The month of October closed with two banking events in clear opposition from the point of view of the industrial choices of the protagonists.
The first concerns the resolutions passed by the shareholders' meetings of Banco Popolare di Verona and Banca Popolare di Milano, in favor of the merger of the two entities, to build the third largest group in the Italian banking market.
In this decision, in addition to the conviction of the social bases, manifested through clear majorities, we can recognize the inputs, which, insistently, continue to come from the IMF, the ECB, the Government and the Bank of Italy, in favor of a greater degree of consolidation of the Italian banking system. The expected effects made it possible to overcome both the resistance in relation to the higher capital requirements required by the ECB, equal to 1 billion, for Banco Popolare, as well as the complexities, at the planning level, of the new business strategies and the integration of the operating machines starting with computer systems. While awaiting more definite market judgments and the effective governance capacity of the new entity, we must at the moment observe the positive novelty of the case.
The second event, which took place almost emblematically in the same unity of place (Verona) and time (just two days before), is represented by the CCB convention promoted by Cassa Centrale Trentina, whose choices, if completed, will have exactly the same outcome opposite to. The "Tridentine schism" aims to aggregate around a quarter of the Italian mutual banks to build a second autonomous cooperative banking group in competition with that of Iccrea, definitively abandoning the possibility of a unitary solution.
Comparing the two events is useful for underlining the contradictions that still characterize the Italian banking industry.
The system of large cooperative banks, now ope legis transformed into joint-stock companies, has entered the wavelength of aggregation solutions, with other possible hubs (UBI, Bper, Creval, Popolare di Sondrio) and with Popolare Vicentina, Veneto Banca and Banca Etruria in the condition of prey, following the respective instability.
It is to be expected that, to avoid some unpredictable jolts, the consolidation process will proceed in the direction it has just begun, with desirable medium-term benefits for the various stakeholders and with them for the entire system.
For its part, cooperative credit, in its overall configuration, represents one of the top five national banking operators.
With a peripheral network of 340 banks and innumerable central and regional bodies, both instrumental (specialized banks, insurance companies, service companies) and institutional (federations, various voluntary and compulsory guarantee funds), the system operates with over 3000 branches, has a market share of around 7% of loans and deposits, 20 billion in assets, 30.000 employees. This configuration reveals an oversizing which translates into a reduced efficiency of a structural order, which has ended up counterbalancing the benefits, including social ones, of the services provided over time to the Italian territories, according to mutualistic objectives, rather than maximizing profits.
The supranational and national supervisory authorities are asking that the aforementioned inefficiencies be finally dealt with through sustainable industrial plans, otherwise the category will decline.
At the same time, the Italian cooperative banking industry assumed systemic importance with regard to its parent company Iccrea Banca - which, like all 'significant' European banks, has been subject to Frankfurt supervision since 2014 - and the reform of cooperative credit, aimed at strengthening the he entire plant, avoiding dispersion of resources, aims at the overall stability of the system, seen as a unicum.
The cohesion contract will be the implementation tool, requiring the transfer of substantial business prerogatives by all the CBs to a parent company, having at least 1 billion in capital. A second group will require the same number of resources, as a constituent element and a series of actions, which are also onerous, to eliminate any interdependence/overlapping with the other entity, starting with the bodies called to intervene in the event of a crisis and to guarantee depositors.
The supervisory regulations on the cooperative banking group will be finalized in November following the implementation of the observations made, inter alia, by the cooperative movement itself and by the ECB, in its role as European supervisor.
Above all, these latest indications must make us reflect on a future that cannot be based either on autonomist vocations lacking adequate programs or on mannered appeals to the unity of the movement, much less if sought through botched governance solutions, as has seemed to be seen in some more recent attempts by the Federcasse summit.
In fact, the observations that the ECB invites to introduce into the regulations emphasize, more than what is foreseen in the Bancaditalia text, the control capabilities of the parent company, to ensure consistency between the operations and strategies of the individual components with the policies and objectives of the group banking as a whole, reiterating the importance of well-crafted risk management, compliance controls, internal audit and planning functions.
On the pivotal point regarding the need for the parent company and the affiliated banks to equip themselves with mechanisms for integrating information systems and data management processes, which ensure the reliability and correctness of risk assessments at an individual and consolidated level, the ECB underlines the opportunity to introduce a deadline for the creation of a unified information system of no more than three years from the signing of the cohesion contract. In the intermediate period, the adoption of adequate integration mechanisms will be necessary, before reaching the final arrangement.
The issues on which we aim to strengthen the regulatory system are therefore of a purely industrial nature, centered on highly structured risk control systems, the weakness of which has been the cause of the most acute banking crises, and on technological solutions, which keep up with information processes for the automation and digitization of banking.
In other words, it is a matter of focusing on expanding the offer of digitized services, on the diversification of risks and on the rationalization of costs, all profiles in direct relationship with the scale of production.
Without a doubt, the technological issue occupies central importance, as it must take charge of the functional and architectural deficits which, under different profiles and not marginally, impact at the moment both on the Icrrea system and on the Trentino one. While representing the two major reference schemes, in the cooperative world there are also choices which, however less representative, use systems of other outsourcers, making the integration of platforms an essential issue to obtain the uniformity required by the supervisory bodies.
But the IT question is not limited to the creation of a single system. It also concerns the modernization of the so-called core banking system, i.e. the organic rewriting of the main management applications (registry, current accounts, loans, payment services, international, finance and treasury, general accounting), according to the most recent approach of information-oriented architectures to services (so-called SOA), which have absolute advantages in terms of performance, consistency and maintenance costs, compared to the systems currently in use.
The continuous renewal of front office applications, pursued in recent years, has in fact ended up postponing choices of structural modernization of the basic applications according to the criteria mentioned above, essential for the new functions of web banking, digital and mobile banking, which will be focused on the speed and security of remote access to the services offered.
The investments, certainly not of limited size, required by this transformation, obviously lend themselves to being better distributed the wider the base of the participating banks is.
Furthermore, in making this choice of renewal of the application infrastructure, the solutions already present on the market by the global banking software industry can be evaluated, which present characteristics of greater efficiency and flexibility compared to our more native solutions, with the possibility of engage the progressive shifting of the technological frontier of industry also by smaller banks.
The management within these systems of some peculiarities of the Italian banking market would not seem to represent an insurmountable obstacle, in relation to the implementation times for these implementations.
The important thing is to consider the technological theme as closely connected with that of business, because it is on this interaction that the most important game will be strategically played to compete on the banking market, which has entered a phase of desirable reconfiguration.
We are therefore convinced that the wish "Ut unum sint" to be addressed to all the components of cooperative credit is not only a call to solidarity and cooperative brotherhood, but above all the solid foundation for convincing and sustainable industrial choices for the relaunch of the whole sector, to be promoted with the simultaneous renewal of the ruling class called to manage the scenario of the reform and the more complex implications of governance.
And we are equally certain that the final reference contained in the ECB's observations to the regulatory system outlined by the Bank of Italy regarding its unfailing powers in the matter of issuing the banking license to credit institutions, including new cooperative banking groups, suggests the criteria of severity to which it will subordinate the authorizations, based on the stability of the system as a whole, rather than segmentations which are immediately more costly and uncertain in the medium term as to the actual advantages for the CCBs.
To the good connoisseur…
