2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
Limited and cooperative banks between 1998 and 2013: an analysis on the data of
the branches
Edoardo Catelani
University of Florence
edoardo.catelani@unifi.it
Abstract
In the last years, the number of the banking branches in Italy has decreased sensibly. It is a
trend that does not show to stop, together with the reduction of the employees of the sector and of
the loans. Our aim is to study the stability of the Italian banking system through the analysis of
volatility of the historical series of the Italian branches from 1998 to 2013. We will conclude that
the cooperative banks has been more stable than limited banks during the economic crisis (20082013).
1. Introduction
The stability of the Italian banking system is one of the principles of the supervisory on the
banks, codified by the laws on this subject too.
Assuming that Italian banking system is stable, because the Bank of Italy and the European
Central Bank guarantee the stability, in our paper we will focus our attention on the trend of the
Italian branches in Italy between 1998 and 2013. This variable is logically connected with the
stability of the banking system: a banking system is stable also when its numbers of branches does
not have variations during a long period of time.
Observing the trend of the number of banking branches existing in Italy from 1998 to 2013 we
can distinguish three different steps:
1)
From 1998 to 2009 the number of branches present in Italy has had a steady rise,
passing from 25.391 in March 1998 to 34.178 in March 2009;
July 1-2, 2014
Cambridge, UK
1
2014 Cambridge Conference Business & Economics
2)
ISBN : 9780974211428
From June 2009 to December 2011 the trend becomes more or less decreasing,
passing from 34.007 to 33.607 units, in a trend that has in some moments a rise from
a semester to another one;
3)
From March 2012 to June 2013 the trend is decidedly decreasing: the number of
branches passes from 33.439 to 32.106 units.
The observation of the previous data is so clear: although from the beginning of the historical
series the difference between the first unit and the last one is still largely positive – almost 7.000
branches more between 1998 and 2013 – the drop is evident.
This phoenomenon must not astonish: in other countries financially more developed than
Italy, as Great Britain, has just happened a lot of time ago, almost from the beginning of 1990s,
because of the changes in the financial and banking sector (French, 2008). In Italy this
phoenomenon was very fast, passing from a good rise to a considerable decline.
There is an aspect to consider in the historical series that we analyze. In the years from 1998
to 2013 there has been many changes in the economics, laws, society that have impressed deeply on
the activity and the performance of the banks. In the present article we consider as a discriminant
variable for our aims one of these events bearer of changes: the subprime mortgage crisis started in
August 2007 in the U.S.A. The reasons of our choice are evident: it has caused a series of financial
and economic consequences still not completely solved. Italian banks, that at first seemed free from
the crisis have been hit – and continue still to be hit – very heavily: for this aim it is enough to show
the trend of the junk debts in the last years:
Years
Junk Debts
2008
41.319
2009
59.166
2010
2011
2012
2013
77.843 107.197 124.974 149.593
Table 1: Junk debts of the Italian banks from 2008 to 2013 (millions of euros)
Source: Reworked version of the Author on data of Bank of Italy (2011, 2012, 2013, 2014)
Table 2.6
Assuming as variable the subprime crisis and following Karim et al. (2011), we can divide the
historical series that we possess into two parts: from 1998 to 2007 and from 2008 to 2013. It is
possible in this way to analyze the trend of the Italian banking branches before and after the crisis
and, in particular, to answer the question if the Italian banking branches, whether at level of total
July 1-2, 2014
Cambridge, UK
2
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
system or at level of historical series disaggregated per typology of banks, are stable, and to
compare the different levels of the statistic factors among the vary historical series.
Through the empirical analysis, at the end, we want to show that cooperative banks supported
better to the crisis and give in this way a contribution at the theory of the anticiclicality of the
behaviour of this category of banks.
2. Literature review
The literature about banking branches is based mostly on the analysis of their performance.
The methodology used for this aim is usually the Data Envelopment Analysis (DEA), that allows to
analyze the efficiency of a single branch through its costs and its profits (Sherman 1985).
This kind of studies has been executed from the end of 1990s for banks of many countries
like, for example, for Greek ones (Athanassopoulos 1997), Cypriot (Zenios 1999), Portuguese
(Silva Portela 2007) and Chinese (Ke 2014).
