Bank Of Italy Research Articles

Intellectual Capital Disclosure: Some Evidence from Healthy and Distressed Banks in Italy

The article investigates the intellectual capital disclosure of Italian banks over the years 2016–2017, applying the specific lens of healthy and distressed banks. To this end, we used content analysis and encoding techniques. The main results point out that intellectual capital (IC) disclosure is generally poor and that the intensity of disclosure varies slightly between healthy and distressed banks. Regarding the quality of disclosure, healthy banks present a higher, albeit modest, tendency to disclose non-qualitative and forward-looking information, maybe due to the fact that they are more focused on the strategies and the relationships with stakeholders as opposed to a more short-term approach of the distressed banks. To complement our study on healthy and distressed banks, we repeated the analysis focusing on bank size and independent directors. In this case, results do not show relevant differences in terms of IC disclosure. Hence, our findings suggest the need to consider banks’ IC disclosure as a strategic asset for increasing, among others, transparency and reputation.

The rise of online banks in Italy “WIDIBA Bank” Case Study

The digitalization of technologies for the functioning of the country’s economy, in particular banking institutions, has made a significant impetus to accelerate their development. It is stated that the use of advanced information technologies in the banking sector of the economy (which was gradually formalized into the concept of “online banking”) has greatly facilitated the implementation of financial transactions, in particular, minimized the physical circulation of money. The purpose of the article is to study the features and principles of online banking on the example of the Italian bank WIDIBA. Methodical support of the paper includes a method of analysis of specific situations. The key components of the case method of the study are research on the basis of literature review; formalization of key theses (issues) in the context of the unresolved part of the study; accumulation and analysis of collected information; identification of key features of the issue. This research was carried out in the light of two aspects: the strategic principles of the spread of online banking in Italy; digital technologies in the context of the strategic perspective of the Italian bank WIDIBA. The paper considers the historical aspects of the introduction and use of online banking services. It is noted that in Italy today there are 207 publicly registered commercial establishments, of which 81 are located abroad, and 6 operate mostly in the format of providing online banking services. The object of this research is the activity of the Italian bank WIDIBA, which is justified by its valuable practical experience in formalizing a plan of adequate timely strategy for entering the market of online banking services on the basis of a carefully developed development strategy. The theoretical researches were carried out in the work, in particular, in the following directions: definition of strategic actions of bank establishment according to a time lag of functioning; analysis of the budget of the banking institution (net profitability, interest margin, operating and administrative expenses, etc.); analysis of the income statement of the bank (the ratio of net profit and loss, interest margin and brokerage margin); work with financial report or balance sheet data on the structure of assets, liabilities, and investments, retained earnings; study of trend dynamics of cash flows (operational, financial, investment and free cash flows). Excellent strategies are analyzed, which demonstrate how the banking sector is extremely dynamic and, that technological investments still allow easier access to new operators in case of the implementation of innovation strategies. Keywords: Online banks; online banking; electronic banking; fintech; financial services; WIDIBA; banking sector; banks’ strategies.

The Long Goodbye. Politics and economy in the crisis of the entrepreneurial State

ABSTRACTThe article deals with the tight correlation between the decline of the ‘Republic of parties’ and the structural transformations of the global economy happening between the late sixties and the seventies in the spheres of monetary policy, international finance, and industrial organization. The crisis of the bond between politics and the mixed economy system planned in the 1930s is read as the story of a ‘long goodbye’ destined to end, after over twenty years, with the inversion of the traditional relationship whereby the economic power was submitted to the political power. The analysis is focused on three fundamental points: the evolution of the relations between Treasury and the Bank of Italy, the crisis of the system of industrial relations, and the major challenge of a new banking system.

Household risk‐sharing channels

This paper aims to fill the gaps in the analysis of risk‐sharing channels at the microlevel, both within and across households. Using data from the Bank of Italy's Survey on Household Income and Wealth covering the financial crisis, we are able to quantify in a unified and consistent framework several risk‐sharing mechanisms that so far have been documented separately. We find that Italian households were able to smooth on average about 85% of shocks to household head's earnings in both 2008–2010 and 2010–2012 spells. The most important smoothing mechanisms turn out to be self‐insurance through savings/dissavings (40% and 47% in 2008–2010 and 2010–2012, respectively), and within‐household risk‐sharing (16% and 14%). Interestingly, risk‐sharing through portfolio diversification and private transfers is rather limited, but the overall percentage of shock absorption occurring through private risk‐sharing channels hovers around four‐fifths, as opposed to around one‐fifth of a shock cushioned by taxes and public transfers, excluding pensions. In addition, by exploiting subjective expectations on the following year's household income, we find significant evidence of a lower degree of smoothing of persistent shocks.

