PUBLIC CREDIT GUARANTEES AND BANKING SYSTEM: THE ITALIAN CASE DURING COVID-19 EMERGENCY

1. Introduction

The COVID-19 pandemic affected countries in an unexpected and deep way — albeit with different timing and intensity — placing Governments in front of unprecedented challenges. These challenges impacted on the entire economic-social system and required urgent interventions in various fields: from health-welfare issues to people’s mobility, work organization and educational activities, to fiscal and economic-financial support to families, businesses and professional activities (OECD 2022).

In this emergency framework, economic-financial initiatives played in many countries an important role in supporting liquidity and solvency of economic agents. The marked increase in demand for loans was frequently related to state guarantee-backed exposures, which played a crucial part in providing the inflow of credit to firms (AECM 2022, Anderson et al. 2021, