented) process governed by the individual savings
banks themselves. In a sense, then, this contrasting evolution follows
institutional patterns well established in both countries. But if the peculiar
characteristics of the process of change, and even some of its substantial
characteristics, can be explained by institutional path-dependence, such
explanation falls short of understanding change itself (its “triggers”, its
directions).
If de-segmentation means the end of a form of compartmentalisation
organised by the State, it does not mean the end of all forms of
compartmentalisation. In both cases actors have re-organised in very
distinct ways, leading to new forms of differentiation. Those forms of
differentiation correspond to a minimal compartmentalisation (territorial
and sectoral in Italy, sectoral in France) and are, therefore, subject to change,
in the absence of further demands for stronger compartmentalisation.
194
Figure 6.4: Ownership and shareholdings of the Groupe Caisse d’Épargne in 2004
100%
Clients
Sociétés locales d’épargne
100%
Caisses
d’Épargne
La Poste
65%
Caisse nationale
des Caisses
d’Épargne
50.1%
49.9%
Sopassure
37%
49.9%
49.9%
Caisse
des dépôts
35%
50.1%
36%
47%
CNP
Crédit Foncier
de France
Eulia
40%
53%
Écureuil gestion
Écureuil
Assurances IARD
A3C
Écureuil
Participations
Cicobail
Saccef
Gestitres
Bail Écureuil
Sogeccef
Banca Carige
Crédit Logement
San Paolo IMI
Real estate
Insurance
Specialised
financial subsidies
CDC Ixis
CDC Ixis Capital Markets
Socfim
CDC Ixis Asset Management
Écureuil Vie
Investment bank
and financial
market activities
195
Figure 6.5: Intermediation circuit in the French savings banks
sector before the 1983 law
Collect
Lending
CDC
Livret A
LEP
All other
products: Livret B,
Éopargnelogement…
Caisse
d’Épargne
Caisse
d’Épargne
Prêts Minjoz
Lending to
households and
associations
GREP
Lending to
institutions
specialised in
industrial
investment
Prêts d’intérêt
régional
Figure 6.6: Intermediation circuit in the French savings banks
sector in the mid-1980s
Collect
CDC
Lending
Livret A
LEP
CODEVI
All other
products: Livret B,
Éopargnelogement…
Caisse
d’Épargne
Caisse
d’Épargne
SOREFI
Prêts Minjoz
Lending to
households and
associations
Lending to
institutions
specialised in
industrial
investment
Prêts d’intérêt
régional
196
Figure 6.7: Intermediation circuit in the French savings banks
sector after the 1991 law
Collect
CDC
Lending
Livret A
LEP
CODEVI
CCCE
Caisse
d’Épargne
All other
products: Livret B,
Éopargnelogement…
Lending to
households and
associations
Lending to
institutions
specialised in
industrial
investment
Prêts d’intérêt
régional
Figure 6.8: Evolution of group centralisation and savings banks
sector cohesion in France and Italy, 1980-2000
Low sectoral cohesion
High sectoral cohesion
Low group centralisation
France
High group centralisation
Italy
197
198
7. CHANGES IN SAVINGS
BANKS’ CORPORATE
GOVERNANCE
7.1
Introduction
Besides facilitating savings banks’ corporate restructuring, the regulatory
reforms in France and Italy allowed the streamlining of ownership and control
– that is, corporate governance. Savings banks’ control had represented
a key stake in the reform process – a process, as emphasised in chapter
5, driven by savings banks’ top management. Understanding changes in
savings banks’ corporate governance requires, therefore, an analysis of
the changing balances of power between top management and other
actors (political actors, employees, clients).
Chapter 6 has shown how the regulatory reforms of the early 1980s in
France and 1990s in Italy paved the way for a “piloted” restructuring of
savings banks by their top management. Changes in ownership and control
have accompanied those shifts in sector and firm boundaries: the former
both facilitated and were reinforced by the latter. In other words, on the one
hand savings banks’ corporate restructuring depended on the clarification
of ownership and control (characterised by implicit privatisation in Italy,
explicit autonomisation in France); on the other the redistribution of
corporate control to the benefit of managers (as will be showed in this
chapter) was strengthened and legitimised by corporate restructuring.
This chapter, therefore, addresses the same questions dealt with in the
previous chapter, which mirrors the research puzzle presented in the first
part of the study. On the one hand, the chapter seeks to understand the
patterns of change followed in each country, with the goal of assessing
the convergent/divergent forces at play across France and Italy. On the
other hand, the chapter aims at identifying the factors of change and
persistence in both countries. Corporate governance, as mentioned in
chapter 2, is often identified in the comparativist literature, as one of the
institutional pillars of contemporary capitalism.
199
In other words, ownership and control are seen as institutions that influence
singular (and aggregate patterns of) behaviour. Here, by contrast, corporate
governance is taken as the dependent variable. The ultimate aim of this
chapter, therefore, is to assess whether and to what extent are changes
in savings banks’ ownership and control attributable to changes in the
institutional “matrixes of constraints and incentives” identified in chapter 4.
7.2
Ownership patterns
7.2.1 The starting point: whose savings banks?
Until the 1980s, neither French or Italian savings banks had clear owners.
In both cases, savings banks were sui generis entities, whose location with
respect to private or public law was ambiguous (see chapter 3), whose
managers were co-opted within a pool of local power holders (notables).
Savings banks’ equity, whether it had foundational or associational
origins (in the Italian case), did not give rise to property rights over the
bank or the bank’s revenues, and their benefits were redistributed through
grants to local associations, or to finance social or artistic endeavours208.
As an interviewee (top official at the FNCE) said:
[In 1981] Savings banks’ ownership was confused: did they belong to
the State? To the nation? That’s what Beregovoy [the Socialist Minister
of Finance] said then. But what does that mean? Who is «the nation»209?
This ambiguity did not, however, place them in equidistance from private
and public sectors. Savings banks were strongly associated with public
intermediation circuits, where public entities – especially the Minister of
the Treasury, in both cases – played a key role in the banks’ corporate
governance. In France, as shown in figure 4.5 (see chapter 4), savings
banks were not really autonomous entities, and were an element of the
so-called ‘Treasury circuit’ (Zerah, 1993) in financial intermediation: decisions
about lending and collect were made by the Caisse des Dépôts et
Consignations, itself organically linked to the Treasury department at the
Ministry of the Economy.
208 Such funds were tellingly called in France the “Fortune personnelle” (personal wealth) of
savings banks.
209 Interview, 24.04.02.
200
In Italy, the two key members (Director and vice-Director) of the savings
banks’ executive board were appointed by the Comitato Interministeriale
per il Credito e il Risparmio (intergovernmental committee for credit and
savings, or CICR), which was dominated by the Treasury as well.
Such unclear ownership lines were problematic, or more precisely became
problematic for several reasons. First, they became problematic for savings
banks themselves, faced with recurrent needs to increase equity (or
recapitalise). Who should do that, and under what form? Since there
were no equity owners, there was nobody to turn to when the issue of
recapitalisation arose. As chapter 5 has shown, the need for recapitalisation
(a precondition for systematic banking restructuring) was among the
driving forces in savings banks reform process during the 1980s.
A second problem associated with blurred ownership was the ‘undue
advantage’ it was perceived to give savings banks over other banks – by
exonerating them from remunerating owners. This undue advantage
became even more problematic after 1985 in Italy, and the introduction
of prudential regulation. Unclear ownership meant, for savings banks,
having more resources at disposal for complying with prudential regulation
(equity-related ratios, reserves)210.
A third problem was the issue of power. In the context of a gradual
loosening of the state’s grip on the banking system, and on savings banks
in particular (see chapter 5), who would take a hold of savings banks, and
therein control savings banks’ economic resources and political assets?
In Italy, the power of the Ministry of the Treasury over executive directors’
appointments had a great political significance. The Casse di Risparmio
were, indeed, a pillar of the Christian-Democrats’ Northern and Southern
power base, and of the Communists in Toscana and Emilia-Romagna.
There is no study on the relationships between the Casse di Risparmio
and political power – just brief mentions in monographs or broader
essays211. However, the existing evidence seems to show that Italian
savings banks were much more of a national and regional political stake
than their French counterparts – the Caisses did represent a political
power place, but at the very local level.
210 The undue advantage given to savings banks by their public status also concerns the
favourable ratings given to them by rating agencies (since they are backed by public
entities, which cannot go bankrupt). Such was the argument used in recent years in
Germany by commercial banks to criticise the “state aids” to Landesbanken.
211 See, in particular, De Rosa (2003) for a historical perspective.
201
In addition, since until the 1980s French savings banks did not pursue an
active strategy on the asset side, savings banks in France were much less
seen as an economic power holder than in Italy, where the Casse di
risparmio could effectively allocate resources to “friendly” firms or clients.
This is a key difference that explains much of the subsequent variations
in ownership changes.
7.2.2 The Italian case: a successful privatisation?
In the Italian case, two clear periods of change can be identified. The first
period, which runs until the 1990 reform, is characterised by attempts at
internal change, that is, change within the sector itself. The failure of the
latter led to legislators’ intervention in 1990. Following that external
change, however, is a decade of tension between political authorities and
“new” owners of savings banks desirous to keep a hold on them.
In the 1980s, several savings banks implemented statutory changes that were
however quickly rebutted by the courts for encroaching upon constitutional
matters (See Cassese, 1983 and Merusi, 1984). Those statutory changes
were primarily aimed at allowing savings banks to raise new equity and
change their governance mechanisms. Given the limits posed to such
changes by the courts and the existing regulatory regime, savings banks
starting pleading in favour of changes in the legislation. This was clearly
expressed at several official meetings. At their 13th annual congress in
April 1982 in Sicily, for instance, the Casse di Risparmio asked for a legal
reform to change the rules governing the access to capital markets, then
restricted, and the possibility to change their governance structures –
introducing the separation between management, control and direction,
on the model of the joint-stock company (Società per Azioni) (ACRI, 1995).
As mentioned in Chapter 5, this view was shared within the central bank,
which made it explicit first in a 1981 White Book; and in a second White
Book published in 1988, where it proposed that public banks be
transformed into joint-stock companies, a status more appropriate for
getting access to capital markets.
202
The second period of change started with the 1990 Amato-Carli reform,
which can be read as an attempt to solve the three issues mentioned above.
More precisely, the 1990 reform constituted an attempt to: i) allow savings
banks to access to new shareholders for recapitalisation, and ultimately
corporate restructuring; ii) level the playing field and iii) make sure that
the transition from the public sphere to the private one would occur
smoothly, and would ensure the gradual constitution of new owners and
stable power groups. The Amato-Carli reform, as showed in chapter 5,
created new legal entities, the Fondazioni, to whom the equity of savings
banks (and of public law banks who belong to the same broad category212)
was to be fully transferred. New owners were thus created ex nihilo.
During the 1990s, both the control of savings banks by Foundations, and
the control of Foundations themselves stood at a centre of a hotly debated
controversy. This controversy originated in the ambiguity created by the
1990 reform. In fact, the latter disposed that the Foundations should
keep controlling shares in the savings banks from which they had been
created. In addition, the 1990 law disposed that the management of
shareholdings in Casse di Risparmio would constitute the raison d’être of
the newly created Foundations.
The application decree of that same year blurred the picture by disposing,
in contrast to the law it was supposed to transcribe, that managing
shares held in savings banks were merely instrumental in producing
revenues; and that the mission of Foundations was to pursue public
interest and “social utility” goals, through actions in the field of welfare,
scientific research, education, health and art. Foundations, therefore,
would not (should not) become holding firms.
These contradictions stood at the heart of the subsequent debates, which
lasted until 2003, and mainly revolved around three issues. The first one was:
what should Foundations do with the shares they owned in savings banks?
The second and the third issues were, respectively, what was the legal
nature of Foundations and who should control them? These three issues
were closely linked to each other, and represented a crucial stake for the
Italian political economy as a whole. If Foundations were to retain controlling
shares in savings banks, and were to be simultaneously recognised as public
entities, controlled by other public entities, then a sizeable share of the
Italian financial system would still belong to a broadly defined public sector.
212 Monte Paschi di Siena, Banco di Napoli, Istituto San Paolo di Torino, Banco di Sicilia, Banco
di Sardegna.
203
If instead, Foundations were to be recognised as private entities with
private owners, but kept holding majority shares in savings banks, this
would imply a shift from public sector to a sui generis political economy,
in which non-firms and non-governmental entities governed part of the
financial system; if, thirdly, Foundations were to lose their control in
savings banks, privatisation would become complete.
Policy-makers first moved to solve the first issue, that of Foundations’
control of savings banks. They introduced fiscal incentives for share
dismissals. A 1993 law exempted the sale of shares by Foundations from
tax on plus-values213. Then, a law passed in July of 1994214 eliminated
the obligation over Foundations to keep control of Casse di Risparmio in
which they held shares215; on the contrary, it obliged Foundations to
relinquish control of the banks. Building on that law, a November 1994
directive (known as the “Dini directive”, from the name of the then
Minister of the Treasury)216 specified the criteria and modalities of share
dismissals from Foundations.
What is interesting is that the Dini directive did not address the issue of
control upfront. Rather, its official aim was to encourage the Foundations
to gradually diversify their risks. In fact, the two ‘parameters’ set up by
the directive were: (a) that at least 50% of the resources (assets) used by
the Foundations for the pursuit of their ‘institutional goals’ (finalità
instituzionale) come from other sources than their shareholdings into
the CR; and (b) that no more than 50% of Foundations’ capital be
invested into shares of the CR. In a sense, then, the directive echoed, on
the regulatory side, the prevalent portfolio management character of the
management of CR shares by Foundations, which was continuously
claimed by the latter in subsequent years. In addition, the Directive set a
deadline (1999) for such control dismissal to take place.
Did the Dini directive impose an unwanted constraint on reluctant actors?
This is what emerges out of several actors’ accounts and perceptions of
the period. Many CRs resorted to the court to object to the directive’s
dispositions. But, according to a central bank official, this was just
foot-dragging on the part of the Casse di Risparmio; what they wanted
was to earn more time.
213 Art.4, Law 489 November 26th, 1993.
214 Law n.474 of July 30th, 1994.
215 More precisely, article 7 bis of the cited law abrogated articles 13, 14, 15, 19, 20 and 21 of
the Legislative decree n.356/1990 that contained references to the public control obligation.