The stability of the banking system has been investigated by numerous studies, for vary
countries of the world and for vary ages, for many different aims. Carlson e Mitchener (2006)
investigate the effect of the deregulation in the 1920s and 1930s in the USA on the banking failures
and then the correlation with the numerousness of the branches in the considered period; Fang et al.
(2014) investigate the relationship between institutional development and stability of the banking
system in the emergence countries, finding that “legal reforms in corporate governance and creditor
rights exerts positive impacts on banking stability.”; Lee (2014), using the data proceeding from 27
Asian countries, investigate the relationship between foreign ownership and stability changes.
This article follows the literature on the stability of banking system through the use of
descriptive statistical methodology. Through the measurement of the volatility of the historical
series of the branches we will try to give an unpretentious contribution to a better comprehension of
what it is happening inside the Italian banking system. Besides, we have the intention of filling a
gap in the literature because, according to my research, it lacks a descriptive analysis about the
numerousness of banking branches in Italy.
July 1-2, 2014
Cambridge, UK
3
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
3. Database
For the empirical analysis we will use the data of the Statistical Bullettin of Bank of Italy, at
free access on the website www.bancaditalia.it, relative to the numerousness of banking branches
apart ATM, that we will not consider, from June 1998 to September 2013. The document furnishes
the data regarding to the previous trimester relative to all banks operating in Italy; it furnishes the
data disaggregated per legal form of the bank. The division articulates on four kinds of banks:
limited banks, cooperative banks, popular banks, branches of foreign banks.
We are used data of fifteen years because the Bank of Italy puts on-line the Statistical
Bullettin just from 1998; on the other hand, in the considered period there has been numerous
changes in the Italian banking sector, passed by a very fragmented system to the formation of big
banking groups and to the following crisis, at least partial, of some group from 2010. We consider
years in which the branches has been influenced by numerous external events.
One of the advantages of having a complete historical series is that it is not a sample: the
reported valuations are so precise. Besides, in the fifteen years reguarding our observation, the data
are taken always through the same methodology; this fact allows to have a homogenous historical
series.
4. Methodology
The statistical instruments used in this article are those of descriptive statistic. Through these
instruments, we will make a base analysis on the data we have obtained.
First of all, we calculate the average of the branches at aggregated and disaggregated level per
legal form, in order to understand the trend in the considered years. Even if the numbers are those
descripted in the paragraph 1, it is well to compare the worked out again data.
We apply after the method of standard deviation and of the coefficient of variation to the two
series in order to understand the variability. At the end, we divide the series into two parts, from
1998 to 2007 and from 2008 to 2013; taking as beginning dates respectively on March 1998 and on
March 2008, we apply the standard deviation to understand better which of the two considered
series has been the more stable one.
We signal the presence of an anomalous datum in the average of the branches of the limited
companies and of the cooperative banks. It is ought to the drastic reduction (more than 1.700 units)
of the number of the branches of the limited banks and at the contemporary increase of the numbers
July 1-2, 2014
Cambridge, UK
4
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
of banks (12 more). Considering that in the same period the numbers of the branches of the popular
banks has increased more or less in the same numerosity, it is possible to suppose a passage of
branches from the limited companies to popular banks.
5. Empirical analysis
The relationship between number of banks and number of branches is not constant: while the
number of banks in Italy has diminished a lot in the period 1998-2013, the number of branches has
had a non-linear trend, as we have just told (paragraph 1). Making the average year by year of the
overall number of the branches in the considered period, we observe that it is in costant increase,
with a stabilization in the last year: this means that the number of banks in the last years has
diminished more than the number of branches.
