Italian Banks between Scylla and Charybdis?

At the beginning of the great financial crisis, Italian banks were just emerging from a process of consolidation, and were enjoying gains in efficiency, positive performance, low risk levels, and adequate capitalisation. Several factors helped them to escape the subprime phase of the crisis comparatively unscathed, in particular their conservative attitude to financial innovation, their maintenance of a traditional business model, their strong local roots, and their well-balanced funding gap. In fact, no Italian banks had to be rescued or failed, and the extent of government intervention with public facilities (through the so-called Tremonti bonds in 2008–09) was the lowest of any Organisation for Economic Co-operation and Development (OECD) country: 0.3 per cent of GDP, against an average of 30 per cent for European Union states.