Bank of Italy

The Bank of Italy (Italian: Banca d'Italia, pronounced [ˈbaŋka diˈtaːlja], informally referred to as Bankitalia) is the national central bank for Italy within the Eurosystem. It was the Italian central bank from 1893 to 1998, issuing the lira. Since 2014, it has also been Italy's national competent authority within European Banking Supervision. It is located in Palazzo Koch, via Nazionale, Rome.

The institution was established in 1893 from the combination of three major banks in Italy (after the Banca Romana scandal). The new central bank first issued banknotes during 1926. Until 1928, it was directed by a general manager and after this time by a governor elected by an internal commission of managers, with a decree from the president of the Italian Republic, for a term of seven years. In 1863, the crisis of the world money market created panic and the rush to the counters to collect the metallic currency in exchange for the banknotes. The Italian government responded in 1866 by introducing the fiat and legal tender of paper money. The government was accused in this way of favouring the issuing banks, and a long debate called the "banking question" arose about the advisability of having one or more issuers.

The Minghetti-Finali law of 1873 established the mandatory consortium of issuing institutions among the six existing issuing institutions, the National Bank of the Kingdom of Italy, Banca Nazionale Toscana, Banca Toscana di Credito, Banca Romana, Banco di Napoli, and Banco di Sicilia; the measure proved insufficient. Following the Banca Romana scandal, the reorganization of the issuing institutions became necessary.

Law no. 449 of 10 August 1893 of the Giolitti I government established the Bank of Italy through the merger of four banks: the National Bank in the Kingdom of Italy (formerly Banca Nazionale in the Sardinian States), the Banca Nazionale Toscana, the Banca Toscana di Credito for the Industries and Commerce of Italy and with the liquidation management of Banca Romana. With a complex series of mergers between these banks, the current Bank of Italy was formed. Some families of bankers, historical partners: Bombrini, Bastogi, and Balduino were the supporters of the operation. The institute enjoyed (together with the Banks of Naples and Sicily) the issuing privilege, it also acted as a "bank of banks" through the rediscount of bills, but did not have supervisory powers over other banks.

The bank remains a private limited company and was headed by a director. From 1900 to 1928, Bonaldo Stringher was the director and gave the Bank the role of manager of Italian monetary policy and lender of last resort, bringing it closer to a modern central bank. In particular, he understood that a central bank cannot aim at maximizing profit (which is achieved by printing as much paper money) but must instead aim at price stability. In 1907, the Bank of Italy coordinated the rescue of the Italian Banking Company, a major lender of Fiat, an operation that ended with the absorption of the bank in crisis into the Italian Discount Bank. In 1911 the central bank organized a consortium to rescue the steel companies (Acciaierie di Terni, Ilva and others) of which the Bank of Italy was directly creditor, financing the operation also through the issue of banknotes.

In 1912, the credit institute for cooperation, with social purposes, was established, led by the Bank of Italy and also participated by public bodies, savings banks, Monte dei Paschi di Siena, the Cassa di Previdenza, and the Credit Institution for the Cooperatives of Milan. The institute in 1929 was transformed by its director Arturo Osio into the Banca Nazionale del Lavoro. In 1913, the Subsidy Consortium was established, led by the Bank of Italy and also participated by the Banks of Naples and Sicily, some savings banks, Monte dei Paschi di Siena and by the San Paolo Bank of Turin. In 1922, the Consortium saved Ansaldo and took control of it. In 1923, it did the same with Banco di Roma. Also in 1913, Francesco Saverio Nitti drew up a bill that entrusted the Bank of Italy with the supervision of other banks, but the private banks managed to avoid its approval. In 1914, the Bank of Italy assisted the Banco di Roma, which had to devalue its capital due to losses reported in the activities in the eastern Mediterranean.

In 1921, after World War I, it was always the Bank of Italy that led the consortium that managed the liquidation of the Italian Discount Bank and saved the Banco di Roma once again from crisis. In 1926, the Italian fascist government of Benito Mussolini undertook a major reorganization of the monetary system, partly motivated by the desire to assert the state's dominance over the private credit system and especially the two Milanese investment banks, Banca Commerciale Italiana and Credito Italiano. The context of the new legislation was also affected by the ongoing turmoil affecting banks affiliated with the Christian democratic Italian People's Party, such as Credito Nazionale.^{[citation needed]}

R.D.L. 812 of 6 May 1926 granted the Bank of Italy an exclusive right to issue currency, terminating the prior issuance privileges of the Banco di Napoli and Banco di Sicilia and abrogating the Royal Decree of 28 April 1910, no. 204. Subsequently, R.D.L. 1820 of 6 November 1926 entrusted the Bank of Italy with the task of supervising savings banks. Also in 1926, the Subsidy Consortium was reorganized as Istituto Liquidazioni, still under the control of the central bank. In 1933 it would be separated from the bank and absorbed by the newly established Istituto per la Ricostruzione Industriale. In 1928, the Bank was reorganized. The general manager was joined by a governor with greater powers. While all the banks were in very bad conditions, the Banca Nazionale del Lavoro of the self-styled socialist Arturo Osio, in 1929 confiscated eleven Catholic banks, and in 1932 the Banca Agricola Italiana which had financed SNIA Viscosa di Gualino.