The Wealth Decumulation Behavior of the Retired Elderly in Italy: The Importance of Bequest Motives and Precautionary Saving

In this paper, we analyze the wealth accumulation and saving behavior of the retired elderly in Italy using micro data from the “Survey of Italian Households’ Income and Wealth,” a panel survey of households conducted every two years by the Bank of Italy. We find that, on average, the retired elderly in Italy are decumulating their wealth (dissaving) but that their wealth decumulation rates are much slower than expected. Moreover, we also find that more than 40 percent of the retired elderly in Italy are continuing to accumulate wealth and that more than 80 percent are doing positive amounts of saving. Thus, the Wealth Decumulation Puzzle (the tendency of the retired elderly to decumulate their wealth more slowly than expected) appears to apply in the case of Italy, as it does in most other countries, before as well as after the Global Financial Crisis. Moreover, our regression analysis of the determinants of the wealth accumulation and saving behavior of the retired elderly in Italy suggests that the lower than expected wealth decumulation rates and dissaving of the retired elderly in Italy is due largely to intergenerational transfers (bequests and inter vivos transfers) and saving for precautionary purposes, especially the former. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The Matthew Effect and Modern Finance: On the Nexus Between Wealth Inequality, Financial Development and Financial Technology

This paper analyses the role of financial development and financial technology in inequality in (returns to) wealth. Using micro data from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy over the period 1991-2016, we find that financial development (number of bank branches) and financial technology (use of remote banking) both have a positive association with households’ financial wealth and financial returns. By applying an instrumental variable approach to control for endogeneity, we find that the two variables are, by and large, substitutes. The economic significance of both decreased in the last part of the sample period, as remote banking became more widespread. Finally, other things equal, the effects of financial development and financial technology increase when moving toward the top of the wealth distribution. This is in line with the so-called “Matthew effect” (Merton, 1968), or the capacity of wealthy households to achieve higher returns than other households.

A Quantitative Analysis of Distortions in Managerial Forecasts

This paper quantifies the economic costs of distortions in managerial forecasts. We match a unique managerial survey run by the Bank of Italy with administrative data on firm balance sheets and income statements. The resulting dataset allows us to observe a long panel of managerial forecast errors for a sample of firms representative of the Italian economy. We show that managerial forecast errors are positively and significantly autocorrelated. This persistence in forecast error is consistent with managerial underreaction to new information. To quantify the economic significance of this forecasting bias, we estimate a dynamic equilibrium model with heterogeneous firms and distorted expectations. The estimated model matches not only the persistence of forecast errors, but the empirical link between investment and managerial forecasts. Relative to a counterfactual with rational expectations, we find that managers exhibit large forecasting biases, which lead to significant distortions in firm-level investment. These distortions, however, imply limited loss in firm value. In general equilibrium, the estimated model leads to negligible aggregate efficiency losses from distorted forecasts.

Values in tension. Clinical quality and civic participation in umbilical cord blood banking in Italy.

In the dominant narrative of bioethics and biomedical discourse on public Umbilical Cord Blood (UCB) banking, the ethical value of donating UCB is unproblematically associated with the clinical quality of collected UCB. This article shows that this view is analytically untenable as it overlooks tensions and conflicts between the social values of donation and the clinical value of banked UCB in concrete arrangements regarding the logistics of UCB donation and collection. Adopting the notion of registers of valuing (Heuts and Mol 2013: Valuation Studies, 1, 2, 125-46) and analysing the case of the Italian network of public UCB banks and collection sites, this article shows how conflicting registers of valuing concerning UCB can shape different organisational models of UCB donation and collection, in which social values and clinical value are not unproblematically conflated. The article aims to demonstrate that the functioning of biobanking arrangements is dependent on how different values are accomplished and aligned in concrete practices of tissue donation and collection.

Market power and stability of financial institutions: evidence from the Italian banking sector

Purpose This paper aims to explore the relationship between bank market power and stability of financial institutions in Italy between 2001 and 2012. The authors first test the existence of a U-shaped relationship between market power and financial stability. Second, they regress the market share indicator on bank risk-taking to underline whether financial stability is affected by increasing or decreasing the market power of banks. Third, they explore whether this relationship is affected by the size, level of capitalization and credit insolvency of banks. Design/methodology/approach Relying on highly territorially disaggregated data at labor market areas level, the authors estimate the impact of bank market power and other explanatory variables on a proxy of risk taking behavior such as the banking “stability inefficiency” derived simultaneously from the estimation of a stability stochastic frontier. Bank market power is taken into account through an individual measure based on loans. Financial stability is calculated through the Z-score. The authors use, as risk-taking measure, the stability inefficiency whose estimation approach is the stochastic frontier analysis. Findings The empirical evidence shows that the inefficiency of financial stability is found to be U-shaped related with respect to the measure of market power. Bank size is an essential factor in explaining the relationship between bank market power and risk-taking. Cooperative banks have fewer incentives to gain market power to better perform in term of risks. The reform of the cooperative banks that took recently place in Italy is not supported by the data. Originality/value The relationship between bank market power and financial stability has been analyzed using a rich sample of cooperative, commercial and popular banks in Italy over the 2001-2012 period. The authors rely on labor market areas being sub-regional geographical areas where the bulk of the labor force lives and works. The paper investigates the market power-stability link considering both cooperative and non-cooperative banks. Indeed, specific attention has been paid on cooperative banks because of their mission in favor of the local community as only few studies, to the best of the authors’ knowledge, examine cooperative banking.

The Impact of Anti-Money Laundering Oversight on Banks' Suspicious Transaction Reporting: Evidence from Italy

We provide the first thorough investigation of the effect of anti-money laundering inspections on banks' reporting of suspicious transactions. We do so by using highly detailed data from Bank of Italy and UIF (Italian authority for anti-money laundering), which include information on i) on-site inspections by authorities and follow-up actions, and ii) quantity and quality of suspicious transactions reports being filed by banks before and after inspections. Through a difference-in-differences econometric analysis we find that inspections (notably when followed by some type of intervention by the authority) induce, ceteris paribus, an increase in suspicious transaction reports being filed by banks. Crucially, the effect is not limited to low-quality reports, as feared in the literature ('crying wolf' effect) but is spread to high-quality reports. Authorities' oversight is thus shown to increase the quantity of information shared by banks without deteriorating its quality.

Monetary Policy, Firms’ Inflation Expectations and Prices: Causal Evidence from Firm-Level Data

We empirically explore the direct and immediate response of firms’ inflation expectations to monetary policy shocks. We use the Bank of Italy’s quarterly Survey of Inflation and Growth Expectations, in operations since 2000, and compare average point inflation expectations of firms interviewed in the days following scheduled ECB Governing Council meetings with those of firms interviewed just before them; we then relate the difference we find to the change in the nominal market interest rates recorded on Governing Council meeting days, a gauge of the unanticipated component of monetary policy communications. We find that unanticipated changes in market rates are negatively correlated in a statistically significant way with the differences in inflation expectations between the two groups of firms and that this effect has become stronger since 2009. We do not find evidence that firms’ pricing plans are affected by these monetary policy shocks nor that firms perceive significant changes in the main determinants of their pricing choices.

‘It’s a family affair’: The discursive entanglement of social formations in public and private cord blood banking in Italy

The dominant narrative in bioethical and biomedical literature criticises private/family cord blood banking as selling a biomedical service that challenges the system of public banks that is based on voluntary donations and distributing umbilical cord blood for medical needs. While the public system is described as embedded in the social relations of reciprocity, solidarity and obligation to the collectivity, private/family banking is accused of being a for-profit commercial market that exploits the emotional vulnerabilities of parents with exaggerated and misleading claims about the clinical uses of umbilical cord blood. This article challenges this view by showing that both banking systems are embedded in social relations. It analyses the discourses produced by Italian public and private umbilical cord blood banks and by healthcare institutions to show how these discourses constitute different social formations and attach diverging meanings of umbilical cord blood banking and clinical use to the set of responsibilities, values and obligations characterising these formations.

