Bottlenecks of the Financial System at the National and Regional Levels: The Cases of Italy and Sardinia

Abstract

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.