Ownership, bank organization and retail lending in a low income area

The focus of this study is on the organizational features of banks operating in the South of Italy, namely major Italian banking groups and local independent banks. In our opinion, in order to evaluate the allocative and operational efficiency of the Southern Italian banking system, the issue to be addressed relates to the potential heterogeneous behavior between banks which are “truly local” – i.e. those banks whose real decisional centres are located in the Southern regions – with respect to those banks operating in the South but which have their decisional centres located in the Centre-North of the country (“outer banks”). The fact that bank strategies are defined in decisional centres located outside the Southern area could indeed explain the reduced credit support perceived by Southern SMEs. Two are the main research questions of the study. First, have the benefits of localism and relationship lending been deeply and negatively affected by the transfer of control rights outside the area (Mezzogiorno)? Second, is the organizational model adopted by local and independent banks (i.e. truly local banks) more effective in dealing with the needs of the local customer base?. Such questions are relevant not only with specific reference to southern Italy, but also to any region which experienced a reduction of locally based banks in favour of foreign banks (i.e. Central Eastern European Countries).