Banking Competition and Bank Size: Some Evidence from Italy

This paper assesses the degree of competition of the Italian banking industry and investigates whether there are differences in the competitive behaviour related to the size of the intermediaries. Competition is measured using the Bresnahan-Lau model, estimated on a panel dataset of 125 observations over the period 1989-2013. Annual data are collected from the Bank of Italy, and are aggregated into dimensional categories: major, large, medium, small, and minor banks. The results suggest that the sector is rather competitive and that the level of competitiveness has increased over the observed period. Besides, the events occurred in the Nineties seem to have had a structural effect on banks’ market power, as well as the aftermath of the recent financial crisis. The estimates also point out that smaller banks enjoy a higher degree of market power, which is consistent with the relationship lending that characterizes the interaction between banks and borrowers in Italy.

Trahit sua quemque voluptas. The multidimensional satisfaction of foreign tourists visiting Italy

Is everyone truly drawn by his or her own delight? Tourist satisfaction - and hence the attractiveness of key tourism destinations - is a multifaceted phenomenon, the understanding of which requires fully integrated and multidimensional interpretative frameworks. Assuming that tourist satisfaction plays a crucial role in defining the present and future of any tourism product or service, we focus on the perception that foreign visitors have of Italy as tourism destination by adopting a multidimensional approach that is based on quantitative information derived from official statistics. Using microdata from the Survey on International Tourism conducted by the Bank of Italy in 2016, the perceived quality of Italian tourism was assessed using an original framework grounded in the counting approach proposed by Chakravarty and D'Ambrosio (2006) and the dominance criterion introduced by Lasso de la Vega (2010). This methodology allows evaluation of the satisfaction of specific subgroups of tourists and analyses differences in perceived quality that is attributable to specific sociodemographic traits. By investigating multiple aspects of tourist satisfaction with a common interpretative framework, the empirical results of this study constitute an advanced knowledge for evaluation of the efficiency of policies promoting tourism attractiveness in Italy.

State Aid and Deposit Guarantee Schemes. The CJEU Decision on Tercas and the Role of DGSs in Banking Crises

In Tercas, the General Court of the European Union decided on the actions for annulment brought against the Commission’s Decision that deemed the measures taken in 2014 by the Italian Fondo Interbancario di Tutela dei Depositi (FITD) in favor of Banca Popolare di Bari to support its acquisition of Cassa di Risparmio di Teramo, a small regional bank operating in the south of Italy, to be State aid. In this respect, the EU competition authority’s opposition to the use of the deposit guarantee scheme (DGS) was critical for the Italian Republic because, at the time of the decision, four regional banks were in the process of being bailed out by the FITD, but where ultimately instead put under resolution, with a dramatic impact on savers’ confidence. The judgment is certainly relevant for many reasons. First, the ruling represents a benchmark in the use of a DGS after the introduction of Directives 2014/59/EU and 2014/49/EU as it implicitly defines the principles according to which a national DGS can intervene in a banking crisis without breaking EU laws on State aid. Secondly, the decision overrules the interpretation presented by the European Commission regarding the role played by the Bank of Italy in the operation carried out by the FITD for the benefit of Tercas.

Local Development, Urban Economies and Aggregate Growth

The aim of this paper is to present an overview of the results of a recent research project by the Bank of Italy. The paper analyses the interplay between historical origins, congestion costs, and agglomeration benefits in shaping the Italian urban system. It shows that urban agglomeration externalities (on wages, productivity, or innovation) tend to be smaller in Italy than in other developed countries; it also shows that the costs of congestion are relatively high and that high housing cost—explained by both physical constraints and public administration inefficiencies—discourage mobility. These features have a relevant impact on the development of an advanced urban system with possible negative consequences on the country’s ability to grow.

Does Home Ownership Crowd Out Investment in Children's Human Capital?

