Author :
Marco Migliorelli is an Economist in the European Commission and a research at the IAE Paris 1 Panthéon-Sorbonne (Sorbonne Business School). He holds a PhD in Banking and Finance. His main research interest include : green finance in europe, cooperative banking, the EU monetary policy, and the relation between bank capitalization and lending.
Executive Summary :
The decline in bank loans observed during the recent economic crisis in Italy has been attributed by a number of commentators to nothing more than the usual decline in the loan demand that occurs in a recession. This paper finds evidence that a capital crunch occurred in the co-operative banking segment in Italy in 2013, shedding some light on the presence of significant supply-side factors on lending retrenchment. Co-operative banks succeeded for years in supporting business and households despite the economic downturn, playing a crucial role in the economy in smoothing the effects of the crisis. Nevertheless, the persistent economic depression in Italy seems to have eventually weakened their capitalization and pushed them to cut-back lending in order to restore
safer capital-to-asset positions. This paper, by discussing the recent difficulties of the banking system to finance businesses and households, contributes to the ongoing debates on the opportunity of evolving the traditional cooperative banks’ business model and on the necessity of introducing instruments able to disintermediate the established banking channel. Finally, the paper introduces the concept of Capital fever and proposes a simple index to measure such a phenomenon.