Financial intermediaries: their evolution and relations with firms

An analysis of the long-term evolution of Italy’s financial intermediaries must consider the macroeconomic constraints impinging on Italy during the early phases of its industrialization in the late nineteenth and early twentieth centuries. The context explains the structuring of the system and the models adopted by the central authorities for systemic stability and satisfactory rates of investment and GDP growth. The pronounced instability associated with a system of “mixed” or universal banks, insufficiently integrated with the financial market, led to the gradual development of an alternative, the “Beneduce system”, which recast bank-firm relations. The internal consistency of this model, designed to buffer exogenous shocks and stabilize capital formation, was progressively eroded in the period of rapid growth following the Second World War, undercutting the ability of the entire financial structure to allocate capital efficiently. In the years of stagflation, the financial deterioration of Italy’s large corporations required an overhaul of the financial system, deemed incapable of efficiently screening entrepreneurs and investment projects. In recent decades the return to universal banking, brought about by a partial institutional convergence, has not been accompanied by robust growth of the kind that Italy enjoyed during the so-called Age of Giolitti before the First World War.