216 Directive of the Minister of the Treasury of November 18, 1994.
204
This interpretation seems quite reasonable, in light of the lame performances
of the stock-market in those years, which prevented from foreseeing the
maximisation of gains on the sale of CR controlling stakes. By contrast,
the ACRI, in its first report on Foundations, claims that a trend towards
control dismissal could be observed before the Dini directive (ACRI, 1995).
Subsequent years, however, proved it wrong. The 1990s were characterised
by a constant struggle between policy-makers and Foundations around
the issue of the control of savings banks.
Data gathered from savings banks individual documents and from ACRI
annual reports on Fondazioni show a clear decline of ownership shares of
Fondazioni in the CR. The median share started diminishing in 1994, and
has diminished every single year since then. It is now (late 2004) around
14%. Of course, this general trend reflects different individual paths.
In fact, one could classify Fondazioni in several groups, according to the
importance of their ownership share and, more importantly, to the
rhythm of dismissal. These data are reported in Figure 7.1.
Figure 7.1: Foundations’ stakes in Italian savings banks
(nr. of Foundations)
100
90
80
70
60
50
40
30
20
10
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Controlling stake
Non-controlling stake
No stake
205
The 1998 Ciampi law, when it was first introduced to the Parliament, was
greeted with positive reaction from the world of savings banks.
According to savings banks officials217, the law “finally recognised their
private nature”. Such recognition was reinforced by the fact that the law,
in the Foundations’ view, set up incentives, not obligations, for the sale
of shares on the part of the Foundations. Foundations were right to see
a shift in attitude from policy-makers – but the Ciampi law was passed in
a context much more favourable to the sales of shares on the market.
The trend towards share dismissal accelerated in the late 1990s, and
slowed down in 2001, due to the European Commission‘s decision to
suspend the concession of fiscal incentives set in the law, arguing that
these amounted to State aid, which runs counter to the principle of
competition. Those Fondazioni that were intent on selling further shares
thus (as of end 2004) suspended their dismissals, the time for the EC to
close its inquiry. This event illustrates the importance of external
incentives for ownership changes at the margin.
Overall, the Casse di risparmio had achieved, by the end of the 1990s,
clearer ownership lines and ownership status. Why, however, did share
dismissal seem such a painful process? Again, this issue raises conflicting
interpretations. Government officials and policy-makers claimed that the
Foundations were just reluctant to cede control over savings banks.
Savings banks and Foundations officials disagreed. The 1997 ACRI annual
report went on to say that “The action of Foundations in [the field of
share dismissals] will be determined above all by market assessment and
economic considerations.” (ACRI, 1997). All savings banks interviewees
confirmed this view.
As one of them, a former savings banks official, said:
It’s not that Foundations do not want to get out [of banks’equity].
It’s just a matter of selling [their shares] at a good price. Sometimes it’s
difficult to sell well the shareholding portfolio, it’s not easy218.
217 See the conclusion of their 1997 annual congress, in ACRI (1997b).
218 Interview, 30.05.03.
206
In fact, that interviewee added, Foundations’ shareholdings within savings
banks are “more a problem for the Foundations than for the banks”219.
Another interviewee, president of a major Foundation, shared this view:
Regarding shareholdings in the bank, they are just financial
shareholdings; I have always thought this way. I have never defended
shareholdings. In fact, had I been able to get rid of them, I would
have invested in real estate220.
Another President said
About [the obligation to sell shares imposed by the government in
1998], I have nothing against it, if we can sell the shares for profit,
and find alternative investment opportunities221.
However, the decrease in Foundations’ ownership did not solve the issue
of effective control of savings banks. In other words, have Fondazioni
seen their control decline along with ownership shares?
This question is difficult to answer, for at least two reasons: first,
the dataset used above focused on Fondazioni’s stakes in their own banks
– and not in other CR, excluding cross-shareholdings from the picture;
second, control does not diametrically correspond to ownership. One has
to look, therefore, at other measures of Fondazioni’s control, besides
majoritary ownership. Indeed, indirect ownership, cross-shareholdings,
and low ownership concentration (meaning that however little their
shareholdings are, Foundations still count among ex-savings banks’
largest owners) all point to a persistent power of Foundations, both at
the large banking groups and in medium-sized savings banks groups.
The Control of savings banks by the Foundations was as hotly debated as
the control of the Foundations. The latter was intensely discussed during
the 1990s (and early 2000s), in relation to the legal nature of Foundations.
Were they public or private entities? That debate had obvious practical
implications: were Foundations to be recognised as public entities,
control by local government would have been justified – and savings
banks would fall again in the public realm.
219 Interview, 30.05.03.
220 Interview, 06.05.03.
221 Interview, 14.02.03.
207
The private nature of Foundations was of course pleaded forcefully by
the ACRI, and backed by several scholars such as Merusi (1993) and
Galgano222. As the ACRI argued, the very concept of “Foundation”
indicates the “civil society provenance of their patrimony” (ACRI, 1997).
Both, therefore, ownership and owners’ control were solved by the early
2000s. To completely assess the effective control of savings banks by
Foundations, however, one has to turn to control mechanisms, which will
be addressed in the following sections.
7.2.3 The French case: the choice of the cooperative model
In France changes started earlier but have not (yet?) brought a complete
break with savings banks’ past. While the 1983 law did not address
the issue of ownership upfront, the 1999 did, by giving savings banks
a cooperative status – and thereby creating new owners under the form
of cooperative membership (‘sociétariat’). Creating owners could not
be achieved until savings banks could rely on their own capital.
Therefore, the 1980s and 1990s were used by gradually constituting
equity or own funds, through the accumulation of revenues and common
funds at the network level (“fonds de solidarité et de modernisation”,
“fonds commun de réserve et de garantie” – see chapter 6), which
represented 49 billion francs in December 1990.
Apparently, therefore, the ownership problem in French savings banks
has been definitely solved since the 1999 law. In practice, however,
the issue of effective control remains open, as we will see in the following
sections. French savings banks still do not have controlling owners.
Internal documents, as well as interviews, showed that savings bank
senior staff (both at the national and the local level) show no interest in
giving the sociétaires real control; and staff at the Fondation nationale
despair at finding owners interested in exerting their rights.
222 As noted in ACRI first annual report on Foundations, if the legislator gave Foundations a
public nominal recognition, the latter authors claim that given the private origin of their
equity, the mostly private locus of their creation, and the end of mandatory control
disposed by the 1994 law, Foundations are private entities. (ACRI, 1995, p.17.)
208
7.3
Control and monitoring mechanisms
The second pillar of corporate governance, besides ownership and control
patterns, is constituted by the mechanisms of governance within firms
and groups. In other words, changes in ownership and formal control do
not automatically translate into changes in the effective exercise of power
within savings banks. The following two sections explore such mechanisms.
7.3.1 The French case: the resistible rise of managerial control
The actual governance mechanisms in French savings banks are described
in Figure 7.3. As seen above, the 1983 law did not solve either the
ownership nor the control issue. Representation of stakeholders was
ensured through the establishment in 1983 of “Conseils consultatifs”.
But those vague bodies, with no clear juridical basis and corporate
legitimacy, did not really function, as a top official admitted in 1991223.
The true reform of control occurred in 1999. Under the 1999 cooperative
status, each client of the Caisses d’Épargne can acquire up to 1000 euros
in shares. Whatever the amount paid and the number of shares held, all
subscribers are entrusted with an equal degree of ownership. Each owner
exerts his/her ownership rights through two levels of governance: a first
level, within a Société Locale d’épargne (SLE), which is a cooperative
institution. There are several SLEs for each Caisse d’Épargne: each SLE
covers a chunk of the territory on which the savings bank operates.
Clients-owners belong to the SLE of their residency. Their shares entitle
them to voting rights, on the (cooperative) basis of “one man, one vote”.
SLE members meet at least once a year, at a general assembly where they
elect the board.
The board, in turn, is entrusted with representing SLE members’ will through
the Comité d’Orientation et de Surveillance (COS), whose members are
elected by the SLE boards. The COS works like a monitoring board, since
it appoints the three to five members of savings banks’ Directoire, which
is the body that effectively runs the bank.
223 Lucien Peretti in La Revue des Caisses d’épargne, February 1991, p.17.
209
The effective exercise of their ownership rights by sociétaires met with
serious difficulties early on. These difficulties were of two types. First, both
the CNCE and the FNCE do not seem to have been wholehearted in their
efforts first to “recruit” sociétaires and then to consider them as the real
owners of savings banks. As mentioned above, the Fédération was
entrusted with the mission to coordinate relations between savings banks
and their owners. Its first task was to create the new owners, by selling
equity to the public, and setting up, in parallel, the governance mechanisms
through which ownership would exert its rights. The acquisition of shares
started on January 1st, 2000 and ended on December 31st, 2003.
In practice, this means that savings banks employees (“agents”) started
to propose to their clients the acquisition of shares in SLE. After a year
and a half, the number of clients-owners reached two million. As of
March 2003, there were 2.7 million clients-owners. The original objective
was to reach 4 million shareholders by the end of 2003.
But that objective was brought down to 3 million in 2003, one million
less than initially planned. Indeed, each sociétaire has subscribed more
than expected: on average, from 600 to 750 euros of shares. And, in
1999, the State was set for the Caisses d’Épargne objective of selling
2.42 to 2.87 billion euros in shares by 2003, the amount raised being
affected to the Fonds de réserve des retraites (the State’s emergency
pension fund). This was, in a sense, the “price of freedom”224 – the
“transfer of ownership” authorised by the State.
As a consequence, the drive to attract new sociétaires responded first and
foremost to a financial necessity: that of not “over-paying” the State in
the operation225. Had the Group maintained the initial target of 4 million
stakeholders, it could have ended up raising much more than the 3 billion
euros originally targeted, and thus lost further money to the State.
This operation, in sum, bears testimony to the low importance given by
the Group to the effective number of their owners.
224 See “La Fédération des Caisses d'Epargne veut peser sur le projet stratégique pour
2004-2007”, in Les Échos, February 27, 2003
225 From interviews with savings banks managers and regulators.
210
Besides, it does not seem that either the CNCE or the FNCE expected to
generate new owners through access to the sociétariat. A document
disseminated by the FNCE in December 2001 is very revealing for that
matter: it shows the potential returns that the Group could get from
promoting sociétariat:
-
-
a better fidélisation of a growing group of sociétaires, who will become
more prone to acquire new products and services from their Caisse;
the emergence of a new “communication force”, since satisfied
sociétaires will “sell” the Caisse d’Épargne in their familial and social
environment;
the availability of a strong potential to be mobilised when needed;
the availability of a reserve of subscription to draw from [in the case
of future capital needs]226.
As one can see, the drive to attract, “recruit” and satisfy sociétaires is not
just a matter of finding owners. It is also (above all?) aimed at keeping
and multiplying faithful customers. This objective is, of course, only halfheartly acknowledged at the FNCE –it is much more explicit at the CNCE.
But this is one side of the coin. The other is that sociétaires themselves
do not seem eager to exert ownership rights, as successive surveys
conducted by the FNCE have shown. Of course, there is no certainty that
those surveys are not biased : the Fédération might well see what it wants
to see. However, one could oppose a counter-factual to this potential
bias: in its power conflict with the CNCE, the Fédération has a vested
interest in developing its power basis within savings banks – namely, the
sociétaires themselves, whose interests it is supposed to represent.
In 1999, 2000, 2001, 2002, a series of quantitative surveys were thus
conducted by the Fédération in order better discern the sociétaires
profiles, their expectations and the degree of their desired involvement in
the life of Caisses. The quantitative surveys were completed with
qualitative studies of samples of sociétaires. This effort was systematised
with the creation of an “Observatoire du sociétariat” within the FNCE.
One of the consistent findings of such studies is that the most important
motivations behind becoming a shareholder are (1) to earn dividends and
(2) to benefit from special offers and banking services.
226 Fédération Nationale des Caisses d’Épargne, Un projet coopératif pour enrichir le projet
stratégique des Caisses d’épargne – Promouvoir l’identité remarquable du Groupe Caisse
d’Épargne, November 2001.
211
In a recent study, the FNCE found that only 19% of respondents identified
the participation in the bank’s life as a reason behind acquiring shares227.
Of course, it might be too early to judge whether this situation will
stabilise in time. Nevertheless, the FNCE is now focusing its efforts on that
small part of “motivated owners”. But the current situation does not favour
the exercise of strong monitoring and control on the part of clients-owners.
A final, and critical obstacle to the effective exercise of ownership rights by
the new owners is the role played the CNCE in the corporate governance
of savings banks. As mentioned above (and shown on figure 7.3),
the CNCE intervenes at a key moment of the governance chain: it gives
its “agreement” on the Directoire (executive board) members appointed
by the COS. The law is ambiguous as to what “agreement” means, and
what is the precise extent of CNCE’s power over COSs’ nominees. In practice,
however, all interviewees (be they at the CNCE, at the FNCE, or at the
local savings banks) recognised the predominance of the CNCE in the
choice of Directoire members.
In addition, the segmentation of SLE (there are 448 SLE for 34 CE) leads
to a greater diffusion of ownership, which, in the legal-economic literature
on corporate governance, is seen as the breeding ground for managerial
control. As a local savings bank staff member candidly said:
The creation of 48 SLE in Picardie (a national record) enables us to be
closer to our clients; but it also gives less weight to SLE …228
In sum, both the FNCE or the CNCE are ambiguous as to what they
expect from sociétaires; in addition, key veto points are retained by CNCE
in the governance process; and the FNCE – that is, the organ supposed
to represent owners - has much less power than CNCE (see chapter 6).
A first element that indicates the real balance of power is the sheer size
of the two institutions, in terms of staff: the FNCE includes around
30 people, while the CNCE is staffed with more than 500 employees.
227 FNCE (2002), “Enquête quantitative auprès des sociétaires”, internal document, (done
through 1224 phone interviews with sociétaires in December 2001 – January 2002).
One should not rely on those numbers, since different numbers have been given by
interviews or in the newspapers. What remains constant is the trend and the relatively low
proportion of owners willing to engage actively in the savings bank’s life.
