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Analyses of the financial structure of Italian firms agree on the evidence that compared with other European countries, companies are characterised by a peculiar fragility because of their lower capitalisation and higher leverage. These effects, in terms of the current and potential financial vulnerability, are well known. During crises, the problems related to internal financing capacity and bank debt funding intensify. What are the best solutions to rebalance the financial structure of Italian firms? How should banks refinance firms to provide them with the necessary period to settle finances? This paper provides the reader with some answers to both questions. With regards to the capitalisation processes, we recommend setting up new highly capitalised intermediaries. In particular, they should be created with capital that comes from selling those bank buildings that are no longer useful, given the increasing importance of online services. Later, we analyse the opportunity for and, thus, the effects of banks to securitise their loans. For both alternatives, we obtain relevant findings that can represent suitable solutions for firms and intermediaries to overcome the credit crunch issue.

This book explores some relevant distortions and market failures in financial and banking markets caused by the recent financial crisis and offers important insights to policymakers as well. After having introduced the reader to the economic background behind the origin of the present financial turmoil, the book proposes a distinct angle to look at some macro and microeconomic aspects. The volume discusses whether and to what extent policies, implemented by governments and monetary authorities to countervail bank defaults and avoid a disastrous financial instability, have in some way determined opportunistic conducts (moral hazard), changes in banks' behaviour, distortive incentives and market failures. Furthermore, the book offers a viewpoint on the effects of the evolution of regulation for the banking sector. Finally, the book assesses how the increase in the cost of funding and the shrinking in credit supply (credit crunch) has modified the financial structure of small and medium firms. To illustrate this, some specific cases at Italian regional level are examined

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