The Reform of Italian Cooperative Banks : Discussion of Proposals

This paper argues that the governance framework of cooperative banks may hamper raising capital, particularly at time of distress, complicating the bank resolution process - especially for large banks - and may not provide adequate incentives to control banks' management. Reforms should preserve the positive characteristics that make cooperative banks a valuable addition to the Italian financial system, while providing enough flexibility and incentives for banks to adopt a suitable governance model. Our empirical analysis suggests that cooperative banks may enjoy a higher degree of monopoly power than commercial banks. Thus, regulations and the enforcement of antitrust policies should ensure a leveled playing field