Banking in Italy
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Banking in Italy
The central bank, which is The Banca d’Italia, was the only bank in Italy issueing and exercising credit control functions until Italy's accession to the European Central Bank, which now controls monetary policy and the Euro, the EU's common currency (excepting the United Kingdom, Denmark, and Sweden). La Banca d'Italia is still responsible for controlling domestic inflation and balance of payments pressures.
When the government drafted legislation for the restructuring of the banking sector on 30 January 1997, this banking sector was finally consolidated in Italy. The bill is the latest in a series of attempts since 1990 to rationalize the sector. However, it comes just as Italy's two biggest banks, CARIPLO and what is now San Paolo-IMI, announced plans to begin privatization by the end of 1997, and other banks in the private sector begin to negotiate strategic alliances, notably between: the private sector bank Ambroveneto and CARIPLO; Cassa di Resparmia di Torino and the Cassa di Risparmio di Verona. Mergers are also changing the face of the Italian banking industry. In early 1999, four of the five largest Italian banks were involved in such deals. Unicredito Italiano and Banca Commerciale Italiana merged to form Eurobanca, while San Paolo-IMI and Banca di Roma also planned to combine their operations. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $458.4 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $628.9 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 4.26%.
The MIB, which stands for Milan Stock Exchange, has risen by 10.6% on 26 March 1997 since the end of 1996 despite the fact that a certain amount of volatility can be appreciated and daily volume of transactions were up substantially. In early-mid-2000, the MIB index hovered between 31,700 and 31,800. However, since the onset of the global recession, the index has dropped significantly. From January 2002 to January 2003, the MIB dropped 4.4%, down to 16,208, slightly more than half of its peak value.
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