228 Interview, 22.07.02.
212
A second element is the fact that the FNCE participation into the
definition of Group’s “strategic orientations”, set by the law, is marginal,
and does not encroach upon the business goals that stand at the core of
savings banks’ strategy (see next chapter). These are clear obstacles to
any kind of substantial monitoring and control from owners.
There is a ‘cultural’ path dependent explanation to such a situation, which is
given at the FNCE : the CE have no “culture” of cooperation (by contrast,
for instance, with the Crédit Agricole). So the current outcome could
reflect path-dependence, and the difficulty to change paths. But that
does not explain change in paths, neither does it account for the fact that
there is an internal conflict and the effective exercise of ownership is not
doomed in advance.
7.3.2 The Italian case
As emphasised above, since the transformation of Italian savings banks
into joint-stock companies, after the Amato-Carli law, the problem of
ownership became a problem of control – that is, what degree of control
could and should the Foundations exercise upon savings banks’
management and strategies. Since the governance mechanisms put in
place by the successive reforms were, in contrast to the French case, in line
with “normal” governance practice in private, joint-stock companies, the
attention should shift to the control of senior management by Foundations.
Before the Amato-Carli law, top officials at savings banks were political
appointees. The appointment system was called ‘terne’ (threes): at the
moment of the renewal of the mandate of savings banks’ chief executive,
the central bank proposed three names to the Treasury. The appointment
was then decided at CICR meetings, in which the central bank governor
had no say. It is notorious that once in the 1980s the Governor of the
central bank was expelled from the meeting room for having expressed
his views about the appointees.
Of course, this system became obsolete with the transformation of savings
banks into joint-stock companies, and with the institution of formal
governance mechanisms. A 1993 referendum abrogated the dispositions
of a 1938 law that gave the Minister of the Treasury the power to appoint
the President and Vice-President of those Casse di Risparmio with
institutional origins.
213
In addition, the 1993 Testo Unico put an end to the Ministerial appointment
of the President and Vice-President of the Banche del Monte, a category
assimilated to that of savings banks. Therefore, while before the renewal
of the boards in 1994-95, almost 19% of board members had been
appointed by the Minster of the Treasury, by 1995 they were only 0.4%229.
This shift benefited the ACRI, which almost doubled its appointees within
the boards (from 8.4% to 15.5%), and cooptation by the board, which
reached 9% of total members by late 1995. Meanwhile, members of
the board appointed by local governments (cities, provinces and regions)
still constituted in the late 1990s a sizeable part of the board: 43%;
And Chambers of commerce appointed 19% of members. As for Casse
di Risparmio with associational origins, more than two third[s] of their
board members were coopted by the Assembly of stakeholders.
The appointment power then passed to savings banks’ legitimate owners,
the Foundations. In addition to being able to appoint their men to savings
board’s top management, Foundations were for a while able to have their
own board members serve on banks’ boards. This was a logical continuation
of the previous regime: in the immediate aftermath of the 1990 reform,
it was conceivably difficult for Foundations to renew all executive
positions either on their board or on savings banks’ board.
A 1993 ministerial decree230 further severed the links between Foundations
and Casse di risparmio by disposing the incompatibility between
mandates at the Foundations and the savings bank. In other words, top
officials and directors of the Foundations who were also top officials at
the controlled savings bank were forced to choose between one of their
mandates231. This was a widespread practice in “institutional” Foundations:
in November 1995, more than 11% of members of the Foundations’
administrative boards were also board members at the controlled savings
bank – half of which were either the President or Vice-President of the
Cassa di risparmio232. Statutory changes were completed in 1997; and in
the 1995-97 period, 54% of board members were renewed. However, here
again, the process of change was slow. In 1998, 24 Foundation board
members (out of a total of 880) still held mandates within the controlled
savings bank233.
229 According to data provided by ACRI (1995).
230 Decree of the Minister of the Treasury of November 26th, 1993, transposing a decision
taken by the governmental committee on credit and savings (CICR) of August 1993.
231 Originally, in the 1990 reform, as the ACRI reports, compatibility between the two mandates
was considered useful to facilitate transition from the old to the new regime (ACRI, 1995).
232 Data from ACRI, 1995.
233 According to ACRI, 1999.
214
They had to choose. As a top official at one of the savings banks said,
In all the Casse di risparmio, there was a powerful man. When they
had to choose between the bank and the Foundation, after the spinoff, almost all of them chose the bank, because banks, more than
Foundations, were seen as a power centre234.
Did this mean, however, control of the bank by its owner? It is not very
clear. As one of the interviewees said,
We cannot generalise. Where there was a strong character, and that
character chose the bank, then it was the manager who controlled
the shareholder. Where the opposite was true, it was the shareholder
who controlled the manager235.
7.4
Discussion
As seen in the previous chapter, the re-distribution of power that occurred
within the savings banks sector in both France and Italy participated
in a broader restructuring process within the banking sector as a whole.
What can we conclude so far?
7.4.1 Ownership and the issue of power distribution
As shown above, the problem of ownership was solved in different ways
in France and Italy (see tables 7.1 and 7.2). In France, the transformation
of savings banks into a cooperative group and the gradual separation of
savings banks from the Treasury circuit led to the creation of new equity
and new owners – the sociétaires, within the specific configuration of the
cooperative sector (one vote per individual owner). In Italy, savings banks’
ownership was also created ex novo, under the form of the Foundations,
but that intermediary step served to gradually align the new ownership
with commercial banks’ owners, through the functioning of the market
for corporate control.
234 Interview, 30.05.03.
235 Interview, 30.05.03.
215
Table 7.1: Ownership patterns in France and Italy, 1980
Legal status
Owners
France
Savings banks
France
Other banks
Italy
Savings banks
Italy
Other banks
Sui generis
Public;
private
Sui generis:
“quasi-public”
Public;
private
State; private
Unclear
Unclear
Ownership
characteristics
Effective control
State; private
Concentrated
Managers;
Caisse
des dépôts
State;
private owners
Concentrated
Political
Political;
private owners
Table 7.2: Ownership patterns in France and Italy, 2002
France
Savings banks
France
Other banks
Italy
Savings banks
Italy
Other banks
Legal status
Cooperative
firm
Cooperatives
and joint-stock
companies
Joint-stock
companies
Cooperative
and joint-stock
companies
Owners
Stakeholders
Stakeholders
and shareholders
Shareholders
Shareholders
and stakeholder
Ownership
characteristics
Effective control
Diffused
Managerial
Diffused;
Strategic owners Strategic owners;
strategic shares
diffused
Managerial
Managerial
Managerial
This difference in outcomes owes much to the difference, underlined at
the outset of this chapter, in savings banks’ relation to power and power
holders. In France, historically, savings banks executive boards were
composed of local power holders: businessmen, politicians, in a word,
notables. Savings banks were a local actor, and were locally important to
politicians. They were, furthermore, autonomous in their governance,
with coopted boards. In Italy, instead, through the appointment of key
board members by the Minister of the Treasury, savings banks were a
national political stake. Since the postwar period, most government
appointees were Christian Democrats236 – and, in some specific cases,
Communists, following an institutionalised bi-partisan spoils system.
236 According to Figliolia, 1981.
216
Reasons behind the changes in corporate ownership and control around
the Foundations are closely linked to Foundations’ potential and real role
within Italian capitalism. Interviews and parliamentary archives show that
several policy-makers hoped to make Foundations become institutional
investors, very much like mutual funds in the United States. In reality,
more than institutional investors, Foundations have taken the other
‘path’ offered to them; they have become grant-making institutions
similar to, or trying to resemble, US Foundations. This horizon was of
course present at the inception, in the 1990 law – but there were
widespread fears that Foundations would long loom as powerbrokers
over Italian financial capitalism, which did not happen – mostly thanks to
the rise of management control in banks and Foundations themselves. In
fact, the diffused character of sociétariat in France and the breakdown of
the savings banks sector in Italy ended up, in both cases, producing weak
owners, while managers strengthened their grip on power.
7.4.2 A convergent trend towards management control
Indeed, savings banks in both countries have undergone a tremendous
power shift in favour of managers. This trend is linked to the changes
studied in the previous chapter: the wave of mergers and the emergence
of big banking groups required specific technical and professional skills at
the executive level, and shifted emphasis from ownership to guidance
and management of savings banks through this period of rapid corporate
change. Professionalisation and growing skill requirements for managers’
position reinforced this evolution. In addition, the increased differentiation
between ownership, control and management have left, in a probably
more durable way than corporate restructuring, considerable leeway to
managers and have weakened owners’ effective power of control.
Such evolution is consistent with the leading role played by savings
banks’ top management in the twin processes of regulatory reform (see
chapter 5) and corporate restructuring (see chapter 6). In the face of of a
radically altered environment (higher interest rates, higher competition,
freer markets, regulatory changes) top managers at savings banks chose
to modernise their banks, and this modernisation effort included the
identification of clear owners and the institutionalisation of owners’
control – without, however, relinquishing power within savings banks.
217
218
8. CHANGES IN SAVINGS
BANKS CORPORATE
STRATEGIES
8.1
Introduction
As noted in the previous chapters, the past two decades have been
characterised by far-reaching changes in banking, both in terms of what
banks are doing and how they are doing it. Savings banks have taken part
in this transformation. Indeed, since the 1970s French and Italian savings
banks have gradually extended the operational (and territorial) scope of
their business. In two decades, savings banks in both countries have
become quasi-universal banking groups, offering a complete range of
products and services present on most segments of the banking market
(retail, investment banking, corporate finance…). These changes were
especially remarkable in France, where savings banks transformed
themselves from being, mostly, quasi-public institutions collecting savings
for non-profit purposes, to banks focused on profitability and revenues.
Understanding these changes, how they relate to changes in the banking
sector as a whole, and how they compare from one country to the next,
is critical in assessing the validity of the neo-institutional theories of capitalist
diversity presented in Chapter 2. As observed then, corporate behaviour
is usually seen as residual, or as the ultimate dependent variable in a long
causality chain – in that framework, corporate behaviour depends on, or
is shaped by, existing institutions. This chapter will not discuss that claim.
Rather, the following pages will investigate the various patterns of banking
strategies and their evolution, and to what extent the changes in banking
strategies can be directly attributed to broader institutional change.
In particular, as in chapters 6 and 7, this chapter addresses the two research
questions formulated in chapter 2; namely, (i) do patterns of change
show convergence / divergence between the two cases? And (ii) are
those differences (similarities) in outcomes directly attributable to the role
played by institutions in mitigating the impact of external pressures on
domestic actors / processes of adjustment?
219
The first section presents and analyses changes in the strategy of savings
banks, mostly relying on balance sheet and annual report data237.
The second section puts things in perspective: how do these changes fare
with the evolution of the banking sector as a whole? Finally, the third
section discusses factors of change, in relation to the changes explored in
the previous chapters: regulation (chapter 5), corporate restructuring
(chapter 6), corporate governance (chapter 7).
8.2
From specialised intermediaries to quasi-universal
banks?
8.2.1 The changing intermediation function of savings banks
Over the past two decades, savings banks in both Italy and France have
radically transformed their business behaviour and strategies – reflected
in shifts in their balance sheet structure. On the assets side, there has
been a shift towards non-bank lending activities. In Italy, as Figure 8.1
shows, non-bank lending238 has continuously increased from the 1980s
onward, from 28% of total assets in 1984 to 62% in 2000. In the
meantime, bank lending has remained constant; the amount of cash and
accounts held at the Central Bank have sharply decreased; and the
proportion of assets held in securities has fallen down, too (from 28% of
total assets in 1984 to 16% in 2000).
French savings banks have followed a similar trend. Figure 8.2. shows
a continuous increase of non-bank lending, from 16.4% of total assets in
1984 to 31.5% in 2000. Overall, however, that proportion is still much
lower than in the Italian savings banks sector. This difference can be
explained by (i) the lower proportion of non-bank lending at the beginning
of the period; and (ii), more importantly, the fact that a significant crust of
savings banks’ “administered savings” resources (the famous “Livret A”)
is still managed by the Caisse des Dépôts et Consignations (CDC) – which
falls into ‘bank lending’ within savings banks’ balance sheet.
237 Balance sheet figures for Italy have been calculated from data provided by the ABI. It is
important to note that these data are disaggregate (by single savings bank) and the
figures used to build the graphics are a median value. I did not use the average value for
the simple reason that some savings banks being much larger than others, it would have
introduced a bias in the calculations. As for France, the calculations were made using
annual report (aggregate) data by the Caisse Nationale des Caisses d’Épargne. Appendix A.
shows the re-ordering of the balance sheet data I had to make.
238 That is, lending to non-financial firms and to households.
220
This point will be analysed in detail in the next section. What this means,
however, is that assets held in “other credit institutions” (of which the
CDC) still represents a sizeable proportion of total assets (41% in 2000),
despite a continuous fall since 1984 (76%), which parallels the rise in
non-bank lending. To note as well: the proportion of assets held in
securities has increased, from almost nothing in 1984 to 15% in 2000.
Figure 8.1: Composition of Italian savings banks' assets,
1984-2000 (in % of total)
100
80
60
40
20
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1984
1985
0
Other assets
Lending to clients
Lending to banks
Stocks
Securities
Cash and central bank account
221
Figure 8.2: Composition of assets in French savings banks,
1984-2000 (in % of total)
100
80
60
40
20
2000
1999
1997
1998
1996
1995
1993
1994
1992
1991
1990
1989
1988
1987
1986
1985
1984
0
Other assets
Non-bank loans
Assets in other credit institutions
Securities
Changes in the composition of liabilities have been important, too. In Italy,
as Figure 8.3. shows, the contribution of non-bank deposits to total liabilities
(e.g. to savings banks’ resources) has fallen sharply over the period, especially
during the late 1990s: from 73% of total liabilities in 1984 to 48% in 2000.
At the same time, liabilities made of bank deposits and securities rose fast,
especially after 1988. That year, securities rose from 1 to 5% of total
liabilities, to reach 8% in 1989, 11% in 1990. In 2000, securities represented
23% of total liabilities. The evolution is similar for commercial banks.
The evidence is straightforward: savings and commercial banks’ liability
composition have converged. The two categories of banks display the
same tendencies with respect to the diminished importance of current
account deposits, the drop in savings accounts, the boom in deposit
certificates, the increased reliance on bonds and “pronti conto termine”,
a remunerated long-term account. The data shows, moreover, that where
savings banks were lagging far behind commercial banks (for example in
the market for deposit certificates), they have caught up and now display
a very similar balance sheet structure.
