Fulvio Coltorti's speech on FIRSTonline on 18 August last on the Banca delle Marche crisis is, in my opinion, appreciable for its courage, lucidity of analysis and proactive ability. And therefore neither the resonance it has had in other newspapers nor some disappointment due to jarred institutional susceptibilities are surprising.
It poses the question of the causes of the instability without pretense, finding them in the inadequate role of the owners, in the governance defects of the Board of Directors, in the disproportionate weight exercised for years by the figure of the General Manager, in the assumption of risks beyond reasonable criteria of prudence, in the inadequacy of internal and external controls of the bank.
His assessments assume a value that goes beyond the single, however serious, episode, proving to be useful for constructing almost a paradigm of the crisis of the local bank, of which there is no shortage of other important examples these days.
I don't know if this objective was implicitly in Coltorti's intentions, but the reference to the situations involving many banks located in those regions that were once identified with the third Italy, the one with an open, flexible economy, came naturally to me. , dynamic, place of triumph of small and medium-sized enterprises (but also of low schooling), innovative lifeblood of national manufacturing and of the champion banks of the territory, ready to support, risk, select. True Schumpeterian world of creative destruction! But also a field in which the economic crisis has had a significant impact on the vicissitudes of debtors, who have always been unwilling to consolidate the results of happy times from a longer-term perspective. This is the situation we know today, including the credit crunch.
But Coltorti does not indulge in factors external to the bank's imbalances, getting straight to the point. After all, it seems to understand, the crisis, like the tide does when it retreats, has only exposed rocks, large and sharp, which had been there for some time and which finally broke through the hull. In short, I agree with Coltorti that the economic crisis as the main reason cannot be accepted willingly in the face of behaviors that have responded to other logics.
It is good to list the most important cases of the moment: 1) Friuli: Hipo Alpeadria; 2) Veneto: Popolare Marostica, Credito Veneziano, BCC Monastier and del Sile, Banca Padovana; 3) Emilia Romagna: Cariferrara; 4) Tuscany: better left alone; 5) Umbria: Popular Spoleto; 6) Marche, already mentioned; 7) Abruzzo: Tercas/Pescara. As you can see the characters are all represented: large, medium and small, of all institutional categories, north, center and south. The market speaks explicitly of other cases, believing that public acknowledgment of the crisis is only a matter of time.
It is therefore quite natural that we wonder about the reasons and raise doubts about the effectiveness of the actions taken to prevent them, intervening with the right choice of timing. Distilling the de quo situations and with some experience gained in a long professional past, I feel like summarizing the causes/contributing causes of the instability into five factors, easily identifiable ex ante and also easy to keep in mind, as they all start with the letter C They are called Confusion of roles, Concentration of risks, Conflicts of interest, Lack of controls, Costs. It seems to me that, apart from some differences in denomination, they coincide, even in order of importance, with those that Coltorti has identified to explain the crisis of the Banca delle Marche.
In the Confusion of roles I frame the role of the demiurge, absolute master of the fate of the bank. Despite much preaching of collegiality, the correlation between approaches based on a single center of power and the banking crisis is very high. How many times have the owners or the nucleus of reference gone in search of a deus ex machina, which would have made the bank grow, benefited the shareholders, satisfied the customers, incentivized the employees, exercised a constructive dialogue with the supervisory bodies, and, if there was anything left, deservedly rewarded even himself?
But, to the more serious cases, all with judicial appendices, we must add those situations in which Presidents, in search of lasting personal affirmation, are eager to take care of everything, from strategy to ordinary management, choosing and ousting General Managers as is done in football with the coaches, General Managers and CEOs who take the place of the Presidents, making them their own dull offshoots or who claim to exercise the function without a substitute capable of substituting them (so that one never doubts who is the only man in charge), members of Boards of Statutory Auditors that exercise powers unrelated to their role, perhaps in conflict of interest with the bank itself. Systematic in the most striking cases the overcoming of any delegation of power, without any reservation or censure by the delegating or control bodies.
Is it possible that we only notice it when the omelette is done, perhaps after having even praised them for a long time?
Concentration of risks is the way to manage the credit portfolio, beyond any criterion of logical differentiation, in any case favoring sectors with higher speculative exposure: investment in the real estate sector unites our critical cases, forcing both in territory and in more distant areas. That percentage of the
30 of credits to the construction sector, which Coltorti cites as being much higher than the average and common to other situations, and, in some cases, even higher. Sometimes it almost comes to call them banks against the territory, rather than banks of the territory or for the territory, looking at the havoc that their loans have often produced. But when one discovers the extent of the excesses committed, how can one speak of a crisis? And the regulatory limits why didn't they pull the brakes in time? And what damage has the manufacturing industry proper received from this diversion of resources?
