Did governance fail universal banks? Moral hazard, risk taking, and banking crises in interwar Italy1
Bibliographic Data
| ID | 3565502 |
|---|---|
| Authors | Stefano Battilossi (0000-0003-3799-2683, Universidad Carlos III de Madrid, corresponding author) |
| Year | 2009 |
| Volume | 62 |
| Issue | s1 |
| Pages | 101-134 |
| Publication date | 2009-08-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic History Review (JOURNAL) |
| Journal identifiers | ISSN: 0013-0117 • E-ISSN: 1468-0289 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/j.1468-0289.2008.00442.x |
| OpenAlex | W2060119059 |
| Language | EN |
| Citations received | 9 |
| References cited | 45 |
In interwar Italy, at least six major episodes of banking crises required the intervention of monetary authorities to bail out, restructure, or liquidate distressed intermediaries. The five large universal banks rescued in the systemic crisis of 1930-1 jointly accounted for one-third of the total assets of the banking system. What made Italian leading banks so prone to crises? This article suggests that their fragility was ultimately caused by governance failures, both public and private, that enhanced excess risk-taking. Empirical evidence is consistent with theoretical insights according to which the potential for moral hazard and conflict of interest, endemic in universal banking, can be magnified when banks enter into long-run relationships with firms and base their growth strategy on the pursuance of monopolistic rents. Interwar Italy emerges as a case in which an insider system devoid of the disciplinary devices provided by sound governance institutions created perverse incentives and weakened the resilience of the banking system to adverse macroeconomic shocks
Business · Corporate governance · Deposit insurance · Economic policy · Economics · Financial system · Incentive · Market economy · Monetary economics · Moral hazard · Restructuring · Banking stability, regulation, efficiency · Finance · Global Financial Crisis and Policies · Italy: Economic History and Contemporary Issues
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From the universal bank to the universal bank
Financial echoes
The 1920s bank lending boom in Spain
Banking on innovation
Financial crisis, contagion, and the British banking system between the world wars
The establishment of banking supervision in Italy
Goodbye connections, hello Bagehot
Competition, over-branching and bank failures during the Great Depression
International Banking 1870-1914
Linear Probability, Logit, and Probit Models
The great reversals
Relationship Banking
A Reinterpretation of the Banking Crisis of 1930
Universal Banking in Pre-World War I Germany
Fiduciariand Firm Liquidity Constraints
Before the Glass-Steagall Act
The Bank Crisis in Italy
The Role of Banks in the Interwar Economy
English Bank Development within a European Context, 1870–1939
The Balancing Act of German Universal Banks and English Deposit Banks, 1880-1913
The German Twin Crisis of 1931
Universal Banking
Universal Banks and German Industrialization
Catching up or Falling behind? Italy's Economic Growth, 1895-1947
| Unique citing works | 9 |
|---|---|
| Citations per year | 0,56 |
| Citation span | 2010 - 2026 (17) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 9 |