222
Figure 8.3: Composition of Italian savings banks' liabilities,
1984-2000 (in % of total)
100
80
60
40
20
2000
1999
1997
1998
1996
1995
1993
1994
1992
1991
1990
1989
1988
1987
1986
1985
1984
0
Other
Equity
Reserves
Liabilities in bonds
Non-bank deposits
Bank deposits
In France, as Figure 8.4. shows, the contribution of non-bank deposits to
total liabilities has declined in the same proportion as in Italy: from 90%
in 1984 to 59% in 2000. The proportion of bank deposits shows a more
contrasted evolution, and seems to have returned in 2000 to the 1984
level. The proportion of secure debt has increased, from 0% in 1984 to
20% in 2000. The level of capital and reserves has decreased, and the
number of “other liabilities” (mainly provisions or products of off-balance
sheet operations) has increased as well.
In contrast to their Italian counterparts, French savings banks do not have
a long history on the lending market. Starting from zero corporate lending
in 1987 (the year savings banks were authorised to lend to firms), this
type of asset was however bound to rise. Which it did: it now represents
between 11 and 15% of total savings banks lending.
223
French savings banks (especially through the alliance with the CDC,
which brought its merchant bank along) have also increased investment
services; and similar to Italy, the share of administered savings accounts
has dropped.
Figure 8.4: Composition of liabilities in French savings banks ,
1984-2000 (in % of total)
100
80
60
40
20
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
0
Other liabilities
Capital & reserves
Securities
Bank deposits
Non-bank deposits
What do all these numbers mean? At a broad level, these shifts in banks’
balance-sheet structures are a clear signal of a profound transformation
in the “intermediation function” fulfiled by savings banks in both countries.
Financial intermediaries, in the classical vision first conceptualised by
Gurley and Shaw (1960), transform short-term liquid funds into longterm lending.
224
In Italy, savings banks were already fulfiling a classical intermediation function
before the 1980s: the Casse di Risparmio were, in effect, channelling funds
from households to firms and public bonds. In other words, they were
transforming short-term money into long-term capital. Within time, they
soon became more reliant on financial markets, while increasing their
lending to non-bank clients – mainly households. The intermediation circuit
was, therefore, not simply reversed (from “households to firms/State” to
“firms to households”), but made more complex, signaling a critical
transformation of financial intermediation as a whole (see chapter 4).
In France, change was even sudden. In the 1970s, savings banks were the
collecting part of a broader intermediation circuit, headed by the CDC
(see Figure 4.5 in chapter 4): the former were merely collecting savings,
and transferred the funds to the CDC, which transformed those funds
into long-term lending to firms and local governments. Now, in contrast,
savings banks both collect savings and directly lend to firms and households;
and, like their Italian counterparts, the intermediation function they fulfil
has become more complex.
Viewed from a narrower angle, changes in the balance-sheet structure
reflect, albeit imperfectly239, a clear trend towards the diversification of
assets and liabilities on the part of savings banks – and the turn towards
new clienteles and markets. This broad trend will be analysed in further
detail in the next two sub-sections.
8.2.2 The diversification of savings banks products and services
•
Italy
Changes in balance sheet structures reflect changes in the
operational scope of savings banks. In Italy, the Casse di risparmio, as
mentioned in the Introduction, were clearly more ‘bank-like’ than
their French counterparts by the late 1970s: they offered a much
broader range of products and services, and autonomously decided
on their investments and the use of their resources.
239 Balance-sheet data are a limited source of evidence since they do not include a growing
part of bank business (called, for that reason, “off-balance sheet activities”): mainly, all
those services provided to clients (savings management, liquidity management, advisory
services….).
225
However, the Casse di Risparmio did stand in a particular segment of
the financial system, in the midway between credit firms (short-term
operations) and ‘special credit institutions’, which operated in the
long-term. Within the context of market segmentation, savings banks
held a rather large and diversified position, financing public institutions
investment, consumer credit, real estate and rural credit (credito
agrario). Their lending revealed a preference for extra-industrial sectors
(see Figliolia, 1981, Capriglione, 1977). There was, however, no legal
constraint specific to savings banks regarding products and services:
savings banks were part of a segmented credit system characterised
by the separation of long and short term finance. In other words,
taking the Hollingsworth formula again, there was no strong topdown imposition of boundaries as to products and services.
The full homologation of savings banks with commercial banks was not
achieved until the Testo Unico of 1993240, which abrogated the specific
legal regime of savings banks (as well as those of Banche popolari and
the Casse rurali), and put an end to credit segmentation (short versus
long term). But the real turning point was reached in the 1980s.
During that period, Italian savings banks started offering “accettazioni
bancarie”, pool medium-term finance, export finance. Services were
developed as well, such as leasing or factoring241. Both services and
specialised financial products were often offered through specialised
subsidiaries. Again, however, these innovations were not specific to
savings banks, and concerned all types of banks. According to Gualandri
and Landri (1994), diversification was the result of convergence
between the aims of policy-makers and those of commercial bankers.
•
France
In France, the process of de-specialisation reflected in the balance
sheet data presented above started in the mid-1960s, but proceeded
very gradually. In the late 1970s, as a respondent put it, the CE were
nothing (yet) but a “small collector of moneyboxes”.
240 Testo Unico in materia bancaria e creditizia, Legislative decree n.385, September 1st, 1993.
241 Leasing allows credit institutions to finance entirely the acquisition of real estate by a firm.
The real estate good is owned by the bank, who collects a rent from the contractor. Upon
the expiration of the contract, the client has the possibility to buy the good, for a price
determined at the beginning, minus the rents paid until then. Leasing became very
popular during the real estate bubble in the late 1980s, when rents sky-rocketed, thus
allowing credit institutions to improve their profitability. But the real estate bubble, once
it exploded, was also at the origins of serious financial troubles faced by French credit
institutions in the early 1990s.
226
In other words, savings banks then were mainly a mono-product
collecting institution. As argued in Chapter 5, the 1983 reform
represented a turning point, the reform considerably extending the
scope of activities savings banks could pursue. But some substantive
changes had already taken place in the previous decade. In fact, the
mid-1960s represent, in Duet’s threefold periodisation of the history
of French savings banks, the “entry into diversification” (Duet, 2001).
Diversification took root on both sides of the balance sheet. On the
collect (liabilities) side, the CE started distributing the Livret Épargne
Logement (housing savings bankbook, or LEL) in 1965. In 1969, the
bons d’épargne logement (housing savings coupons) were launched;
and in 1970, savings banks started offering Plans d’Épargne logement
(housing savings plan, or PEL). These products were all savings
account products; but they differed from the Livret A by being more
flexible (they were not ‘administered savings’, as was the Livret A,
whose interest was determined by the government). Besides those
savings account products, savings banks diversified liabilities by
proposing investment instruments to their clients, mainly SICAV
(Société d’Investissement en Capital Variable), which are managed
investment funds. Savings banks’ first SICAV in stocks was launched
in 1967; the first SICAV in bonds in 1969.
On the lending (assets) side, the 1950 Minjoz law allowed for part
of the resources collected by savings banks under the form of
administered savings to be used for financing local governments’
investments in housing (see chapter 5). But until the late 1960s, savings
banks’ role was circumscribed to the transmission of proposals to the
CDC, which then decided whom to lend to, and which managed lending
procedures. Besides, savings banks were not allowed to develop lending
to individual clients until 1969 and the creation of the Prêts Épargne
logement (housing saving loans). Two years later, in 1971, savings
banks were authorised to offer personal loans and housing loans.
Changes accelerated in the late 1970s and early 1980s. In 1978, savings
banks were allowed to open checking accounts for their clients. This was
a major break-through for savings banks, who until then were not
allowed to offer any collect product other than savings accounts.
227
In addition, in the following years new administered savings instruments
were created, such as the Livret d’Épargne Populaire (popular savings
bankbook, henceforth LEP), in June 1982; and the Compte d’épargne
pour le développement industriel (savings account for industrial
development, or CODEVI) in October 1983. These products were
“banalised”, i.e. they could be distributed by all kinds of banks.
But savings banks soon took a lead in the distribution of such products,
building on their experience with administered savings accounts.
Further product innovation took place in the 1980s: a first short term
SICAV was launched in 1982; two new Fonds Communs de Placement
(investment funds) were created in 1985 (Epareurop and Eparpacific);
and two pension insurance instruments were launched in 1985 and
1987 (Plan d’Épargne Retraite). Among the most dynamic savings
banks, the Caisse d’Épargne Bouches du Rhône proposed, in 1985,
11 investment products, all specific to the savings bank sector
(Éparcourt, Eparpacific, Epardyn…). In 1991, the savings banks network
offered 19 SICAV, 9 FCP, and collected 107 billion francs through
those channels, or a 13% market share. In June 1984, a first savings
banks bond was put on the market. In 1985, savings banks joined an
interbanking coordinating entity that launched a nation-wide credit
card (the Carte Bleue). The Plan d’Épargne Populaire (popular savings
banks), a new savings product, was launched in January 1990. It was
a success and created a very competitive market, but CE quickly got
20% of market shares. Finally, the 1980s also saw the creation of new
lending instruments; in addition to housing lending, savings banks
were authorised in 1985 and 1987 to lend to individuals and families.
Mostly, however, these lending products were complementary to
the various savings products savings banks were already offering
(Prêts complémentaires livrets, prêts complémentaires plans…).
To sum up, while Italian savings banks never really differed from other
categories of banks in terms of products and services, French savings
banks did, until the 1980s and 1990s, when they underwent a progressive
homologation of banking products and services across sectors, as
shown above. During that period, French savings banks caught up on
commercial banks.
228
8.2.3 Exploring new markets, targeting new clienteles
This catching up process in the French case, and the enduring similarity
between Italian savings and commercial banks, was not limited to
products and services; it also concerned clienteles and markets. Table 8.1
shows the composition of Italian savings banks’ assets and liabilities, by
types of clients. Again, the ‘clientele mix’ of savings and commercial
banks have converged: savings banks have increased their lending to
households, which were already sizable in the mid-1980s; commercial
banks, meanwhile, have almost closed the gap. Similarly, both savings
and commercial banks have decreased their lending to the government
and to private firms.
Table 8.1: Composition of liabilities and assets of Italian banks,
by market
1980
Savings
All
banks banks
Lending
1986
Savings
All
banks banks
1995
Savings
All
banks banks
1996
Savings
All
banks banks
100
100
100
100
100
100
100
100
Households
17.79
2.78
18.42
3.62
37.67
35.31
38.74
35.96
Government
11.56
9.51
6.72
7.99
6.81
5.09
6.64
5.00
Non-financial 68.40
firms
85.24
69.63
81.63
46.84
49.69
45.28
48.33
9.87
Other
1.49
0.00
1.44
0.00
7.97
9.25
8.37
Liabilities
100
100
100
100
100
100
100
100
Households
72.35
71.62
80.59
75.07
62.59
61.98
63.94
62.54
Government
10.34
7.69
4.19
3.83
2.87
2.72
2.96
2.85
Non-financial 15.20
firms
19.43
13.73
19.27
7.47
9.45
7.32
9.16
1.26
1.49
1.83
27.07
25.85
25.78
25.45
Other
2.11
Source: Schena (1998).
On the liabilities’ side, the evolution is smoother, but sill shows similar
trends at play for the two categories of banks: a gradual decrease of the
reliance on households savings, on government and firms, balanced by
an increase in other forms of liabilities (such as stocks and bonds).
229
In France, savings banks show a similar trend towards exploring new
markets – but in a much more limited way. French savings banks are
historically specialised in the market for individual credit and collect (see
chapter 3). They are also well positioned in the NGO market and the local
government market, again due to their historical role in financing local
governments’ investment in social housing. However, the Caisses d’épargne
are quasi-absent of corporate markets. Due to the lack of data on that
issue, one can only rely on estimates provided by savings banks actors
themselves. According to one of these estimates (given by a CE manager
working in that domain), the situation is very heterogeneous within the
group: one third of CE are well rooted in the SME market, one third is
making significant efforts to increase their activities in that sector and the
last third is totally absent of the market (see table 8.2.).
Table 8.2. Banking market shares in France
Commercial banks
1986
Deposits
1993
1999
1986
Lending
1993
1999
49.9
46.6
38.9
50.7
50.3
44.3
37.1
Cooperative banks
45.3
52.3
59.6
24.7
27.2
Of which: savings banks
17.4
18.7
19.8
3.9
4.8
7.6
4.8
1.1
1.5
24.6
22.5
18.6
Others
Sources: Commission bancaire (2000), lacoue-labarthe (2001)
But the SME market is an explicit target for the savings banks group, as
stated in recent commercial strategy papers released by the CNCE – along
with the so-called “professional” market, that is the market of loans to
professionals (medical doctors, lawyers…)242. The position on those
specific markets depends greatly on the specific history of local Caisses
– which accounts for the heterogeneity mentioned above. For instance,
the CE of Picardie’s larger than average market shares in small firm
lending are due to the acquisition of a leasing firm in 1995.
Market, clientele and product strategies have of course evolved together.
The need to move into new markets, or to remain competitive in traditional
markets, stimulated savings banks in both countries to innovate and
multiply the number of products offered, while services tailored to the
clients grew in importance.
242 The market for professionals corresponds to lending below 1.5 million euros; the market
for small and medium size enterprises (SMEs) corresponds to lending between 1.5 and
15 million euros. Lending above that amount belongs to the corporate market.
230
For instance, one of the innovations of the early 1990s in the French savings
banks group, the “Compte Satellis”, a treasury management service,
was developed in 1991, at a time when the newly re-dimensioned group
sought to enter corporate markets. As a top savings bank official said
in the late 1980s: “The opening of the squirrel [the savings banks groups’
nickname] to the business firm’s universe corresponds to a strategy
that needs to be pursued up to the end so that not to lose touch with
competition”243.
8.2.4 From core businesses to large groups
The corporate strategies pursued by savings banks in the 1980s and
1990s relate to the shift in corporate boundaries analysed in chapter 6.
