The Italian banking system

Italy: Bank of Sicily

The way the banking system functions in today's environment is a process that most people do not really seem to be aware of. Banks can put our lives in serious danger and what is happening in these years will have an effect on the next 30-50 years. Italy, like other nations, was heavily affected by the worldwide economic crisis, but what is different about the Italian banking system is that, with the exception of Unicredit, Italian banks seem to be much stronger than their international counterparts. Indeed, the investments of the Italian banks turned out to be more conservative and safer than originally thought. Traditionally, Italian institutions have been very cautious in terms of cash, and the Bank of Italy has always exerted direct control over the system. This has and continues to allow proper cash flow, and also a controlled credit lending that is never wild and irrational. This has resulted in the Bank's ability to avoid the dramatic personal and corporate disasters that have occurred elsewhere.

This conservative structure clearly influences everyday services, where: credit cards are given with the warranty and coverage of a solid bank account and personal assets; mortgages and variable loans usually require a significant down payment; and most importantly, the actual legalities of opening an account are taken very seriously. The paperwork is often tedious and frustrating especially if someone is used to the American system, but on the other hand this process conveys a sense of actually doing something important, almost sacred, which gives responsibility to the customers and also to the branch handling the account. Yes, because branches are key in the Italian system, as they are actually the ones handling the accounts rather than a central headquarters, and although transactions can be made over the internet or at any branch, certain things can still only be done at the agency where the account was originally opened. This creates slowdowns, but it also personalizes the relationship between the customer and the bank.

The Internet is fully implemented into the banking system as well and many banks provide services that are secure and highly advanced, but what really holds back Italian banking in comparison with others is the cost of having an account. Some fixed costs are imposed by the government and are impossible to go around; in addition, anything related to bank affairs, including sending out bank statements, is charged against the account. This is quite unpleasant, especially when internet access allows real time data, making the paper statement obsolete and an unnecessary expense. These hidden fees seem to be high but so far any serious effort to remove them has failed.

Heavy government involvement is a dangerous phenomenon when it comes to banking, because it opens the public to peculiar interventions that Italians have suffered several times in history. One famous case happened one weekend when the Italian government charged every bank a fixed fee to be collected on every single bank account. Basically, it was a tax designed in 24 hours and didn't allow for citizens to respond. This is an extreme example, but it left a strong mark on Italian society. Although almost 20 years has passed since then the fear of a repeated government action is still very real, as the banking system is exactly the same and has not been reformed or changed. On the other hand, having such strong government positions allows deeper control and protection of the accounts, preserving assets.

It is hard to find the perfect banking system. Italy's system has proven to be solid in terms of protecting assets, yet too slow for everyday transactions and business needs. Some could say "better safe than sorry" While others argue "better exposed than flat." The truth is probably somewhere in the middle but one thing is for sure: Italian banks are not competitive on the international markets. Yet, now with hard cash in their reserves and the Euro being so high, they could take the opportunity to invest and take a few risks, as there are good assets and highly rated companies that need liquidity and could turn great profits in the years to come. Maybe it's time to relax a little and let Italians' money work for them a bit more.