Innovation and Regulation in the Wake of Financial Crises in Italy (1880s-1930s)

Financial Market Regulation in the Wake of Financial Crises: The Historical Experience Conference, p. 45, 2009

29 Pages Posted: 8 Jul 2012

See all articles by Alfredo Gigliobianco

Alfredo Gigliobianco

Bank of Italy

Claire Giordano

Bank of Italy

Gianni Toniolo

University of Rome Tor Vergata - Faculty of Economics; Centre for Economic Policy Research (CEPR); Duke University - Department of Economics

Date Written: April 16, 2009

Abstract

Between the 1880s and the 1930s, three “regulatory cycles” can be identified in Italy. In the underlying model, each financial crisis gives rise to regulatory changes, which are circumvented in due time by financial innovation, that can then contribute to the outbreak of a new financial crisis. In Italy, overtrading of the banks of issue in the 1880s contributed to the 1888-1894 financial crisis, which yielded regulation concerning only these banks and restricting their activity. The German-type universal banks, created at the turn of the century and unconstrained in their undertakings, were at the core of the 1907 and the 1921-1923 crises. These led to a banking law in 1926 which, arguably, was born obsolete, in that it was not aimed at regulating universal banking as it had developed until then, but it contained general provisions regarding the whole range of deposit-taking institutions. Finally, the evolutionary adaptation of the universal banks into holding companies, not taken into account by the preceding law, contributed to the 1931-1934 banking crisis, followed by the 1936 bank legislation.

JEL Classification: G28, N20, N40

Suggested Citation

Gigliobianco, Alfredo and Giordano, Claire and Toniolo, Gianni, Innovation and Regulation in the Wake of Financial Crises in Italy (1880s-1930s) (April 16, 2009). Financial Market Regulation in the Wake of Financial Crises: The Historical Experience Conference, p. 45, 2009, Available at SSRN: https://ssrn.com/abstract=2101710

Alfredo Gigliobianco (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Claire Giordano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Gianni Toniolo

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy
+39 06 7259 5734 (Phone)
+39 06 202 0500 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

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