Corporate restructuring, mergers, and acquisitions were a means to pursue
the strategy of diversification just analysed, so as to become a universal bank
or a multi-functional group. Conversely, diversification and competition in
all markets were necessary to ensure the sustainability of external growth
(M&As) strategies. French savings banks’ acquisition of the Crédit Foncier
de France in 2003, belongs to that logic – as has been the continuous
effort to build partnerships and set up specialised subsidiaries.
As an interviewee from the CNCE said,
In order to build all those national structures, we have to make
partnerships, create profit centres. All these subsidiaries will be listed.
To be able to maximise, a large banking group must be present on all
types of activities (métiers). All of those structures must be united
within the group244.
This strategy was, as we saw in chapter 6, systematically pursued by
the French savings banks ‘network head’ after 1988. Subsidiaries built
after 1988 by the CENCEP, with the CDC or specialised institutions,
covered: off-balance-sheet activities, such as OPCVM Écureuil-Gestion
(created in 1989), life insurance (Écureuil-Vie), damage insurance
(MURACEF), leasing (Bail Écureuil, Mur Écureuil, Cicobail), capital-risk
(Épargne Développement), project financing (Ingecep, created in 1990).
243 A top official at a SOREFI, cited in Le Méridional, June 9th, 1989.
244 Interview, 24/04/02.
231
8.3
Convergence and Resilience
8.3.1 Cyclical change or convergence?
Most of the changes presented above are common to all category of
banks. In other words, the move towards universal banks is not specific
to savings banks in either country. Banks tend increasingly to act in the
same way: offer similar products to similar clients in the same markets,
following comparable commercial targets. There is a clear trend towards
operational isomorphism. This is true even for those credit institutions
that were least considered as “banks”. This is the case, for instance, of
the French Post office, which during the 1990s gradually asserted its
banking identity. In 1994, for example, it gained (from the State245) the
right to practice overdrafts; in 1998, it gained the right to pull back postal
current accounts’ encours (Comptes courants postaux, ou CCP) worth
25 billion euros from the Treasury to one of its subsidiary (Efiposte).
The evidence displayed above therefore provides strong support both to
convergence theories and to the ‘systemic congruence’ view also adopted
by VOC scholars. However, this is not the end of the story. A more careful
look at the data shows that strong divergence forces are at play beneath
this broad converging trend.
8.3.2 The persistence of market niches: products…
The convergence story ignores, first of all, the persistence of market
niches, which lead to divergent business strategies. What savings banks
lost in statutory and legal peculiarities, they gained in building on their
competitive advantages in specific niches. This is the argument made by
De Boissieu, among others (De Boissieu, 2000).
•
France
French savings banks are aggressively moving towards the corporate
lending market. However they are still a small player in that market –
and they know their real strength is household lending. All interviewees
in the French savings banks group acknowledged this: “At the end
of the day, that’s were our natural market is” said one of them246.
245 Since 1990, every four years the Postal office negotiates with the State, under a so-called
contrat de plan (Planning contract), its strategy and its public service obligations.
246 Interview, March 2002.
232
The savings bank group, furthermore, remains among the main lenders
to local governments, and the main providers of credit to public
housing programs. In addition, the Livret A still represents a sizeable
part of savings banks revenue.
What about other non-bank resources? The first section showed that
French savings banks greatly diversified their offer of credit and services,
but also of collect instruments, i.e. savings and deposits accounts.
Looking more closely at French savings banks’ balance sheet structure,
however, one quickly notices that a large chunk of non-bank liabilities
consists of “special regime” savings accounts: Livret A247, of course,
but also Pel, Lep, Pep, Codevi… Those collecting instruments
represented 87% of non-bank lending in 2000, against 13% for
credit and current accounts248.
The case of the LEP is interesting. Created in 1982, the Livret
d’Épargne Populaire (LEP, or popular savings bankbook) was originally
destined for low income households – individuals exempted from
income tax, or paying a tax below a certain level. Conditions of access
were broadened by a 1997 ministerial decision, setting a ceiling of
660 euros. Return for LEPs was originally set at the Livret A rate level,
with a supplement to compensate the real negative return on Livret
A, which persisted until the mid 1980s. Once real return on Livret A,
however, returned to “normal”, the advantage given to LEP rate
was maintained249.
Therefore, one can conclude that French savings banks did choose
to diversify and diminish their reliance on the Livret A, which was
preventing them from becoming fully-fledged banks; but at the same
time, diversification took very familiar forms. In other words, French
savings banks ventured into new activities by relying on “old” or
traditional business practices and behaviour.
247 That part of Livret A not destined to the CDC.
248 Source: Groupe Caisse d’Épargne, Rapport Annuel 2000.
249 As emphasised by in Nasse and Noyer, 2003 (annex 2).
233
•
Italy
In Italy, too, product diversification and homologation with commercial
banks are neither complete nor irreversible. In 1981, in the Italian
savings banks journal, an observer noted that the de-specialisation
wave that started in the 1970s would be reversed, and that “the time
has come to put in place a new specialisation, which would justify,
within the frame of a pluralistic banking system, the existence of
[bank] categories” (Ruozi, 1981, p.438).
The same observer added that while savings banks had to a large extent
assimilated the operational characteristics of commercial banks, they
maintained a “proper physionomy”, both on the assets and the
liabilities side. The high proportion of liabilities made up of clients’
deposits (versus other bank loans, for instance) was evidence of the
persistent rooting of savings banks in local markets. Ruozi further
described a “complementary intermediation” to that done by
commercial banks, corresponding to the “functional specialisation”
of the Italian banking system. But divergence did not originate
in persistence or path dependency. Ruozi equally showed that
the shift from loans to bonds, which characterised Italian savings
banks’ assets in the 1970s, reversed the postwar trend, which had
seen a shift from bonds to loans (Ruozi, 1977).
The same comment could be made today. A longer-term perspective
would show that the convergence of liabilities does not change the
fact that savings banks have long been characterised by a heavy
reliance on deposits from households. This was true in 1981 (see
Figliolia, 1981), and still holds today. Conversely, the current shift to
lending reverses a previous trend which itself reversed a previous one.
There is, then, a specificity in savings banks’ product strategies.
Such a strategy is not opposed to that followed by commercial banks.
As Figliolia noted in 1981, there is “no dualism or alternative, but
complementarity and development of commercial activities in strict
linkage with other activities” (Figliolia, 1981).
234
8.3.3 … And markets and territories
•
France
As emphasised above, French savings banks are still heavily dependent
upon their retail markets for their income. In particular, the Caisses
d’épargne remain a major provider of special savings accounts to
households. In addition, French savings banks hold niche positions
in the lending market for local governments and for associations
(non-governmental organisations). Savings banks’ large market
shares in these two specific lending markets owe to their historical
legacy, and in particular their experience of lending under the Minjoz
law250 framework. The Minjoz law, as mentioned in chapter 5, was
the result of heavy lobbying by savings banks through key politicians
(of whom Minjoz himself), aimed at enlarging their operational
scope. The Minjoz law created another, very specific intermediation
circuit within the ‘Treasury circuit’ analysed in chapter 4.
Under this framework, savings banks could ‘sponsor’ borrowers (local
governments) by presenting them to the CDC for lending. Out of that
‘sponsoring’ the Caisses earned a fixed commission. In 1971, the CE
gained the right to manage lending contingents directly – assuming
risks and earning interests251. Those funds were, at first, mainly aimed
at financing investments into collective infrastructures – transportation,
public housing…
In the early 1980s de-centralisation reforms passed by the Socialist
governments increased local governments’ financing needs and fed
the Minjoz intermediation circuit. After 1986, the majority of “Minjoz
contingent” funds were destined for social housing. By the end of
1990, the government decided to put an end to those de-centralised
Minjoz contingents; thereafter, Minjoz loans would be made solely by
the Caisse des Dépôts. However, the Caisses d’Épargne continued
providing funds to local governments (out of ‘normal’ resources)
for financing investments into social housing252. During the 1990s,
the Caisses d’épargne strengthened their position in the local
government market by offering new financial products and services,
such as project finance (through Ingecep, a product created in 1990),
treasury management…
250 Law of June 24th, 1950.
251 CENCEP, Pour mieux connaître la Caisse d’Épargne, November 1984.
252 CENCEP, La Caisse d’Épargne: une mutation réussie, Paris: October 1991.
235
As for associations, savings banks were authorised in the early 1980s
to finance the investments of those associations who benefited
from local governments’ guarantee (under the Minjoz framework).
Here again, their strong retail position at the local level, along with
their local networks, helped tie strong links with associations.
•
Italy
The Italian savings banks’ territorial rooting has long constituted the
core of their identity. At their 1981 meeting in La Spezia, savings banks
officials underlined the usefulness of savings banks as a category, and
the necessity to distinguish oneself from other banks not in terms of
banking products, but in terms of banking segments (Lisanti, 1981).
Recent works have shown how savings banks’ business remains
closely linked to local economic systems. Farabullini and Gobbi have
shown, for instance, that savings banks remained, throughout the
1990s, the main providers of bank lending to small and medium firms
belonging to industrial districts alongside Banche popolari, and ahead
both of commercial banks and cooperative banks (Farabullini &
Gobbi, 1997). In sum, savings banks have kept their leading role
within Italy’s “localistic” banking system (Locatelli, 1998b).
Furthermore, Bongini and Locatelli argue that “in contrast to other
banks, savings banks have chosen, following the liberalisation of
bank branching, to intensify their presence in their regions of origin,
which constitutes a specificity even with respect to Banche popolari,
characterised by the density of local rooting” (Bongini and Locatelli,
1998: p.216).
8.3.4 The role of non-profit objectives in savings banks’
business strategy
As mentioned in the introduction and chapter 3, savings banks’ corporate
identity is linked in part to the importance of non-profit activities financed
by their revenues. However, the transformation of savings banks in the
two countries had a profound impact on those non-profit activities – and
their fate diverged in the two cases.
236
•
Italy
The role of non-profit objectives in savings banks’ business strategy is
marginal since the unambiguous divorce between banking business
and general interest activities that took place in the early 1990s.
The Legislative Decree 356/1990 specified the sectors of intervention.
A 1991 law253 made mandatory for the Foundations to dedicate part
of their annual revenues254 to constitute special funds at the regional
level and at the disposal of voluntary associations. Non-profit objectives,
therefore, were entirely transferred to the newly born Foundations.
•
France
Like their Italian counterparts, French savings banks have long been
committed to redistributing part of their revenue to the local economy,
mainly through grants or zero-interest loans. In France, this tradition
is associated with the diffusion of public baths and “workers’ gardens”
(jardins ouvriers) in the late XIXth and early XXth century. This practice
was essentially the prerogative of the local Caisses. Until 1994 there
had never been any successful attempt to centralise, or at least
coordinate such activities. In 1994 a Foundation was created: called
“Fondation Caisses d’Épargne: Agir Contre l’Exclusion” (Savings banks
foundation against social exclusion), it was set up to rationalise the
uses of the fortune personnelle of the single Caisses. It defined three
axes for intervention: fight against illiteracy, fight against the exclusion
of the elderly, and fight against the exclusion of the unemployed.
The 1999 reform represented a major turning point for French savings
banks’ non-profit activities. The law, indeed, obliged savings banks to
direct part of their revenue to non-profit activities – the so-called
“projets d’économie locale et sociale” (social and local economy
projects, or PELS). The PELS correspond to the savings banks’ “general
interest missions” (missions d’intérêt général, or MIG), recognised
by law. The FNCE, whose mission was to coordinate non-profit
activities at the national level, defined in 1999 three main axes for
intervention, drawing on savings banks’ variable past experience:
“local development” (including loans and subsidies for firm creation),
“social cohesion” (subsidies to associations fighting illiteracy, for
instance), and “quality of life” (housing, environment…).
253 Law n.266, August 11th, 1991, article 15.
254 Specifically, one fifteenth of their revenues, net.
237
What makes French savings banks original, especially compared to
their Italian counterparts, is that non-profit activities are pursued
along for-profit ones. The linkage is even stronger since, as a top
FNCE official said,
In Italy, Fondations get their revenue from their assets, whereas in
France, if the CE does not make profits, there won’t be any MIG255.
And according to another respondent,
The French situation is very peculiar: it’s the law that gives MIG to the
CE. We are not sad about that. This situation is linked to history
and to the culture of CE. It’s an incentive to make profits256.
This second quote, however, underlines the ambiguity of PELS. Yes, there
is an incentive to pursue non-profit activities that is nestled within the
very core mechanism of profit-making. But doesn’t it mean that,
reciprocally, PELS could be conceived as a somewhat other form of
profit making?
In fact, looking at the substance of some PELS themselves, for instance
those within the “local development” axis, one quickly notices that
they are more like capital-risk. This is duly acknowledged (within the
Group) by the Fédération257. Asked about the linkages between
redistributive goals and corporate interest, one interviewee responded:
We try not to link the two: it is not because we support an
association that we will force it to open an account with us.
We are very careful not to mix the two: first because we would
compete with ourselves, secondly because it’s very complex258.
Added to the ambiguity regarding the nature of PELS, and the
expectations nourished by the Caisses about them, is the ambiguity
about the status of PELS within the day-to-day business activities of
savings banks. There is no coherent practice across Caisses d’Épargne:
MIG are sometimes the direct responsibility of a Directoire member;
sometimes they are managed by junior staff.
255 Interview, 24/04/02.
256 Interview, 24/04/02.
257 For instance in the appendix to the internal document Orientations des projets d’économie
locale et sociale des Caisses d’Épargne
258 Interview, 27.06.02.
238
In Picardie, for instance, responsibility for the PELS belongs to the
Direction for Communication (headed by a junior manager). Besides
the issue of location of MIG within the organisation, there is the issue
of the sheer means attributed to their management. At the Fédération,
all respondents acknowledged this was an issue. In Paris, for instance,
only five agencies have someone specialised in MIG. As a respondent
belonging to a regulatory authority told me in an euphemistic way,
One can question oneself about the means savings banks give
themselves to manage those PELS259.
Overall, therefore, the exact “meaning” of PELS within the new Group
is a moving target. But in the French case, in contrast to the Italian one,
non-profit missions and activities have actually been reinforced by the
law, rather than weakened or dissociated from profit objectives.
