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The Italian Banking System During the 1907 Financial Crisis and the Role of the Bank of Italy

Author

Listed:
  • Francesco Vercelli

    (Bank of Italy)

Abstract
This paper examines the Italian banking system during the 1907 financial crisis, from start to finish. Using bank balance sheet data from the Historical Archive of Credit in Italy, we analyse the developments of the banking system in the run-up to the crisis. We show that the four Italian mixed banks, which registered a rapid growth at the beginning of the 20th century, were little engaged in the traditional activity of bill discounting and largely involved in ‘repurchase agreements’ on stocks and in correspondent current accounts. Because of this business model, the mixed banks – and in particular the Società Bancaria Italiana – turned out to be fragile when the international crisis hit the country. Then we analyse the complex interactions between the major financial institutions and the government in order to face the crisis. We focus on the role of the Bank of Italy, which acted as a modern central bank for the first time since its creation.

Suggested Citation

  • Francesco Vercelli, 2022. "The Italian Banking System During the 1907 Financial Crisis and the Role of the Bank of Italy," Quaderni di storia economica (Economic History Working Papers) 49, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:workqs:qse_49
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/quaderni-storia/2022-0049/index.html?com.dotmarketing.htmlpage.language=1
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    References listed on IDEAS

    as
    1. Tallman, Ellis W. & Moen, Jon R., 2012. "Liquidity creation without a central bank: Clearing house loan certificates in the banking panic of 1907," Journal of Financial Stability, Elsevier, vol. 8(4), pages 277-291.
    2. Moen, Jon & Tallman, Ellis W., 1992. "The Bank Panic of 1907: The Role of Trust Companies," The Journal of Economic History, Cambridge University Press, vol. 52(3), pages 611-630, September.
    3. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    4. Odell, Kerry A. & Weidenmier, Marc D., 2004. "Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907," The Journal of Economic History, Cambridge University Press, vol. 64(4), pages 1002-1027, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial crisis; history of banking;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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