Parents generally care for their kids, either for altruistic or for strategic reasons. To secure them a better life than their own, they can invest in the children’s human capital or accumulate real wealth to bequeath to them. In equilibrium, with complete markets and no imperfection, the marginal returns from the two strategies are equalized, an optimal distribution of children’s endowment between human and nancial (real) wealth is reached and no crowding out occurs. In the real world, with incomplete and imperfect markets, a displacement can occur. A strong preference for home-ownership makes parents inclined to consider the house as the typical bequest-friendly asset, even at the expense of children’s education. Mis-perceptions of the relative returns of the two dierent forms of wealth, with a perceived excessive premium of the returns from housing wealth, may also be at work. We consider this picture to be highly representative of the Italian situation and analyze the possible trade o between (children’s) human and real capital by using the Bank of Italy’s Survey of Household Income and Wealth (SHIW). Our evidence points in the direction of conrming our hypothesis.

Modelling the Loss Given Default Distribution via a Family of Zero-and-one Inflated Mixture Models

SummaryThe empirical distribution of the loss given default (LGD) has support [0, 1], contains an excess of 0s and 1s, and is often multimodal on (0, 1). Though some parametric models have been used in the credit risk literature to model the LGD distribution, these peculiarities call for more flexible approaches. Thus, we introduce a zero-and-one inflated mixture where a three-level multinomial model is considered for the membership of the LGD values to the sets {0}, (0, 1) and {1}, whereas a finite mixture of distributions is used on (0, 1). To allow for more flexible shapes on (0, 1), we consider component distributions already defined on (0, 1) and distributions on (−∞, ∞) mapped on (0, 1) via the inverse logit transformation. This yields a family of 13 zero-and-one inflated mixture models. They are applied to two data sets of LGDs on loans: one from a European Bank and the other from the Bank of Italy. The best performers in our family, selected via classical information criteria, are then compared with several well-established semiparameteric or non-parametric approaches via a convenient simulation-based procedure.

Impairment of intangible assets and disclosure by Italian banks

Purpose The purpose of this paper is to examine the methods used to perform impairment test for intangible assets from a business combination and the information provided by the consolidated financial statements of a Group of Italian banks in the period 2009-2014. The purpose is to verify if, as assumed in literature, there is a positive link between profitability and the tendency of manager’s to post the impairment losses of intangible assets promptly and accurately. Design/methodology/approach The existence of a link between profitability and the quality of disclosure was verified by constructing correlation indices, and then ascertaining not only the reliability but also the strength and direction of the statistical connection between the above two aspects. A multivariate linear regression reconfirmed the results obtained by the previous bivariate analysis. Findings The results confirm the basic assumption, showing that the link between the aspects considered is statistically significant and positive in all the years in question. Originality/value This study fills a gap, given that no papers were found in literature specifically pertaining to banks and other financial institutions. Moreover, the decision to focus the study on Italian banks seems to be particularly appropriate for a number of different reasons: before the financial crisis, Italian banks made numerous acquisitions, posting high amounts for intangible assets; the financial crisis made the stock market prices plummet, thus making it necessary to write-off intangible assets from business combinations; and even before the ESMA, the Bank of Italy intervened on several occasions on the question of reporting, urging Italian banks to comply with disclosure requirements and impairment criteria.

Food waste reduction and food poverty alleviation: a system dynamics conceptual model

The contradictions between food poverty affecting a large section of the global population and the everyday wastage of food, particularly in high income countries, have raised significant academic and public attention. All actors in the food chain have a role to play in food waste prevention and reduction, including farmers, food manufacturers and processors, caterers and retailers and ultimately consumers. Food surplus redistribution is considered by many as a partial solution to food waste reduction and food poverty mitigation, while others criticize charitable initiatives as inadequate responses, that inhibit governments from responsibly protecting the citizens right to food. This paper frames food assistance as “hybrid systems”, situating at the intersection of territorial food, public welfare and third sector voluntary systems. Based on available literature and reflections on previous research examining food banks in Italy, we develop a system dynamics conceptual mapping. The aim is to model a set of relations and dynamic mechanisms associated with variables relevant to food waste generation, food recovery for social purposes and food poverty alleviation. The analysis of feedback interactions highlights the (actual and potential) vulnerabilities of food assistance systems that occur when addressing food poverty by reducing food surplus. In summary, as the awareness on food poverty and food surplus arises, incentives to food recovery and redistribution strengthen the role of (voluntary) food assistance actors, increasing their exposure to drivers of change, such as retailers’ standards for food surplus prevention. This paper contributes to the current academic debate on charitable food assistance, with insights for policy makers and other systems’ actors.