Italian banking branches 2000-2013
40.000
35.000
30.000
25.000
20.000
15.000
10.000
5.000
0
mar-13
mar-12
mar-11
mar-10
mar-09
mar-08
mar-07
mar-06
mar-05
mar-04
mar-03
mar-02
mar-01
mar-00
Italian banking branches 20002013
Graph 1: Trend of the average of branches per bank for the Italian banking system from
1998 to 2013
Analyzing the average year by year of the single historical series, we note some aspects:
July 1-2, 2014
Cambridge, UK
5
2014 Cambridge Conference Business & Economics
1)
ISBN : 9780974211428
The limited companies are widely over the overall average, while the cooperative
banks, at the contrary, under the overall average; the dimensions of the cooperative
banks are more reduced than the limited companies ones;
2)
All series are constantly increasing, apart an anomalous datum in the limited
companies on December 2011, of which we have just signed the presence previously
and that is not significant for our aims;
3)
The averages of the branches per bank for the popular banks have an absolutely
unforeseeable trend;
4)
The averages of the branches of foreign banks were kept low until 2008, year in
which they have had a considerable increase, at least until 2013. They remain widely
under the overall average.
Let’s concentrate our attention on the coefficients of variation of the branches of limited
companies and cooperative banks, starting form the general series. The series of the more variable
branch is the cooperative banks one, followed by the limited banks.
Coefficient of
Coefficient of
variation of the
variation of the
branches of
branches of limited cooperative banks
banks 1998-2013 1998-2013
0,10
0,16
Table 2: Coefficient of variation of the branches of limited and of cooperative banks between
1998 and 2013
Let’s disaggregate now the data dividing the series into two parts (before and after the crisis),
according to paragraph 4.
July 1-2, 2014
Cambridge, UK
6
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
Coefficient of
Coefficient of
variation of the
variation of the
branches of
branches of
limited banks
cooperative banks
1998-2007
1998-2007
0,10
0,11
Table 3: Coefficient of variation of the branches of limited companies and cooperative banks
between 1998 and 2007
Coefficient of
Coefficient of
variation of the
variation of the
branches of
branches of
limited banks
cooperative banks
2008-2013
2008-2013
0,06
0,03
Table 4: Coefficient of variation of the branches of limited and cooperative banks between
2008 and 2013
The variation of the branches before the crisis is homogeneous enough for the two series: the
highest one is that of cooperative banks but just for 0,1%. This is not true for the series after 2008:
the variation for the two series becomes wide and the datum with the lowest coefficient is the
cooperative banks’ one. From these data, it is simple to argue that the cooperative banks have
reacted better at the crisis in comparison with the limited banks, considered that they have varied
less the number of their branches in comparison with the other kind of banks.
This datum is confirmed and explained better by another kind of analysis, the analysis of the
per cent variation considering as reference base respectively on 1998 and on 2008. It is in costant
increase for the limited banks and the cooperative banks until 2007, while from 2008 there is a
substantial differentiation. The per cent increase for the limited companies rises still a short time
until 2010, year in which the trend is reversed; the decrease becomes showy and wider and wider.
The trend of the per cent variations of the branches of the cooperative banks continues to rise until
2011, moment from which it become stable.
July 1-2, 2014
Cambridge, UK
7
2014 Cambridge Conference Business & Economics
Quarter
Mar-98
Jun-98
Sep-98
Dec-98
Mar-99
Jun-99
Sep-99
Dec-99
Mar-00
Jun-00
Sep-00
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
July 1-2, 2014
Cambridge, UK
ISBN : 9780974211428
Trend
limited
banks
Trend
cooperative
banks
0,008
0,024
0,048
0,066
0,068
0,087
0,094
0,102
0,113
0,122
0,114
0,127
0,138
0,144
0,154
0,159
0,245
0,249
0,256
0,273
0,270
0,303
0,294
0,295
0,297
0,303
0,301
0,309
0,311
0,310
0,319
0,325
0,329
0,336
0,351
0,355
0,364
0,426
0,441
0,013
0,026
0,037
0,043
0,055
0,060
0,071
0,080
0,085
0,091
0,104
0,110
0,120
0,128
0,139
0,147
0,165
0,179
0,194
0,207
0,219
0,230
0,244
0,255
0,268
0,283
0,297
0,305
0,319
0,330
0,348
0,358
0,374
0,386
0,403
0,415
0,432
0,443
0,468
8
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
Table 5: Per cent increase of the variations of the branches for limited and cooperative banks
between 1998 and 2007
Quarter
mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Trend
limited
banks
Trend
cooperative
banks
0,003
0,007
0,015
0,015
0,005
0,003
0,000
-0,005
-0,016
-0,020
-0,033
-0,038
-0,043
-0,043
-0,109
-0,115
-0,119
-0,130
-0,143
-0,151
-0,178
0,014
0,022
0,039
0,045
0,055
0,062
0,073
0,078
0,089
0,097
0,106
0,109
0,114
0,115
0,119
0,121
0,123
0,122
0,124
0,121
0,124
Table 6: Per cent increase of the variations of the branches for limited and cooperative banks
between 2008 and 2013
6. Conclusions
The economic crisis that by now has been hiting Italy for many years, has had a big
reverberation also on the number of the existing banking branches: the aggregated datum shows a
wide decrease at national level. Nevertheless, if we pass beyond the aggregated datum and we
analyze the historical series disaggregated per legal form, we notice some variation between the
series.
