54 March 2007 VARIETIES WITHIN CAPITALISM? THE MODERNISATION OF FRENCH AND ITALIAN SAVINGS BANKS, 1980-2000 PERSPECTIVES VARIETIES WITHIN CAPITALISM? THE MODERNISATION OF FRENCH AND ITALIAN SAVINGS BANKS, 1980-2000 Olivier Butzbach Faculty of Political Science Second University of Naples Via del Setificio, 15 Complesso Monumentale Belvedere San Leucio 81020 Caserta (CE) Italy E-mail: [email protected] Acknowledgments This study draws on my doctoral dissertation; my thanks, therefore, go first of all to my doctoral thesis advisor, Martin Rhodes, who helped me focus and asked me the right questions throughout my research and writing. My thanks also go to the other three members of my doctoral jury: Colin Crouch, Richard Deeg and Adriano Giannola, who provided me with precious comments in the last phase of the writing process. I also thank all my interviewees, whom I cannot list here, and all of those who, at various stages, have facilitated my research. In particular, I wish to thank, in France, Valérie Delumeau and Jean-Philippe Goethals and the staff at: the Caisse d’Epargne de Picardie, the Caisse d’Epargne de Provences Alpes Corse, the Fédération Nationale des Caisses d’Epargne and the Caisse Nationale des Caisses d’Epargne; in Italy, the Associazione fra le Casse di Risparmio Italiane, Mrs. Giacchetti and the Associazione Bancaria Italiana. I further wish to express my gratitude to my Italian friends and colleagues, in particular Adriano Giannola and Giuseppe Pennisi who have honoured me with their trust and given me, at various stages of my doctoral life, very valuable support and opened for me the doors to the University. Last but not least, I wish to thank Mita and Nicolas for their continuous support and their resistance to “doctoral fatigue”. This study has been published by ESBG (European Savings Banks Group) in the framework of the first Savings Banks Academic Award. The objective of the Savings Banks Academic Award is to stimulate comparative research projects on the rich historical heritage of the European savings banks and to propose solutions for the future. The findings, interpretations and conclusions expressed in this paper do not necessarily reflect the views of ESBG (European Savings Banks Group or WSBI (World Savings Banks Institute). ESBG nor WSBI guarantee the accuracy of the data included in this work. The material in this publication is copyrighted. ESBG – The European voice of savings and retail banks. 4 EXECUTIVE SUMMARY The world of finance has changed rapidly over the past two decades: heightened competition, financial globalisation, technological innovations, regulatory changes… European savings banks, which constitute a pillar of European political economies, have had to adjust. French and Italian savings banks have been all the more exposed to change as they formerly belonged to a very specific kind of financial system characterised by heavy state intervention and regulation; and as such state-administered credit systems have been completely dismantled during the 1980s. Savings banks in both countries faced, therefore, a dramatically altered environment to which they had to adjust in order to survive. This research, building on a case study approach, aims at uncovering the process of change in the savings banks sector in France and Italy; and at identifying the factors of change in each country. According to the literature on comparative political economy, adjustment patterns (of firms or national economic systems) are shaped by existing institutions. Institutional specificities, which are path-dependent over time, determine the peculiar outcome of change in each country; and while convergence is the outcome of market forces, divergence reflects the operation of “rigid” national institutions. The research question addressed here concerns, therefore, both the direction of change and its causes. In other words, what explains French and Italian savings banks’ apparent different trajectories in front of common pressures to adjust? Findings show simultaneous convergence and divergence forces at play within French and Italian savings banks’ adjustment processes. French savings banks have become a nationally integrated cooperative banking group, while Italian savings banks have either merged with other banks to form nationally integrated commercial banking groups, or formed alliances at the regional or local level. 5 On the business side, the evidence is even less linear: savings banks in both countries have demonstrated a suprising ability to innovate (at the level of products or markets), while maintaining strong positions in their traditional activities. Findings suggest, therefore, the presence of a multi- layered process of change, where institutions both determine and are determined by the strategies pursued by top management. 