It can be said without risk of being contradicted that in Veneto the local bank as a category has practically disappeared. It was not the only region of Italy where the local bank lost positions, but it is undoubtedly the one where the phenomenon was more massive. In 2010 alone there were 57 banks based in the Region: 11 were limited companies, 5 cooperative banks, 40 cooperative credit banks. They operated there with 2.300 branches out of a total of 3.600 and a share of just over 60 percent.
After six years, 34 remained, of which 28 BCCs, all smaller in size. Of the remaining six, between co-operatives and spas, few can be classified as local banks. In fact, some have a specialist vocation, others are integrated into groups, whose strategies are dictated by the respective parent companies outside the region. A certain disintermediation was also recorded, which led depositors (households and small businesses) towards postal products, following fears related to the long story involving the two popular companies that ultimately went bankrupt.
Furthermore, cooperative credit is destined to lose further strength as a unitary subject, given that in the formation of the groups desired by the reform, 14 mutual banks will join the Iccrea group and 10 to that of Cassa Centrale Trentina. These are choices that will further fragment the offer of banking products and services intended for local markets, weakening the position of individual intermediaries, including through internal forms of destructive competition.
The market shares held by local banking in the Veneto region are now equal to a few percentage points. Veneto banking mainly belongs to the Intesa, Unicredito, Bpm and Monte dei Paschi groups, the latter nationalized. What happened appears as a sort of winner's curse, given the way Veneto banking localism was interpreted only a few years ago, even thinking that it was the pivot of the process of modernization of the industrial system, which had entered a crisis of competitiveness.
From acclaimed local banks, small and medium-sized banks have reduced in a few years to a completely marginal presence, in short they have failed miserably in one of the richest areas of Europe. We are convinced that the cause of all of this was the attempt to take possession of a role that was not theirs, which progressively led to its distortion, until it fell apart. What are the evidences for this proposition? Firstly, the growth of operating dimensions, also in contrast with the trends of the remaining parts of the banking system, has loosened the ability to select customers, leading to the renunciation of the information primacy of proximity to one's traditional markets.
The plethora of organizational structures (number of branches, networks of shareholdings, including foreign ones, acquisitions of banks in other regions of Italy, even in critical conditions) are the most significant facts. The quantitative growth has therefore brought with it greater concentration, by sector (primarily in real estate) and by customer, and an increase in the average size of customers, also following the expansion of existing credit relations with the large banks, a policy which has partially delegated the direct selection of counterparties to the major intermediaries.
The loss of selectivity was the antechamber of other and much more serious governance imbalances and maladministration phenomena. The point, in fact, to which to return is that of assuming a role of credit support of the large and medium-sized industry which has progressively generated greater permeability to situations of conflict of interest. The transformations that have taken place in governance are the immediate mirror of this process. It is difficult to give a precise representation of the plethoric and increasingly complicated governance of the banks we are talking about.
Let's try to summarize it by focusing on what emerges from the latest financial statements of Banco Popolare (2015) and of the two bankrupt cooperative banks (2016). In a few years, the number of members has almost doubled to reach the hyperbolic figure of 600.000 units. On average, one out of three Venetian families was a member of the three popular ones. Limiting ourselves to the boards of directors of the parent banks, i.e. neglecting those of the dozens and dozens of companies and banks they own, the number of members ranged from 12 each for Popolare Vicentina and Veneto Banca to 24 for Banco Popolare.
Of these, more than half were, at those dates, expressions of the Venetian and national industrial world, that is, borrowers of credit from the administered banks themselves. However, this number is reductive, it is a blurred picture, because it does not take into account the changes that have taken place over the last few mandates, and especially in the most recent period when attempts at bailouts have been made, with the aim of keeping the crises still at the regional level. As Ferruccio De Bortoli recalled in the Corriere Economia a few weeks ago, today all entrepreneurs, starting with the president of Confindustria, applaud the rescue interventions paid by the state and invite us to 'turn the page'. None of these gentlemen remember meeting Zonin and Consoli!
Bank management bodies made up of majorities of so-called reference debtors go on a continuous search for collusive balances, foster forms, even implicit ones, of reciprocal conditioning, favor exchanges and ways of compensating the various interests at stake. In this situation, management in turn is led to distort its own role either by accentuating power in an uncontrolled manner (a slave-master who directs traffic between the various stakeholders, causing inevitable traffic jams and deviations from paths of legality) or by reducing itself to executor of orders of the most influential exponents (a master-servant who assumes increasing responsibilities in exchange for material recognition and prestige, as long as the game lasts, that is, until the moment of the final explosion).
Obviously the last managers are excluded from these considerations, called to the bedside of the banks, now in articulo mortis. Added to these imbalances is the need to keep the immense social bases under control both to capture their consensus, which is necessary at the time of the renewal of offices, and to use them for the growing capital needs required by the growth in volumes and levels of risk. Having done so in ways that are not always transparent has resulted in the placement of shares and bonds with parties unaware of the risks. A large part of the zeroing of primary and secondary capital weighed on them, before the interventions to be paid by the taxpayer.
The conclusion of these few and general reflections is that when the local bank goes into crisis it no longer has anything local. We must return to the bank-industry report with a further observation. When credit selectivity criteria are loosened, a form of distortion of competition is produced, in circumscribed territorial contexts with a strong sectoral characterization, as occurs in the case of districts, since the credit granted in abundance keeps alive even the less efficient, which would quickly be expelled from the market if stricter criteria were followed. The interest in a more selective bank should in the first instance be precisely the more robust productive part.
When undue support to less efficient operators harms the more efficient beyond a certain limit, it is the latter who ask the bank to close the purse strings. In doing so, bad debts begin to emerge to an ever greater extent, to the point of determining the collapse of the bank itself. This is the reason why the loss of prudence and independence criteria of the local bank quickly sanctions its end. At a certain point the situation is no longer sustainable and the caps pop. This seems to have happened, in the illusion of transforming a localized system into a system with a national or even international vocation, which was not within the reach of our ephemeral regional champions.
And in the end it is the industry that determines the end of the bank, considering it no longer functional to its survival. The arrival of the big banks in territorial contexts such as the Veneto is the only way to cut these knots cleanly, even if it will not be easy since a period of consolidation and reorganization will be necessary which could take years to reabsorb the moral hazard that has arisen produced in previous periods. To restore the creditworthiness of companies, trust in the quality of the information coming from them will have to be re-established. It will take some time. Rightly selective behavior will prevail which will restrict the supply of credit.
It is no coincidence that, in the signed agreement, Intesa has reserved the possibility of retroceding to the liquidation a further 4 billion of loans of the two bankrupt banks, which, in a context of absolute urgency, it has not had the opportunity to examine with due diligence . The fact is that all these things are by no means new in the centuries-old history of the bank. Unfortunately we have not yet learned enough from the disasters that are created by a distorted relationship between bank and industry. And, even if it is diabolical, we continue to persevere in the error, believing that every time we have in our hands the philosopher's stone that works a miracle and disproves the harmful precedents of this marriage.
As we wrote in the article published a few days ago with the title "What really happened in the banks of the Veneto region", the problem worsens not a little if even the authorities think they have that same philosopher's stone in their hands.
