E-banking, Governance and Local Banks: The Italian Case

In this paper we examine the potential impact of e-banking on local banks. More specifically, with reference to the Italian experience, the empirical analysis in the first part shows that the introduction of e-banking has been significantly slower in banks with a low turnover of board members, a situation typical of most local banks. The low propensity to innovation of these banks would therefore seem to correspond to rather static corporate governance structures that could therefore weaken the market position of these banks in the future. In the second part, with the help of a reference model, we illustrate how the advent of e-banking seems destined to heighten the competitive pressures on bank interest rates. Nonetheless, the preliminary empirical evidence—again regarding the case of Italy—that accompanies the analysis thus far provides little support to this assumption. The projected conclusion one may draw from the evidence presented is that there is still a window of opportunity for foot-dragging local banks to get in step with the spread of e-banking, before they must suffer the inevitable increase in competition.