It is true that supervisory policies have become more restrictive in determining credit losses and the values of guarantees and that, as is said by many, the operation being carried out is probably too rapid for the attitudes of the system. It seemed that we wanted or needed to do as soon as possible to fill the gaps produced in years of underestimation of the phenomenon and low rates of coverage of anomalous loans, but, I agree with you that we need to "give time", because this greater rigor can be metabolized. Unfortunately it is also true that the market value of the properties guaranteeing loans has fallen by over a third, mercilessly highlighting the imprudence committed. How many years will it take to restore the right balance?
The conflict of interests that takes different forms, from the "reference debtor" to the formation of clots of power that bend decisions to non-technical criteria, can also be found in the situations that concern us. The point is that the development of these unhealthy relationships, even though it takes place over long periods of time, rarely attracts due attention, despite the fact that there is no lack of data and information for the correct focus on the problem, gradually as the dimension of the exposures towards the components of corporate bodies and their branches increases. The effects of the new rules on related parties will have to be assessed.
Defective Controls are the ... shrunken leg of Governance, despite the fact that for internal controls, risk management, compliance, internal Audit, the activities of auditors and statutory auditors are regulated, except for others. Paraphrasing other statements, one could say that the Italian supervisory regulations are the most beautiful (the strictest or the most pervasive?) in the world, but situations of inadequacy within the bank repeat themselves frequently.
The substantial delay that Coltorti attributes, in the case of Banca delle Marche, to the supervisory bodies of the Bank of Italy also concerns some of the banks mentioned, given that, due to serious irregularities, the judiciary intervened first, forcing the receivership of the bodies .
In any case, one cannot fail to agree that it is wrong to imply that it is in any case "better late than never" or that, ex post, all the initiatives undertaken are declined in one's defence. The fact is that the stable was closed after the oxen had escaped.
Finally, the costs which, if they are not in themselves the cause of the explosion of the crisis, are a factor of aggravation of any attempt to relaunch the company. The gigantism of the distribution networks, the failure to renew operating processes, the renunciation of continuous efficiency improvements can also be found in the disruptions, consultancy and other wastes are endemically accompanied by the more serious critical factors mentioned above. The system continued to grow in its most inefficient components (the branches) even after the global crisis had been underway for some time, obtaining the necessary authorisations, where necessary. How to plan downsizing now should be a matter of more careful analysis and comparison and not the result of pressing situations and impromptu decisions.
So, returning to us, a model of bank instability can really be built, given the recurring and common elements that underlie it, as a reference for more effective prevention.
The part constructens should at this point take the place it deserves in any critical reasoning, provided that some prejudicials are clear, in order to be concretely propositional.
We need to put the real issues on the table, without indulging in acknowledgments of the banks' capital solidity, a necessary but not sufficient condition; when you try to restart the engines, you need new capital and whoever is willing to put it in, as well as an operational machine put back in running condition, as you rightly acknowledge.
We must ask ourselves whether we are dealing with a situation that requires industrial reconversion actions of a non-negligible part of the banking system, with the consolidation of portions of it. We must recognize that some of the general rules governing the governance of banks with a broad shareholder base, which are now obsolete, need to be changed. That the turnover in the functions of responsibility in the management of banks must be faster, that there is no need for deus ex machina, but for collegiality of decisions, for which greater knowledge and skills and more effective methods of censorship of operations are required deviant. These are structural and not managerial elements.
The relaunch of credit, even with a more direct involvement of the production base present in the bank's territory, must represent the natural purpose of all this effort.
This would seem to me to be the right time not to let go of some essential points of Coltorti's speech and to discuss proposals, trying to involve all the parties involved to a certain extent, in the awareness that self-referentiality, wherever it comes from , is in itself a factor that obscures any attempt to prevent and correct behaviors that distance from sound management practices.
Unless, having made due comparisons with other countries and judging them all to our advantage, celebrated the adjustment measures already rapidly put into action, recognizing that each case has its own individual explanation, given the tenuous signs of an improvement in the economy makes a lot of talk, do not take note that, after all, there are no serious problems for local banks or that, if they do exist, they concern only the others.
