The focus of this fourth edition of the annual National Conference on the Italian banking system was the future of a sector being squeezed between, on the one hand, a veritable regulatory deluge that has contributed to reduced profit margins, and, on the other, new competitors from associated sectors that already existed (shadow banking) or are entirely new (fintech), which threaten business that has always been the preserve of the banks.
From a regulatory standpoint, there was unanimous consensus on the need for a “grace period” to help the banking system come to grips with the enormous amount of rules that have been promulgated at the European level over the past seven years. The message conveyed by representatives of the Italian banking community was that there are too many rules, too much regulatory uncertainty, and too many regulators. While certain objectives made imperative by the recent financial crisis could now be said to have been fully achieved (with banks’ capital levels significantly increased), the participants stressed the necessity of gauging the ultimate effects of what has been accomplished. Most importantly, all that still remains to be done in terms of implementing already-enacted legislation and new rules for matters not yet covered should not be allowed to undermine the confidence of operators in the certainty of the rules in place. It was suggested that the watchword in banking regulation today must be stability, as this is the only way of ensuring that banking institutions will be able to draw up business plans that enable value to be created rather than destroyed for their shareholders – all in the knowledge that there can be no financial stability without economic growth. For this reason, it was seen as necessary to look to the relationship between banks and industry, and to the contribution that the former can and must provide to the production system to help make it competitive.
In an industrial system like Italy’s, characterized by a vast number of SMEs that struggle to access the capital market, it was deemed crucial to find means of channeling financial resources their way. While it was conceded that part of the solution might lie with traditional mechanisms, such as public guarantees or forging networks between various operators to achieve critical mass, it was nevertheless felt that innovative and technological capabilities must be made to feed into one another in order to arrive at solutions that truly permeate to the core of the country’s production system and kick-start growth.
In summing up, it was observed that today, more than ever, the imperative is to “digitize or die”, including in the banking sector. Indeed, the digital revolution is one that cuts across all sectors of the economy, with the financial sector being no exception. It is important to bear in mind, however, that digital innovation not only heralds great opportunities, but also significant risks. Creating an IT department will not suffice alone – entire business models will need to be overhauled. Only by rising to this challenge, and at the same time being able to count on a set of clear and stable rules, will the Italian banking system once more create value not only for its shareholders, but for the country’s economy as well.