July 1-2, 2014
Cambridge, UK
9
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
The statistical analysis verifies the observations and allows to confirm a substantial resistance
of the section of the banking branches of the cooperative banks and a contemporary decline of the
banking branches of the limited banks during the more intense period of the economic crisis. The
reason of these trends is to find probably in the cooperative logic that looks for a less research of the
profits.
We must explain why in the complete series 1998-2013 result more stable the coefficient of
variability of the limited banks because it seems to contradict our exposition. If we consider just a
moment, there is no contradiction, because, while the branches of cooperative banks have increased
costantly during the reference period, the branches of the limited banks have had before an increase
and then a decrease. It is obvious that, measuring the deviation from the average we obtain in this
second case, a less variability.
References
Athanassopoulos A., 1997, Service quality and operating efficiency synergies for
management control in the provision of financial services: Evidence from Greek bank branches,
European Journal of Operational Research 98 (1997), 300-313.
Banca d’Italia (2011) , Supplementi al Bollettino Statistico. Moneta e Banche, XXI (16).
Banca d’Italia (2012) , Supplementi al Bollettino Statistico. Moneta e Banche, XXII (17).
Banca d’Italia (2013), Supplementi al Bollettino Statistico, Moneta e Banche, XXIII (7).
Banca d’Italia (2014) , Supplementi al Bollettino Statistico. Moneta e Banche, XXIV (1).
Carlson M., Mitchener K. (2006), Branch Banking, Bank Competition, and Financial
Stability, Journal of Money, Credit and Banking, Vol. 38, No. 5 (August 2006).
Fang et al. (2014), Institutional development and bank stability: Evidence from transition
countries, Journal of Banking and Finance, 39, 2014, pp. 160-176.
French S., Leyshon A., Signoretta P. (2008), “All gone now”: the Material, Discursive and
Political Erasure of Bank and Building Society Branches in Britain, Antipode, 2008.
Karim et al. (2011), The subprime crisis and stock index futures market integration, The
Journal of Risk Finance, vol. 12, n. 5, pp. 400-408.
Ke Wang et al., 2014, Omega 44 (2014), 5-20.
July 1-2, 2014
Cambridge, UK
10
2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
Lee C., Hsieh M. (2014), Bank reforms, foreign ownership, and financial stability, Journal of
International Money and Finance, 40, pp. 204-224.
Resti A. (1997), Evaluating the cost efficiency of the Italian banking system: What can be
learned from the joint application of parametric and non-parametric techniques, Journal of Banking
and Finance, vol. 21 (2), pp. 221-250.
Sherman H.D., Gold F., 1985, Bank branch operating efficiency: evaluation with data
envelopment analysis, Journal of Banking and Finance, 9, 297-315.
Silva Portela M., Thanassoulis E., 2007, Comparative efficiency analysis of Portoguese bank
brunches, European Journal of Operational Research 177 (2007), 1275-1288.
Yang C., Hsian Ming L., 2012, Managerial Efficiency in Taiwan bank branches: A network
DEA, Economic Modelling, 29, 450-461.
Zenios C. et al. (1999), Benchmarks of the Efficiency of Bank Branches, Interfaces, 3 MayJune 1999, pp. 37-51.
July 1-2, 2014
Cambridge, UK
11