The Curious Case of Italian Interlocking Directorates

Abstract

In this chapter, we provide an overview of the Italian legislation on interlocking directorates and its enforcement in the last decade. In 2011, Italy introduced a specific anti-interlocking provision aimed at promoting competition in the banking, insurance, and financial sectors. After explaining why these personal ties may facilitate or reinforce the achievement of a collusive or quiet life equilibrium among competitors, we attempt to evaluate the effectiveness and limits of the Italian interlocking ban. Using the banking sector as a case study, we present data on the number of interlocking directorates that persist among the first 25 banking groups operating in Italy at the end of 2018. The result of our study is that interlocking directorates among major Italian banks seem to have disappeared. This is in line with empirical studies that show that, in the period following the entry into force of the Italian interlocking ban, bank lending rates fell, indicating more vigorous competition. We conclude our chapter questioning whether the 2011 Italian interlocking ban has had any effect on the ownership structure of the relevant market players, for instance contributing to the disposal of minority and cross-shareholdings held by competing companies, and on the composition of their governing bodies.

Keywords: interlocking directorates, Italian interlocking ban, anti-interlocking provision, personal ties, ownership ties, financial firms, competition

JEL Classification: G3, G30, K2, K20, K21, K22, L4, L40, L41