The curious case of Italian interlocking directorates

In this chapter, we provide an overview of the Italian legislation on interlocking directorates and its enforcement in the last decade. Italy has introduced an anti- interlocking provision to promote competition in the banking, insurance, and financial sectors. Even if it is not easy to make comparisons with other EU Member States, many studies claimed that the number and relative dimension of the Italian financial companies linked by interlocking directorates were greater than in other Member States. This is why, in 2011, in the aftermath of a very harsh financial crisis, Italy enacted a statutory provision forbidding the simultaneous appointment of the same person to the board of directors (or to other corporate bodies) 2 of two or more competing financial companies. After explaining why, without regulation, these personal ties may facilitate or reinforce the achievement of a collusive or quiet life equilibrium among competitors, we provide a brief description of the main features and scope of the 2011 Italian interlocking ban. We then attempt to evaluate its effectiveness and limits. Using the banking sector as a case study, we gathered data on the number of interlocking directorates that persisted among the 25 largest banks and banking groups in Italy at the end of 2018. The result of our study is that interlocking directorates among major Italian banks seem to have disappeared. This is at odds with the prevailing empirical literature which has claimed that interlocking directorates are still a widespread reality of Italian capitalism, with possible persisting anticompetitive effects in many markets. To counter this claim, we also considered some empirical studies showing that, in the period following the entry into force of the interlocking ban, bank lending rates fell, which suggests more vigorous competition. We conclude the chapter by questioning whether the 2011 interlocking ban has had any effect on the ownership structure of the relevant market players – for instance, contributing to the disposal of minority and cross-shareholdings held by companies operating in the sectors concerned – as well as on the composition of their governing bodies.