European Banking Union to the Rescue? How Supranational Institutions Influenced Crisis Management in Italy

ABSTRACT

This article examines the management of the recent banking crisis in Italy. In particular, we investigate the changing coalitional dynamics among Italian banks with a view to identifying the conditions under which banks are more likely to share the costs of crisis management. We argue that banks’ preferences are significantly shaped by the institutional context within which they operate. In particular, the establishment of Banking Union in the European Union (EU) significantly weakened the traditional coalitional dynamics among Italian banks by injecting uncertainty about the distributional effects of crisis management policy solutions.

KEYWORDS:

• European Union
• banking crisis
• Monte dei Paschi
• Veneto Banca
• Banca Popolare di Vicenza
• historical institutionalism

Acknowledgments

We wish to thank the Editors and Reviewers of South European Society and Politics for their helpful comments. We would also like to thank Giuseppe Montalbano for excellent research assistance. Last but not least, we would like to thank the Scuola Normale Superiore for the research fellowship awarded to Manuela Moschella and Lucia Quaglia to work on this project.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Public support to ailing banks can be provided directly through recapitalisation and/or indirectly through the provision of public guarantees on banks’ liabilities.

2. It should be noted, however, that a number of studies indicate that the expectations derived from the literature on national models of capitalism are a poor predictor of crisis management dynamics. For instance, Culpepper & Reinke (2014) Woll (2014).

3. Yet, several banks were subject to some form of political influence via the banking foundations, which are discussed later on in this section.

4. According to some estimates, more than 80 per cent of bank NPLs are in the corporate sector (Jassaud & Kang 2015).

5. The limited amount of government funding provided to Italian banks was partly due to the limited fiscal space of the country.

6. Subordinated bondholders suffered losses due to burden-sharing, but retailers were to be partly compensated by the bank, for approximately €1,5 billion.

Additional information

Notes on contributors

Manuela Moschella

Manuela Moschella is an Associate Professor of Political Science at the Scuola Normale Superiore. Her research is focused on the determinants of macroeconomic and financial policies at the domestic, European and international level. She was awarded research grants and fellowships to conduct research on these themes from the Centre for International Governance Innovation (CIGI), Compagnia di San Paolo and Scuola Normale Superiore.

Lucia Quaglia

Lucia Quaglia is a Professor of Political Science at the University of Bologna. Previously, she was professor of Political Science at the University of York. She was awarded research grants and fellowships from the European Research Council, British Academy, Hanse-Wissenschafts Kolleg, University of Bremen, Fonds National de la Recherche du Luxembourg, European University Institute and Scuola Normale Superiore.