News analysis: Italian gov't pushes for consolidation of cooperative banks
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E-mail Xinhua, January 28, 2015
A decree recently enacted by the government of Prime Minister Matteo Renzi which orders Italy's biggest cooperative banks to change their ownership structures is drawing attention to the country's banking system.
Based on the decree, which must be converted into a law within 60 days, the 10 biggest of these banks with assets above 8 billion euros (9 billion U.S. dollars) have 18 months to change their ownership structures and become joint-stock companies.
"Current rules allow every shareholder to have only one vote, despite the fact that these banks have become very big and are working in an international context," Flavio Bazzana, a finance professor at the University of Trento, explained to Xinhua.
Bazzana noted that big cooperative banks, which count tens of thousands of shareholders, currently have serious problems of governance due to the "one person one vote" rule.
The reform, which would make the voting power proportional to the number of shares held by every shareholder, is in line with past requests from the Italian central bank and the European Central Bank (ECB) and will not impact smaller cooperative banks, he said.
The government's move drove up the stock-market value of some of the biggest cooperative banks, Bazzana went on explaining, as on the one hand was designed to improve efficiency of the banks and on the other hand to encourage mergers, which markets like.
If converted into law, the reform would foster consolidation and more modern governance for an important part of the Italian credit system, Giovanni Bossi, CEO of Banca IFIS, a bank specialized in the sector of trade receivables, non-performing loans and tax receivables, told Xinhua.
In his view, banks would be encouraged to adopt new, sustainable business models. "It is an evolution that Italian banks can no longer avoid and that brings with it a more efficient system of access to credit, more important than ever in this historic moment," he highlighted.
"Virtuous networking is encouraged and is made available for Italy's real economy, which could be an incentive for foreign investors," Bossi also added.
However, the number of disappointments was high and fights have been announced against the reform to allow banks to keep their current legal status, an analyst based in business capital Milan noted.
According to the association of cooperative banks Assopopolari, he said, the reform is fraught with negative implications as risks transferring the ownership of an important part of the Italian banking system to big international banks.
"Theoretically, the reform should strengthen the banking system by enhancing cost cutting, but would neither bring results in terms of revenues nor help deal with non-performing loans, the key problem of Italian banks," the analyst told Xinhua.
He also warned of possible "defensive mergers" in the case that some of the biggest cooperative banks merge together to avoid being purchased, which would further amplify the existing difficulties. Enditem
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