This national roundtable discussion got underway with the observation that, traditionally, the banking system has played a key role in economic growth by channeling personal savings into financing the productive activities of businesses.
Since the 1990s, however, throughout the Western world, albeit to varying extents in each country, the nature and operating practices of major banks have changed. Business loans have been greatly reduced compared to the resources invested in securities and derivatives. In addition, it was highlighted that within a short space of time, the average value of a major bank, once in the ballpark of that of a large multinational corporation, has become tenfold that of the latter. This has also increased the political influence of banks, as evidenced by the sector’s high level of expenditure on lobbying activities in the United States. The participants noted that the transformation wrought in the nature of banks and the predominance assumed by financial over “real” banking activities led to the prevalence of perverse incentives in favor of short-term returns and higher risk-taking, which in turn paved the way for the outbreak of the crisis whose negative effects on the real economy are still evident.
It was stressed that, ironically, the new regulatory framework that is emerging at a global level is likely to keep these perverse incentives intact and act as a disincentive to banks intent on returning to channeling savings towards the financing of productive activities. There was a general consensus that the rules should, instead, facilitate the development of different banking and finance models depending on the relevant local context. To that end, national authorities should be accorded more discretion and flexibility. A more satisfactory regulatory environment would see banks encouraged to improve efficiency and transparency, rethink the ways in which they service customers and reduce contact costs.
At the national level, the participants felt that certain rules currently in force that act as disincentives should be reviewed. Cases in point include: the rules that allow the free portability of loans even for larger businesses; the rules that govern (to distorting effect) usurious practices; and tax laws which do not permit the payment of group VAT. Other key reforms identified as necessary include measures aimed at facilitating the growth and internationalization of Italian businesses, as well as incentives to encourage the listing of medium-sized enterprises on the stock market, thereby reducing regulatory costs of entry and the threat of contestability for control.