Mario Draghi, governor of the Bank of Italy, has recommended changes in Italian banking laws that would facilitate takeovers of the country's small and mid-sized institutions, so that the region's bigger lenders could consolidate to protect themselves in the face of ever-increasing foreign competition.
While 2006 saw $85 billion in merger activity among Italian banks, including the formation of Intesa Sanpaolo after Italy’s second and third largest lenders joined forces, Bloomberg reports Italy’s central bank as quoting the number of independent lenders operating in the region as standing at 639 at the end of 2005.
The recently completed [banking sector] consolidation, while important in its scope, makes little change to the level of concentration in the system, because of the fragmentation that remains, AFX quotes Mr Draghi as saying in a keynote speech in Turin.
Many of Italy’s small and mid-sized institutions are made up of cooperative lenders. The shareholding and voting regulations of the cooperatives, known as ‘popolari,’ shield them from hostile takeover bids, as they not only limit investors to one vote, but also restrict the size of the shareholdings.
However, Mr Draghi has called for the governance of these popolari banks, especially the larger ones, to be changed, and for foreign investors to be allowed greater shareholding and decision-making rights.
Mr Draghi made a further anti-protectionist argument for the importance of bank mergers, claiming that it could unlock synergies, therefore lowering prices for consumers. He also commented that lenders should divest their fund management segments and open their operations to third-party providers to encourage further competition.
Bloomberg reported Assogestioni, a Milan-based money managers’ group, as commenting that some of Italy’s largest banks, including Sanpaolo IMI and Capitalia SpA, have recently lost share in their domestic market as a result of foreign competition.