Competition, over‐branching and bank failures during the Great Depression: New evidence from Italy

Journal article

This paper employs quantitative and qualitative methods to examine the link between banking competition, branching and financial distress during the interwar period in Europe, focusing on Italy as a case study. Regression analysis and a systematic review of printed sources show that banks experiencing distress had opened scores of branches and operated in areas with harsher competition. Poor managerial choices led banks to have higher operational costs, pushing them to more remunerative but riskier activities. The 1920s saw a profound transformation of the Italian banking system, with extensive branch expansion and cut‐throat competition for deposits. This paper argues that these changes in the structure of the banking system rendered it more fragile when the international crisis hit. Available evidence on other European countries suggests that Italy was not an isolated case. The study contributes to the literature on banking crises during the Great Depression and the effects of banking competition on financial stability.

Authors: Molteni, M

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Wiley
• Journal: The Economic History Review
• Publication date: 2024-03-04
• DOI: 10.1111/ehr.13340
• ISSN: 0013-0117 and 1468-0289
• Language: English
• Keywords: bank failures; competition and financial instability; great depression; banking crises; banking history; financial development; Italy; bank branching