8.3.5 The persistence of differences among savings banks
Besides the arguments made above (about market niches), convergent
trends that can be observed at an aggregate level also lose salience when
looking at disaggregated data. This is especially true for Italy. Figures 8.5
and 8.6 show the balance of savings banks revenues between ‘old’
banking activities (the interest margin – right scale) and ‘new’ ones
(revenues from services – left scale), in 1986 and 2000. What emerges
from these data is the increased heterogeneity between savings banks
over time, in terms of revenue diversification.
That diversity can be explained in the following terms. In the early 1990s,
once savings banks were enabled to merge and expand on new markets,
only the largest savings banks – and those integrated within a group –
succeeded in diversifying their balance sheet structure. In addition,
decreasing interest rates in the 1990s automatically reduced all savings
banks’ interest margin, but those who suffered most were the banks
essentially relying on lending to households and small firms – i.e. the
smaller savings banks. These banks displayed a limited capacity or
willingness to engage in new markets and the divide grew between these
banks and the ones that did choose to invest in the development of new
skills and services.
259 Interview, 06.03.03.
239
Whereas, in 1994 for instance, Cariplo clearly stood as an outlier in terms
of its share of revenues generated from services as opposed to gains from
traditional banking activities, by 2000 a small group of large savings
banks had taken the same path. This trend explains why, on average,
savings banks’ balance sheet structure seems to have converged on
commercial banks’.
8.4
Discussion
8.4.1 The role of competition
Starting from the early 1980s in France, late 1980s in Italy, competition
in the banking sector accelerated and intensified. The number of bank
windows has greatly increased in Italy, along with the evolution of the
volume of intermediated funds – that is, total banking collect and
lending. The first clearly outpaced the second during the 1990s. This is a
clear indicator of intensified competition, although still insufficient.
Indeed, it is first of all limited to the retail segment of the banking market,
in which localised contact with the clients is a key factor of success.
Secondly, it is theoretically possible that the multiplication of bank
windows did not affect competition – in the case of segmented markets,
where the increase in the number of bank branches helped credit
institutions to reach out to their respective markets and clienteles,
without affecting other credit institutions. This was obviously not the case
in Italy in the 1990s, and the assumed correlation between the ratio
number of bank windows / volume of intermediated funds and the
intensity of competition seems to be valid.
A same observation could be made in France, where bank windows have
increased in number, although to a lower proportion than in Italy. The issue
is how did heightened competition affect banks’ strategy? During the
1980s and 1990s, the interest margin in Italian banking has diminished.
In other words, the revenue drawn from traditional banking activities
(collect and lending) has decreased, revealing a compression of passive
and active interest rates260, at a time when wholesale banking is again
in crisis261.
260 Passive interests are the interests paid by banks to accounts holders; active interests are
the interests charged by banks on lenders.
261 See “Banque française: la réallocation des actifs en faveur des activités de détail sera
durable”, Les Echos, April 22, 2003.
240
Such an outcome is often attributed in the literature, in part at least,
to the effects of competition. Competition plays out either through an
immediate threat on current market positions or an expected threat on
future market positions. Competition, therefore, erodes monopoly or
dominant positions in all segments of the market, thus leading to an
alignment of the price of credit (interest rates) across all credit
institutions. Again, factors other than competition have certainly played
a role in the reduction in banks’ interest margins – above all, the monetary
policy pursued by the central bank, in a context of low inflation.
Beyond prices (and interest rates), however, competition also provokes
changes in the qualitative aspects of corporate behaviour – the markets,
clienteles targeted, the products and services offered. In France, all
savings banks staff interviewed insisted on competition as being the main
driver for a strategic re-positioning towards new clienteles and markets.
As one of them said,
I don’t think we can disconnect ourselves from the market: Crédit
Agricole or Crédit Mutuel don’t do anything else [than us], but they
have better results (coefficients d’exploitation)262.
This is a long-held view for some of the Group’s top executives. In 1989,
for instance, Charles Milhaud, the future president of the CNCE and one
of the main actors of change, said in a newspaper interview
We are in a new economic and financial configuration: how not take
it into account and prepare our Caisses to analyse all constraints
created by it ? Market demands produce changes that touch on our
traditional activities and force us to integrate within our instruments
all financial management tools now used by all credit institutions263.
If, in the 1970s, competition was less real than perceived (or anticipated),
this changed in the early 1980s, with the creation of ‘banalised’ savings
instruments – i.e. savings products available to all credit institutions.
In addition, in August 1983 the rate served to LEP holders was set one
point above that served to Livret A holders (8.50% against 7.50%) –
which, in a context of persistent inflation, could do nothing but decrease
Livret A’s relative attractiveness compared to other savings products.
262 Interview, 27.06.02.
263 In Revue des Caisses d’Épargne, February 1991, p.19.
241
The same awareness of rising competition and its impact on savings banks’
market shares can be found in Italy. Repeatedly, since the late 1970s,
savings banks officials warned that change was an imperative in the face
of competition. A defensive strategy was called for by top officials at
several major savings banks in the mid-1980s: savings banks ought to
renew the way they did business; otherwise, they would be crowded out
by new intermediaries (Acciaro, Giovando, Molinari, Tommasini, 1985).
A similar point was made in 1985 by the then president of ACRI, who
emphasised
The impossibility of survival in a niche that, sooner or later, would push
the [bank] out of a continuously evolving market, which promises an
agitated existence for those firms that do not quickly adapt264.
Although competition, whether effective or expected, did certainly play a
role in bringing change in savings banks’ corporate strategies, it does not,
however, explain why savings banks chose one specific strategy, or why
strategies differed from one savings bank to another (in the Italian case).
Secondly, the emphasis put on competitive behaviour does not automatically
respond to changes in savings banks’ external environment, i.e. increased
competition: it reflects specific dynamics at play within the organisation
of savings banks in both countries, namely what I have called the “quest
for autonomy” and the “pursuit of profitability”.
8.4.2 The role of changes in the regulatory environment
The impact of regulatory change on savings banks’ change in corporate
behaviour is multi-faceted. First of all, the intensification of competition
analysed above can be partly attributed to key macro regulatory changes,
especially banking market de-segmentation (see chapter 5), which put an
end to ‘top-down compartmentalisation’ (see chapter 4 as well).
Secondly, regulatory changes specifically aimed at the savings banks
sector (the 1983 and 1999 reforms in France, the 1990 reform in Italy)
might have induced savings banks to opt for specific courses of action.
For instance, the lift of restrictions on corporate lending, in the case of
French savings banks, certainly helps to explain the rapid entry of savings
banks into the corporate market.
264 Ferrari, 1985, p.1039.
242
However, again, as mentioned in chapter 4, changes in the regulatory
framework led to the transformation of the framework of constraints
and incentives faced by savings banks in both countries. It did not force
savings banks into a specific course of action. To illustrate this distinction,
one should think of the case of check accounts, which French savings
banks were first authorised to offer in 1978: until 1981, very few Caisses
actually explored this new opportunity, showing that other forces were at
play than orient Caisses’ behaviour – organisational capacity, management’s
availability, clients’ responsiveness…
The issue here is first to understand to what extent changes in corporate
behaviour were determined by regulatory changes. It is, secondly, to
understand how the variety of strategies pursued by savings banks can
be explained by regulatory change. As for the first issue, it seems that,
especially in the Italian case, those savings banks that preserved their
specific business identity did so in the absence of any political-legal
support or protection. Historically, as mentioned above, no substantial
limitations were attached to savings banks’ activities (vis-à-vis commercial
banks’ ones). Rather, until the mid-1980s the existing regulatory regime
established a strong “firing wall” between short and long-term credit.
Savings banks, as most publicly owned and commercial banks, were
entitled to provide only short and medium term lending. But the Italian
Casse di risparmio were on a much more equal footing with their commercial
competitors than were their French counterparts. In addition, a 1978
decision by the Credit and Saving Governmental Committee (Comitato
Interministeriale per il Credito e il Risparmio, o CICR) ended the ban on
the creation of new bank branches, which led to a rapid increase of the
number of bank windows in Italy. A further 1989 decision by the CICR
totally liberalised the ATM opening regime265. Finally, a 1993 law, the
Testo unico in materia creditizia, while incorporating the Second
European directive on Credit institutions, drastically reduced the number
of legal categories of banks266.
265 CICR deliberation of January 20, 1989.
266 Until the 1993 Testo unico, Italy had 10 broadly defined legal categories of banks: Istituti
di credito di diritto pubblico (they were 6 in 1988) and Banche di interesse nazionale (3),
which were state-owned (through the public holding IRI), Banche di credito ordinario or
commercial banks (110), Banche popolari cooperative that had a cooperative status (127),
Casse di risparmio (76), Monti di credito su pegno 1a categoria (7) and Monti di credito
su oegno 2a categoria (2), both categories which were attached to savings banks, Casse
rurali e artigiane that became the cooperative banks (726), foreign bank subsidiaries (38),
and Istituti di categoria (5), that is,
243
In his speech to the Camera dei Deputati to present the Ciampi-Visco
reform design, the relatore said that “Too many banks still limit
themselves to collect and lending. Everybody knows that the rise of
revenues from services is fundamental for banks to stay on the market.
[…] Savings management, product personalisation, corporate finance
represent the challenge of the future. […] The legislator’s duty is to
provide a certain framework for that process”267.
As for the second point, the Italian case clearly shows that a single set of
regulatory constraints and incentives led to a variety of behaviours, thus
questioning the explanatory strength of ‘regulation’ as a source of change.
The French case is more ambiguous, since a) the internal cohesion of savings
banks and of the savings bank group was strengthened by regulatory
authorities and b) there is no strong variety of strategies among savings
banks. However, regarding the first point one can point out that the
“privileged” status of the Livret A has been repeatedly questioned by
policy-makers and regulators alike. In the 1996 annual report of the
Commission Bancaire, Jean-Claude Trichet, the then Governor of the
Banque de France, called for “restoring French banks’ profitability” and
for ending the “distribution of certain specific products”. Behind that
formulation many observers saw an implicit reference to the Livret A268.
A few months later, a report by the Senate Finance Commission (so-called
“Rapport Lambert”) called for the generalisation of the distribution of
de-taxed bankbooks, such as Livret A (savings banks and Postal office)
and the “Livret bleu” (distributed solely by the Postal office) – as well as
a broader re-definition of the missions of savings banks. More recently,
the Nasse-Noyer report, commissioned in 2003 by the Minister of the
Economy, further questioned the necessity to maintain alive the Livret A.
Therefore, if, on the one hand, the principle of sector and group cohesion
was regularly supported by regulatory authorities, on the other hand
the latter did not support savings banks’ specialisation. Regulatory desegmentation, which started in the 1970s and continued in the 1990s,
was clearly aimed at creating a level-playing field within banking
and finance and did not create pockets of protection and privilege for
non-commercial banks.
267 Camera dei Deputati, Atti Parlamentari, Disegno di Legge n.3194, February 18th, 1998.
268 See for instance “Les Caisses d’épargne en danger”, in L’Humanité, December 13th, 1996.
244
In France, savings banks’ belated access to checking accounts (1978) and
corporate lending (1985) coincided with the opening of “administered
savings products” to other credit institutions: the Livret d’Epargne Populaire
(popular savings book, or LEP) and the Compte d’Epargne Valeurs
Industrielles (or CODEVI) were created in the early 1980s as a means given
to commercial banks to tap into administered savings, while differentiating
the sources of long-term finance (for housing and industry). In this
context, the enlargement of savings banks operational scope was meant
to balance commercial banks’ entry into administered savings.
In addition, the numerous changes that took place during the 1970s and
1980s did not lead the banks to automatically seize the new opportunities
offered to them. For instance, deposit accounts, authorised in 1978, remained
a marginal activity for many years. In 1984, for instance, or six years after
the 1978 authorisation, deposit accounts still represented less than one
percent of the Caisse d’Épargne des Bouches du Rhône’s total liabilities.
In both countries, therefore, neither the specific character of savings
banks’ strategies nor their variety (in the Italian case) can be attributed to
changes in regulation. A final argument against the regulation-driven
explanation of change in corporate behaviour lies in the fact that, as
shown in chapter 3, regulatory change in France (and, to a lesser extent,
in Italy) was largely driven by savings banks themselves, since the postwar
period (see Duet 1991). Duet speaks about “almost thirty years of endless
lobbying for the authorisation to open checking accounts.” (Duet, 1986).
Similarly, a top French savings banks official used the expression of “long
march” in an article published in La Revue des Caisses d’Épargne in 1976,
to qualify savings banks’ lobbying.
As emphasised in chapter 2, the various approaches inspired by new
institutionalist theories claim that institutions shape (or structure)
individual behaviour. The previous section already examined the relation
between savings banks’ behaviour and regulation, which could be
broadly understood as ‘political-legal’ institutions. VOC scholars often
focus on the role played by several other institutions, among whom
corporate finance and corporate governance. In the present case, it
would be tricky to identify corporate finance institutions distinct from
banks’ behaviour, since banks’ business is to “create” corporate finance.
The next section will therefore discuss the role corporate governance
institutions played in the shift in savings banks strategies, starting from
the already mentioned IEF report, which argues that “the absence of
majority [private] shareholders restricts market forces from being wholly
effective in influencing banks’ current performances” (p.123).
245
Since both competition and regulation played a role in bringing about
changes in savings banks’ strategies, but since neither competition nor
regulation explains either the substance of such changes (Italian savings
banks’ localism, French savings banks’ persistent reliance on traditional
savings products) or the variety of strategies pursued, one has to turn to
other two explanatory factors: the drive towards autonomy and the
divergent quest for profitability.
8.4.3 The drive towards autonomy and the pursuit of profitability
The drive towards corporate autonomy has been a powerful factor behind
the French savings banks’ gradual enlargement of their operational scope
– while managerial autonomy was a strong driving force behind Italian
savings banks’ changes in corporate behaviour. Corporate autonomy can
be defined as the capacity of a firm to autonomously make key decisions
about its resources and investment strategies. As seen in chapter 4, the
emancipation of French savings banks from the CDC’s umbrella was a key
motivation for savings banks executives. The transformation of French
savings banks into ‘real’ banks, through the full control of their resources
and the ability to determine autonomously the range of products they
offered, meant a full emancipation from state-directed intermediation
circuits. One does not need, however, to accept Duet’s teleological
argument about the inevitability of such a transformation, akin to a return
to the XIXth century origins (Duet, 1986: 148-149).