6 VARIETIES WITHIN CAPITALISM? THE MODERNISATION OF FRENCH AND ITALIAN SAVINGS BANKS, 1980-2000 Table of Contents Acknowledgments 4 Executive summary 5 Introduction 9 1. Factors and directions of change in European banking 17 2. Organisational and institutional change in national financial systems 39 3. The role of savings banks in the European economies in the XXth century: the cases of France and Italy 53 4. The unravelling of state administered credit systems and their impact on banking 93 5. The regulatory normalisation of savings banks 141 6. The changing boundaries of coordination: savings banks’ corporate restructuring and sector organisation 169 7. Changes in savings banks’ corporate governance 199 8. Changes in savings banks’ corporate strategies 219 9. Conclusions 251 Bibliography 263 7 8 INTRODUCTION 1. The research puzzle: European savings banks’ adjustment to radical shifts in their environment Savings banks fill both an important and peculiar space in the history of European financial systems. In fact, savings banks can be considered as trademarks of the economies of Germany, Belgium, Spain, France, Italy and the Netherlands, since they are intricately linked to those countries’ industrial and financial development, and because they exhibit strength and financial power rarely seen elsewhere. The first savings banks were created in the early to mid XIXth century in the UK and Germany as deposit banks catering for the low income earning populations, who were then ignored by other credit institutions. Along the years, the savings banks movement spread throughout Europe and savings banks expanded their activities on the asset side, through lending both to individuals and small firms – considered too risky by large national banks - and through financing public investments via the holding of government securities. Initially, savings banks were mostly local, private, non-profit banks often organised in strong sector associations at the local, regional and national level – epitomised by the German model of “giro” associations. Most savings banks were originally set up by local power-holders and institutions linked to the church or to the rising elites of the new industrial society. Their non- profit nature meant that, in contrast to commercial banks, they did not have to make profits or pay dividends. In fact, savings banks carried out an explicit redistributive mission, giving part of their yearly revenues to the poor or to the local economy. Hence savings banks’ profound rooting in local economies and communities. 9 Savings banks usually benefited from a protective legal status that allowed them to exert their mission as public goods providers without being confronted to the same market pressures faced by commercial banks. In Germany, for instance, the Sparkassen used to enjoy unlimited state guarantees that enabled them to secure the highest possible credit rating (which recurrently raised the concerns of for-profit competitors and European regulators). Most European savings banks retained their specific organisational and governance features throughout the XXth century. Today, they are still powerful actors in the banking sector in France, Germany, Italy, Norway, Belgium, Spain, Austria, Portugal, and Sweden. Their local rooting and ownership, the trust they built over the years among depositors, the occasional protection and regulatory advantages provided to them by the state enabled savings banks to reap and keep, until today, high market shares in the deposit (and in some cases the lending) market in the nine countries mentioned above. More precisely, in 2002 European savings banks represented, on average, 25% of housing loans in their home country, 23% in lending to firms and households, and held 19.6% of total assets in the banking market; on the liability side, they held around one third of total deposits1. In Spain, the 46 Cajas held, as of December 2002, 46% of banking loans and 47% of deposits. And these market shares have been growing over the past ten years. In 2000, French savings banks “weighed” 36.6% of total lending to households (commercial banks held a 44% market share in this segment), against 27.4% in 1995; more generally, cooperative banks increased their shares in deposits, up to 59.7% of the market in 20002. In Italy, (former3) savings banks held in 2003 a 27% market share for deposits, and a 17% market share for lending. In Germany, the non- profit sector is even more dominant; in 2002 75% of deposits were at Sparkassen or at Deutsche Genossenschaftsbank, the lead institution of the co-operative banking sector. 1 Data from the European Savings Banks Group’s 2003 Annual Report. The data refer to the eight countries mentioned