Corporate governance and performance: A study of the reform of cooperative credit system in Italy

Elena Bruno,Giuseppina Iacoviello

doi:10.22495/cocv18i1siart11

Elena Bruno, Giuseppina Iacoviello

Open Access

https://doi.org/10.22495/cocv18i1siart11

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Journal: Corporate Ownership and Control	Publication Date: Jan 1, 2020
Citations: 3	License type: CC BY 4.0

Affiliation: University of Pisa

Abstract

The aim of the paper is to identify and discuss the suitability of the corporate governance structure of the Cooperative Banking Group (CBG) for preserving the distinctive characteristics of the cooperative credit banks (CCBs), such as mutuality and localism, as well as for guaranteeing the levels of capitalization, respecting the overall performance objectives. The analysis methodology uses a case study. The paper provides some reflections on the possible impacts of a radical change in the Italian cooperative credit system following the 2016 reform. The pilot model needs further adjustments in itinere, based on rigorous empirical tests conducted to confer on it the characteristics of universal applicability in the context of the CCBs. The major contribution of the paper is evident from the resulting interpretative process; the analysis conducted on a case study allows us to highlight the importance of the organizational dimension in the CCBs; the performances achieved by these, although with some distinctions throughout the Italian territory, are the result of the adequacy of the governance structures and the corporate control functions, which, even when partly outsourced, are always rigorously inspired by the logic of interconnection among those responsible for the functions themselves

Highlights

A definition of cooperative credit banks (CCBs) is contained in the sector regulations (articles 35-37 – Legislative Decree 385/93 – Testo Unico Bancario (TUB)), having been established following the issue of the new banking law (TUB) as “descendants” of rural and artisanal credit institutions, preserving, albeit with some necessary adaptation, the economic social function, the juridical form and compliance with structural and operating “rules”, such as the mutualistic purpose, the provision of credit mainly to shareholders in support of the development and promotion of the respective area
It was founded as a rural and artisan bank, following the issue of authorization by Bank of Italy, with prevalent operations aimed at members and objectives to support local agricultural and artisan development; subsequently, it was transformed into a CCB, following the new regulatory provisions, contained in the TUB; the CCBβ was interested in merger-by-incorporation processes as a response to the need for territorial expansion and reinforcement arising from the pressure of competitive stimuli and international regulatory discipline
The systematization of the scientific literature, which aided the development of both research hypotheses and empirical analysis, was followed by the discussion of a case study demonstrating how the legal form of the CCBs is binding for corporate governance mechanisms, since internal regulations and external rules, typically regulatory, assign specific roles and responsibilities to the corporate control functions involved in the governance process and condition their ownership structure

Summary

Introduction

A definition of cooperative credit banks (CCBs) is contained in the sector regulations (articles 35-37 – Legislative Decree 385/93 – Testo Unico Bancario (TUB)), having been established following the issue of the new banking law (TUB) as “descendants” of rural and artisanal credit institutions, preserving, albeit with some necessary adaptation, the economic social function, the juridical form and compliance with structural and operating “rules”, such as the mutualistic purpose, the provision of credit mainly to shareholders in support of the development and promotion of the respective area. With specific reference to Italy, Bank of Italy has revised, in general, the regulatory provisions on Corporate Governance and internal controls (Circular No 263/2006 – New prudential supervisory provisions for banks and Circular No 285/2013 – Supervisory provisions for banks), and, in particular, for the CCBs, with the Legislative Decree 18/2016, converted into DL 49/2016, introduced a sector regulation aimed at reforming the cooperative credit system, through the establishment of the Cooperative Banking Group to which all the CCBs not opting to sign the “way out” clauses must adhere

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