The issue of corporate autonomy is, however, a complex one. As we saw
in chapter 6, French savings banks’ shift towards autonomy went hand in
hand with group centralisation, which led to a decrease of autonomy at
the local banks. As an interviewee, at the CNCE, said:
The CNCE’s principle is to say «OK, les Caisses, you are grown ups,
you take care of the means to reach those objectives»269.
Managerial autonomy, in contrast to corporate autonomy, can be defined
as the capacity of managers to build on their technical (and managerial)
legitimacy to make key decisions about a firm’s orientation. Managerial
autonomy was a factor in French savings banks modernisation, too.
269 Interview, 23.04.02.
246
In fact, gaining autonomy from the State (corporate autonomy) was
associated with increased managerial autonomy, at least until the 1999
law and the apparition of owners. But as the previous chapter has shown,
savings banks managers were then in a (strong) position to limit the
effective exercise of control by owners.
In the Italian case, corporate autonomy was less an apparent problem.
Savings banks were already autonomous entities by the early 1980s (from
both a legal and economic point of view), in contrast to their French
counterparts. As Figliolia noted in 1981, “there is no regulation that
attributes to other banks the autonomy given to Casse di Risparmio”
(Figliola, 1981: 1017). However, as noted in chapter 5, at least the largest
savings banks were closely knit within power networks dominated by the
Christian Democrat party on the ‘political’ side, and the Treasury on the
institutional side. It is probable, therefore, that corporate autonomy played a
role as a force for change – but its effects are likely to have been ambiguous.
Managerial autonomy is also an ambiguous factor in the Italian case
since, as we saw in chapter 5, Foundations remain an important role as
minority owners in many savings banks.
A second powerful factor for generating change has been the shift in
savings banks’ corporate objectives. Here the concepts developed by
Quack and others around the “social structure of performance” are
useful. Morgan and Quack (1999), and Salomon (1999), have shown that
different measures of performance, which entail different social
structures, are at play in the banking sector. Beyond performance,
however, one could argue that corporate objectives are social structures
as well, and their substance does not automatically follow from changes
in the external environment – such as competition.
In France, as mentioned in the previous chapters, until the mid-1970s
savings banks were considered as a quasi-public institution collecting
savings. Their transformation into real banks started through the ranks of
a minority of savings banks managers and executives who carried on a
different vision of the corporate mission savings banks should pursue
than the non-profit, localised objectives then in vigor. This ‘business
profitability’ objective grew in importance over the years, and became the
top priority for savings banks.
247
As Charles Milhaud said in 1989: “The Spanish started [lending to business
firms] in 1978. Since then they have become hyper-performing”270.
According to a CNCE staff, the current commercial strategy of the savings
banks group is entirely geared towards generating
new potential for growth in revenues (PNB) – since that in retail, there
are no longer important growth potentials271.
In contrast, several interviewees (in particular the union members) spoke
of savings banks abandoning their core mission, which is, according to
them, to focus on lower middle class and poor households. As one of
them stated,
What can we say? The savings banks are losing their soul272.
There is, therefore, a “conflict of visions” within savings banks, between
those who wish to pursue profitability objectives similar to those of
commercial banks, and those arguing that savings banks should follow
more ‘social’ corporate objectives.
This conflict of visions draws on the drive towards autonomy analysed in
the previous section. Managers – and in particular CNCE staff – built their
technical legitimacy, and therefore their autonomy and power, on the
profitability goals underlying savings banks’ performance273. In contrast,
the staff who have remained ‘faithful’ to the old corporate objectives are
locked in a minority power position, de-legitimised by managers’ use of
external factors to buffer their arguments – which repeatedly surfaced
during interviews, through references to ‘competition’, ‘our competitors’,
or ‘customers’. Interestingly, however, the actual balance of power depends
on a new factor, namely, the sociétaires, whose present non-involvement
in savings banks’ strategies maintains managers’ autonomy and the
domination of profitability goals over other objectives. This could change
in the future.
270
271
272
273
248
Charles Milhaud interviewed in Professions du Sud-Est, September 1989.
Interview, 25.07.02.
Interview, 01.07.03.
Interestingly, among the specificities of the savings bank category emphasised by a former
president of ACRI in the early 1980s were the fact that governance structures included
persons (board members) who did not gain direct economic profit from
their decisions; this allowed, in his words, to “temper that merchant’s instinct described
by Bagehot” .
What about Italy? There, too, change in corporate behaviour was preceded
by a shift in corporate objectives that reveal a conflict of visions. Along
the 1980s, the ‘pursuit of profitability’ objective became widely shared
amongst savings banks’ officials and top managers. This evolution can be
observed through the proceedings of the multiple seminars, conferences,
and annual meetings that took place during the period. At a meeting
organised in 1981 by the Cassa di Risparmio della Spezia, for instance,
several participants worried that in the name of functional specialisation
savings banks would be forced into a specific role (that of guaranteeing
savings), which would create an “operational cage” (Lisanti, 1981). In the
same meeting, savings banks officials expressed their reluctance to
indexing interest rates paid to depositors on inflation, and talked instead
of fine-tuning pricing to specific products and clients; and of pushing for
the development of services paid by the clientele. During the 1980s and
1990s, with the intensification of competition profitability received even
more emphasis.
However, turning into for-profit enterprises did not necessarily mean losing
savings banks’ specific business identity. In the 1980s, Italian savings
banks could still be defined as “innovative firms in the roots of tradition”
(Ferrari, 1985). Tradition, that is – especially savings banks’ specific
governance structures according to Ferrari – were good at ‘tempering
the merchant’s instinct’ (Ferrari, 1985 – a reference to Bagehot’s famous
formula). Ferrari also distinguished between profit seeking and profit
maximising, arguing that in the case of savings banks, seeking profits was
subordinate to ensuring high levels of equity and funding local public
interest activities. Turning to services was, according to Figliolia (1981),
the best way to re-assert savings banks’ peculiar identity.
However, again, those changes are not all-encompassing. Onado’s 1990
work on a sample of 108 Italian banks showed, for instance, that banking
competition undeniably increased in Italy during the 1980s, but it did not
result in fundamentally altering banking performance or business (Onado
1990). Increased competition was, according to Onado, a kind of “lopsided process”, characterised by a mere transformation of bank revenues
from direct intermediation to placement fees. “Alternatively stated, he
continued, banks have not lost their relationship with the customer and
that certainly helped maintain segmentation (by location, type of deposit,
class of customer, size of accounts, etc.)” (Onado, 1990: 104). If the situation
has changed much since the early 1990s, savings banks remained, at
least until the early 2000s, characterised by their localism and orientation
towards small and medium firms (see section 8.3 above).
249
Figure 8.5: Italian savings banks' revenues from 'old' and
'new' banking activities in 1986 (in bn lire)
1,000,000
800,000
600,000
400,000
200,000
1,000,000
800,000
600,000
400,000
200,000
0
0
Figure 8.6: Italian savings banks' revenues from 'old' and
'new' banking activities in 2000 (in bn lire)
1,000,000
800,000
600,000
400,000
200,000
250
1,000,000
800,000
600,000
400,000
200,000
0
0
9. CONCLUSIONS
9.1
Summary of findings
Finding # 1: Simultaneous convergence and divergence
of regulatory regimes
The regulatory reforms of savings banks in France and Italy present
several commonalities: in both cases, the reforms aimed at (i) statutory
normalisation, (ii) sector re-organisation and (iii) market de-segmentation
and increased operational homologation. At the same time, however,
there are considerable differences in the final (as of 2004…) outcome of
the regulatory process. In Italy, the savings banks lost their specific legal
status in 1990, and regulators and policy-makers encouraged savings
banks to form alliances with other types of banks, thus encouraging the
break-up of the sector. In France, by contrast, policy-makers guaranteed
the unity and cohesion of the sector and transformed the nascent group
into a cooperative holding. In other words, savings banks were placed
at the opposite ends of the renewed public (cooperative) vs. private
(commercial) balance in banking in the two countries.
Finding # 2 – Divergence as change rather than persistence
The factors of divergence and convergence do not fit neatly with the
external pressures vs. internal (institutional) resistance story. The French
case, in particular, shows that both divergence from the Italian case and
from the “market-based” ideal-type resulted from a change of path, i.e.
the transformation of savings banks into a cooperative group.
251
Finding # 3: Regulatory reform as a mix between ideas, interests
and institutions
Regulatory reform in both countries resulted from the intertwining of
political change, change in economic conditions and the coming of age
of specific ideas regarding the nature of the banking firm and the role of
the state in the economy.
Finding # 4: In both countries, one can observe the same shift from
sector to group coordination…
Changes in savings banks’ corporate and sector boundaries have led to a
shift from sector to group coordination in both France and Italy.
Corporate boundaries have been profoundly transformed in both
countries, where most savings banks have merged or formed close
alliances with other banks. Simultaneously, there has been a decline in
sector associations’ strength; and the re-shuffling of “sector banks” or
central cashier corresponded to an increased centralisation at the group
level – and the gradual obsolescence of sector financial solidarity.
Finding # 5: …However, group coordination came with increased
sector cohesion in France, while in Italy it accompanied the
breakdown of the savings banks sector
Despite finding # 4, there is no unambiguous convergence at the
coordination level between the two cases. In France, group centralisation
occurred strictly within the (old) sector boundaries, benefiting from the
maintenance of sector-specific protections guaranteed by policy-makers;
and the sector bank and head of network functions were merged into a
powerful holding. In Italy, in contrast, group centralisation took place at
the expense of sector cohesion: large savings banks “quit” the category
to form powerful, integrated banking groups with commercial and
privatised banks. In addition, savings banks’ specific financial linkages were
either abandoned or subsumed within the banking system as a whole.
252
Finding # 6: Such institutional change at the coordination level
owes much to organisational dynamics
Shifts in corporate and sector boundaries, and in coordination modes,
cannot be attributed solely to increased returns to scale or to politics.
Indeed, politics did play a role, but regulatory reforms were strongly
influenced by some key savings banks actors and cannot, therefore,
be considered as a purely independent variable. As per increased returns
to scale (the key mechanism invoked by tenants of the narrow version of
path dependence theory), it is difficult to identify, especially in the Italian
case, a homogeneous set of actors all pushing for institutional change (in
the same direction). Rather, shifts in coordination resulted from
organisational dynamics: i.e., the alliance between a small group of top
savings banks actors and of regulators and policy-makers interested in
favouring the emergence of strong banking groups (either within or
across the savings banks sector), while other savings banks actors
followed suit (French case) or chose another path (Italian case).
Finding # 7: Divergence as a by-product of change
Again, divergence in the evolution of coordination modes is not simply
the result of institutional stickiness. In both cases, the gradual
disengagement of the State, along with the activism of the groups
mentioned above, led to the re-organisation of coordination along
“principles of differentiation” already present, although under a latent
form, in the past: territorial dualism in Italy, versus “sector” (cooperative
versus commercial) competition in France.
Finding # 8: French and Italian savings banks differ as to what
solutions were brought, during the 1980s and the 1990s, to the
ownership problem…
The lack of clear ownership was one of the issues at the top of policymakers and savings banks’ top executives’ agenda in both countries the
early 1980s. However, this same problem was solved by different means
in the two countries. In France, after a long period (1983-1999) in which
ownership was never clarified, the 1999 reform “created” new owners
by transforming savings banks into a cooperative group.
253
In Italy, the 1990 reform addressed the ownership issue upfront by
separating savings banks, which became joint-stock companies, from
new owners, the Foundations, in turn owned by public and local entities.
The subsequent decade saw a struggle between Foundations and policymakers around the issue of effective control of savings banks.
Finding # 9: …However, the renewed corporate governance
arrangements, in both cases, reflect the rise of managerial power
In practice, however, the new corporate governance mechanisms implemented
in the 1990s ended up, in both cases, strengthening managerial control
over savings banks. In Italy, political conflicts around the issue of banks’
ownership and control allowed managers to gradually strengthen their
power. In France, the creation of new owners (the “sociétaires”) did not
translate into effective ownership. Corporate governance mechanisms
proposed by savings banks’ management, as well as the effective balance
of power within the savings banks group and the lack of interest of the
new owners towards their power of control, all played in favour of the
strengthening of managerial power to the expense of the sociétaires.
Finding # 10: Again, institutional factors are not sufficient to
explain these changes in savings banks’ ownership and governance
Regulatory changes had a direct impact on ownership and governance of
savings banks in both countries. However, those changes were partly
endogenous. Other institutional factors, such as the shift in coordination
modes, co-evolved with ownership patterns, rather than shaping them.
Finding # 11: Over the past two decades, savings banks in both
countries have aligned their business practice to that of
commercial banks
Market de-segmentation, shifts from structural to prudential regulations,
changes in clients’ attitudes and preferences, technological innovation, all
contributed to a sharp increase in competitive pressures in the banking
sector. Such pressures have led savings banks to enlarge the scope of
their operations; adopt commercial targets and strategies widespread
among commercial banks; behave more like a profit-making firm and less
like a non-profit institution.
254
Finding # 12: However, savings banks have retained key distinct
operational features
French savings banks’ collect is still heavily dominated by administered or
semi-administered savings products. Their lending is still mainly oriented
towards households and, to a lesser extent, local governments and nongovernmental organisations. The cooperative status of the French savings
banks group has sanctified the traditional redistributive mission of savings
banks – although actual practice is ambiguous. In Italy, savings banks or
former savings banks still lend to small-and medium enterprises and are
a key financial partner of industrial districts. Again, the maintenance of
local rooting is not a homogeneous phenomenon across the Italian
savings banks sector.
Finding # 13: Such operational and business distinctiveness is,
again, the outcome of various factors – the drive to autonomy,
compartmentalisation…
9.2
Discussion
9.2.1 Research questions
The two overarching questions formulated at the outset of this study where:
(i) what are the changes undergone by savings banks in France and
Italy in the 1980s and 1990s – and do such changes show convergence
or divergence across the two countries? and (ii) what explains French
and Italian savings banks’ apparent different trajectories in front
of common pressures to adjust?
The findings synthetised above help us respond to these two questions.
A further discussion of this findings follows.
