Bank credit lending to small and medium enterprises: was there a credit crunch in Italy?

In the coming months the European scenario will be characterized at least by three features: weak growth, high liquidity, and a new supervisory architecture (Single Supervisory Mechanism). In such an environment which will be the perspectives for the Italian commercial banks? Which are the potential drivers of banking efficiency and profitability? Will the Banking Union contribute to the stability and growth? The 19th Report on the Italian Financial System investigates key issues in two broad areas of research: banking and governance. In the Part One, the Report offers new empirical results on the evolving relationships between banks, firms and retail customers, with a special focus on lending, both at the micro and macro level. In this regard, the authors explore: the banking profitability indexes in the European context; the bank loan supply to the SMEs in Europe; the credit lending to Italian SMEs and the factors of reduction; the relationship between banks’ performance and localism effects; the local banking, proxied by the BCC role, and the economic growth; the local conditions, in particular in the South of Italy, and the risk assumption of the banks; the degree of banking penetration in Italy over the last 15 years; the retail banking after the Great Crisis and new strategies; the private banking in Italy and the entrepreneurial system. Then the Part Two presents new empirical and institutional insights on crucial features in the regulatory, supervisory and corporate governance settings. In particular, the Report analyses: the systemic risk of European financial system over the period 2006-2012; the banks reserving behavior and their opacity; the role played by independent directors and governance ratings; the credibility of European banks’ risk-weighted capital; the banking governance and the new EU supervision. In conclusion, profitability and governance represent the two pillars to build the transformation of the Italian banks into European ones. The Italian banking system has to be able to count on effective supervision in order to best face the questions that have become inevitable for any board of directors: how to increase productivity vis-à-vis a drop in profitability? Is governance setup the most appropriate for the job? At the same time, however, without equal rules and homogeneous supervision, even appropriate and courageous corporate efforts run the risk of dissipating their potential effectiveness.