The Banking Environment
Economic and political environment
Italy was a founder member of European Monetary Union in January 1999 and since then the monetary policy has been conducted by the European Central Bank.
Italy has strong trading relationships outside the EU, with USA, North Africa and Middle East in particular. The service sector accounts for 68% of GDP, Industry for 30% and Agriculture 2%.
GDP per capita is USD 20,000.
Italy is one of the tenth more industrialised countries in the world. The north of Italy is far more industrialised than the south.
The Italian economy has a large number of SMEs, many active internationally at a relatively small overall size.
Under the impulse of competition and privatisations the Italian Banking system has produced significant progress in the average size of intermediaries and in the range of services offered.
Efficiency raised.
Merger and acquisitions have reduced the gap between the Italian and foreign banks as to operational volumes. The gap reflects the minor development of the banking market in Italy. Ratio between credit and GDP is equal to 85%.
Last 26th June 2004 central banks and surveillance Authorities of the Group of Ten approved the test of the new agreement on banks’ capital elaborated by Basel Committee. The new Agreement will be come in force in a progressive manner between the end of 2006 and the subsequent year.
Simulations made on a large scale show that its application will not generate restrictive impacts on credit offer. Many major Financial Institutions, including Italian ones, will determine prices and conditions of credit in line with those deriving from the new Agreement. (data source: Banca d’Italia Governor’s speech dd 08/07/2004)
Banking in general
The Bank of Italy (the Italian National Central Bank) is now part of the European System of Central Banks but has retained the national supervision of the Italian banking system.
The Bank of Italy protects savings and savers through the stability of intermediaries. It promotes the efficiency and competitiveness of the credit system and thereby favours the allocation of the funds raised for the growth of production and the formation of new savings.
The banking system, which has been greatly strengthened in the last decade by privatizations and extensive restructuring, is committed to sustaining firms that are sound and profitable but too small to confront today’s increasingly fierce international competition.
Historically the Italian banking sector has been fragmented and largely shielded from foreign competition. The situation has been changing markedly in the last decade with a substantial acceleration as the Single Market and the European Union has come into being.
The process of consolidation of the Italian banking industry is on-going, reflecting the need for banks to reach a greater size and a higher efficiency level in a highly competitive international arena. The three largest Italian banks by stock capitalisation were Unicredito Italiano, SanPaolo Imi and Banca Intesa.
With the acquisition of Banco di Napoli in the year 2000 and the merger with Cardine Banca in 2002, the Sanpaolo Group significantly increased its distribution capacity and territorial network, expanding to the North East and the South of Italy.
There are many regional and local banks. Banks operating nationwide usually consist of multiple mergers.
The postal system plays an important role in Italy as it covers the whole country with its network. Poste Italiane have created a bank in the last ‘90s, becoming the first big competitor of the Italian banking system in the retail segment.
Foreign currency accounts can be held by residents inside and outside Italy, and by non-residents within Italy. Credit interest can be paid to residents and non-residents alike, on EUR and foreign currency balances.
Currency
The euro.