255
9.2.2 Multiple patterns of change
•
Convergence and divergence
The findings presented in chapter 6, 7 and 8 show that convergence,
co-evolution and divergence forces are simultaneously at play in the
French and Italian banking sectors. There is convergence on a third
model: the two cases show a move from the state-administered
model to a hybrid bank-market model of finance. There is coevolution: both countries have moved (in parallel) from stateadministered financial systems to this new hybrid. There is divergence
between the two cases: French savings banks have become an
integrated cooperative banking group, epitomising France’s new
functional dualism; Italian savings banks have ceased to exist as a
category and taken on various paths mostly linked to territories,
epitomising Italy’s new geographical dualism. One can therefore
agree with Boyer, who argues that modern capitalism tends towards
‘homeostatic equilibria’ characterised by mixed convergence and
divergence, both being two among a multiple array of possible
configurations (among which collapse, catch-up…) (Boyer, 1996).
These observations are consistent with two hypotheses recently
explored by the literature on comparative capitalisms, namely: (i) firms
(economic actors in general) face a multiplicity of orders and (ii) the
very nature of institutional complementarities might favour change
instead of resilience. The first hypothesis is both empirical and
theoretical (see Whitley, 1992b and 1999; Fligstein, 1996; Hancké
and Goyer, 2005). Empirical observation tells us that multiple patterns
of adjustment (or behaviour) exist throughout economic systems.
Theoretically, the hypothesis derives from the argument that national
business systems are characterised by the co-existence of multiple
logics or conventions that influence the behaviour of single firms.
This hypothesis does not need to lead to a constructivist view of firms’
behaviour; as Hancké and Goyer point out, it is perfectly consistent
with the view that “while institutional frameworks may be
considerably more malleable and open than the conventional views
assume, systemic constraints of internal coherence impose limits on
this openness” (Hancké and Goyer, 2005: 60).
256
•
Variety in time
As noted in Chapter 2, new institutionalist approaches to economic
and industrial change mainly rely on one specific theory of change,
namely, path dependence theory. Yet the conclusions exposed above
point to a much murkier nature of changes in the political economy.
The corporate strategies pursued by French and Italian savings banks
perhaps best illustrate these multi-layered characteristics of change.
The 1980s and 1990s showed the capacity of savings banks to quickly
adapt to a changing competitive environment – through product
diversification, entry into new markets, targeting new clienteles,
adopting new business practices. There was, clearly, a change of path.
At the same time, however, savings banks in both countries pursued
a niche strategy, building on the segments of a banking market where
they had the stronger position: administered savings products, mortgage
lending, lending to small firms – thus relying on their territorial
rooting. These are clear instances of path dependence. In addition,
firms (savings banks) played a central role in the transformation of the
banking system in both countries – a role recognised central in the
most recent theories of institutional change (Pierson, 2003; Thelen,
2004; Streeck and Thelen, 2005), and is explored below.
9.2.3 A management-led modernisation process
•
The role of institutions
What is the role of institutions in fostering and shaping change in
savings banks’ behaviour? As seen in chapter 2, the neo-institutionalist
theory at the basis of most comparative works on modern capitalism
assumes that actors’ behaviour is shaped or influenced by institutions
– through various mechanisms, as Hall and Taylor (2001) point out:
coercion, mimetism, constraints and incentives… The evidence presented
in this research suggests apparently contradictory observations.
Institutions have certainly played an important role in shaping the path
of change in both countries. Polity-linked institutions have determined
the pace of the reform and its outcome. Among those institutions,
the electoral system and the party structure certainly played a role in
the gap between reforms in France (early 1980s for the first wave)
and in Italy (late 1980s).
257
As for the reform’s outcomes, the linkages between reform-minded
policy-makers, technocrats and top savings banks officials help
explain how the actual reform mostly embodied designs previously
elaborated by the savings banks themselves. There is, therefore, a
continuous and bilinear interaction between (policy) institutions and
(banks’) strategy.
The role of coordination institutions is much more ambiguous.
As chapter 6 has shown, at the outset of the 1980s sector
organisation was stronger in Italy than in France; this relationship was
reversed in the subsequent decade. Therefore, differences in
outcomes (the diverging cohesion of the savings banks sector in both
countries) cannot be attributed to institutional differences. As shown
in chapter 6, the shift in corporate and sector boundaries within the
French and Italian savings banks sector has much to do with a shift in
the internal balance of power, to the benefit of savings banks’ senior
managers. In the French case, top officials at the savings banks allied
with bureaucrats and policy-makers to push forward the aggregation
and centralisation of the savings banks group. As chapter 7 has
shown, moreover, the acquisition of cooperative status and the
institution of new owners did not threaten managers’ power within
the group, since governance mechanisms were carefully designed so
as to prevent direct control from them, and since the state regulators
showed little interest in the effective exercise of ownership rights
within the group.
In an interesting study of British clearing banks, Morison notes the
“traditional supremacy of geography as the primary organisational
dimension, both domestically and internationally” (Morison, 1994: 84).
As mentioned in Chapter 1, Morison mentions two other “organising
principles” in banking: pace of change, and interdependence
between various banking businesses. These three principles, however,
do not maintain equal importance throughout the years. In fact,
according to Morison’s periodisation of organisational change in
British clearing banks, “phase five” (the early 1990s) is characterised
by the lowering importance of geography, which he could see, for
instance, in the decline of the role of the regional director.
258
Morison’s historical analysis can be transferred to cross-country
comparisons – since, in methodological terms, both types of analyses
share an interest in variation-finding, be it across time or across space.
This framework becomes especially enlightening for our comparison
between France and Italy. It seems that the divergence that occurred
between France and Italy, in the 1990s, operated precisely at the level
of the organising principles: in France, regulatory, pluralistic
segmentation gave way to functional specialisation, while in Italy, the
same type of segmentation, once abandoned by the State, gave way to
geographical dualism. In other words, geography as an organisational
principle has seen its importance grow along with the dismemberment
of state-sponsored segmentation – in contrast to the British case.
Such thesis is close to the arguments put forward by Verdier (2002,
2003), cited in chapter 2: banking structure in industrialised countries
is shaped by historical state centralisation.
All these observations point to the non-univocal relationship between
institutions and individual (or aggregate) behaviour on the one hand;
and between institutions and change on the other. In the cases of
French and Italian savings banks, there are three distinct institutional
dynamics. First, shifts in the macroeconomic and macro-regulatory
regime (including the international monetary regime) have changed
the matrix of constraints and incentives facing savings banks.
Secondly, savings banks have reacted by adjusting their behaviour
AND modifying (or helping to modify) the micro institutions they were
submitted to: specific regulations, sector organisation, ownership
and control. In this case, findings can illustrate the double-loop
relationship between firms and institutions proposed elsewhere:
“the degree of complementarity between institutions varies across
societies and firms are able to use this variability, both within societies
and across them, to develop new patterns of action that in turn
contribute to the reshaping of institutions at the national and the
international level.” (Morgan, 2005: 415) Third, the adjustment
process has revealed the role played by the “meta-institutions” just
mentioned: state centralisation and territorial segmentation.
•
The forces of change: competition and management’s quest for autonomy
As chapter 5 has shown, the regulatory reforms at the root of
modernisation were strongly influenced by the policy ideas promoted
by savings banks managers, who benefited from their proximity to
political power (at the regulatory and parliamentary levels).
259
Macroeconomic shocks and policy shifts in the 1970s left those actors
with the conviction that the structural conditions of banking business
would be unequivocally altered in the subsequent decade; by
anticipating change, savings banks could shape the reform outcome
in the direction wished by top management. In particular, savings banks
could hope to (i) free themselves from the state; (ii) give themselves
the means to build banking groups able to compete in a liberalised
banking market. Both objectives fit within the top managers’ quest
for managerial autonomy (from the state and the market).
Such quest for autonomy also drove the post-reform corporate
restructuring process in both countries (chapter 6), as well as the
changes in corporate governance (chapter 7). Savings banks’ top
managers succeeded in building integrated groups, either encompassing
the whole sector (as in France), or through cross-sector alliances
mainly at the regional and inter-regional level (Italy). At the same
time, management carried a move from state control and blurred
ownership to private ownership and control; but this was a gradual
change, and in both countries senior management kept the banks
under control – either through specific corporate governance devices,
as in France; or through minority but controlling stakes by Foundations
in Italy, impeding new owners to take control.
9.3
Implications of the research
9.3.1 The implications of changes in the savings banks sector
for the banking system as a whole
Changes in the savings banks sector may have, and in fact have had strong
implications for national banking systems as a whole. First, as argued in
chapter 1, savings banks represent a sizeable part of national banking
systems throughout Europe – both in terms of assets (lending, especially to
local government, small firms and mortgage to households) and liabilities
(collect of households’ savings). French savings banks, for instance,
accounted for 17.8% of all deposits in 2003, and 42.3% of lending to
NGOs. Italian savings banks, in the mid-1990s, represented around 30%
of deposits and 26% of lending to firms. More recent data are difficult to
collect given the restructuring trend in the Italian banking sector that led
to many mergers among savings banks or between savings banks and
other categories of banks. The sheer quantitative importance of the savings
banks sector means, as emphasised in the Introduction, that changes in
that sector cannot leave other segments of the banking system unaffected.
260
Secondly, patterns of change in the savings banks sector show many
similarities with those followed by other bank categories, i.e. commercial
and cooperative banks. Such similarities can be attributed to two factors:
(i) the occurrence of external shocks that force all banks to adjust in a
similar way – that is, the de-segmentation of markets and the shift from
structural to prudential regulation; (ii) mimetism, or isomorphism
between banking categories.
Third, savings banks interact with other segments of the banking sector,
through competition or corporate restructuring processes. Many large and
medium-sized Italian savings banks, as we have seen, have participated
in the mergers and acquisitions wave that has led to the constitution of
Italy’s four major banking groups. On the business level, if savings banks
have engaged in isomorphic behaviours, adopting business practices and
goals from other banking categories, it is not unconceivable to think that
in the process savings banks increased the creditability and the attractiveness
of such business practices and goals for other banking actors.
9.3.2 The implications of changes in banking on national
economic systems
A second broad implication of the research has to do with national
capitalisms as a whole. As argued in the introduction, many scholars have
emphasised the centrality of financial systems in national capitalisms.
More precisely, financial systems generate some of the defining
characteristics assumed by national economies. For instance, bank-based
systems enable firms to access long-term finance in exchange for stable
ownership and control patterns. As a consequence, changes in financial
systems cannot leave other (real) economic sectors unaffected.
In the case of savings banks, their traditional clientele (low income
earning households, small firms, local government) might be adversely
affected by a shift away from their needs towards other segments of the
market. In other words, savings banks in particular, and banks in general
generate their own sets of constraints and incentives to which other
actors are exposed; changes in banks’ behaviour lead to changes in those
constraints and incentives.
261
9.3.3 Theoretical implications
The findings presented in the previous sections have theoretical
implications as well, which might inform future research in the field of
comparative political economy. First, as argued above, patterns of change
are multiple and are not limited to the binary logic emphasised in the
neo-institutionalist literature. It might be more useful to rely on broader
and looser theories of change. Secondly, if the systemic congruence
hypothesis does not hold, one might want to look at the dynamics at play
within each national capitalism. This research agenda does not mean that
any comparative perspective should be abandoned. Actually, one
potentially interesting implication of the findings presented here is that
internal differentiation processes helps explain cross-country differences.
In other words, the various types of segmentation/fragmentation
characterising each national financial system might constitute the central
differentiating factor between national systems. Varieties within capitalism
generate varieties of capitalism.
262
BIBLIOGRAPHY / REFERENCES
a.
Sources
The study relies on descriptive statistical data on savings banks’ balance
sheets. For Italy, all the data come from the Bilbank database compiled by
the Italian Banking Association, available upon request. For France, balance
sheet data has been collected from various sources: annual reports of the
Commission Bancaire; annual reports of the CENCEP, later the CNCE.
Balance sheet data were not manipulated since the research only uses
rough indicators (such as the ratio of liabilities on own funds or the ratio
of liabilities over assets). Balance sheet data for other categories of banks
(mainly commercial banks) are aggregate data compiled from various
central bank annual reports.
The study also uses data on various indicators, such as: the number of
banks, the number of banking mergers and acquisitions, etc. Those data
have been compiled from official publications by the regulatory
authorities in each country. Those documents were consulted at the
Banque de France library, at the Banca d’Italy library, and at the Italian
Senate library.
Semi-structured interviews
The study draws on 52 semi-structured interviews conducted with key
informants in both countries. Interviewees include: parliamentarians
(former or current), one former Minister, savings banks managers, staff at
the sector association, union members, and other stakeholders (such as
experts involved in the various reforms). The table below recapitulates the
number and quality of informants.
263
Savings banks association
Savings banks management
France
Italy
11
5
Total
16
8
5
13
Savings banks union members
3
2
5
Parliamentarians
3
2
5
Ministers
0
1
1
Central Bank staff
1
5
6
Ministry of the Treasury staff
3
2
5
29
23
52
Total
Sampling was made on the basis of the role played by the informant in
the policy/change process (key stakeholders) and on the informant’s
experience with savings banks. The goal of such semi-structured
interviews was, indeed, twofold: (i) gather first hand information concerning
the dependent and independent variables; (ii) question informants on the
meaning they gave to the changes under study. Various interview protocols,
along with the list of interviewees, are included in the appendix.
Documents and archives
The study relies extensively on savings banks’ documents and archives,
especially: (i) annual reports (in France, the annual reports of the CENCEP,
later Caisse Nationale des Caisses d’Épargne; of the Caisse d’Épargne de
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(ii) internal journal (in France: the Journal des Caisses d’Épargne, part of
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from savings banks themselves or consulted in savings banks’
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have been obtained from the main bank trade unions in both countries.
Moreover, the research builds on the analysis of legal and regulatory texts,
mostly published in the Journal Officiel in France and the Gazzetta Ufficiale
in Italy, and in regulatory authorities’ various bulletins and annual reports.
264
Finally, the research draws from an extensive analysis of the parliamentary
proceedings related to the major regulatory reforms in both countries, in
particular: the 1983 and 1999 laws in France and the 1990 and 1998
laws in Italy. Those parliamentary proceedings were mostly consulted at
the Senate library in Italy, and the library of the Assemblée Nationale in
France. Part of these proceedings was also published, either in the Journal
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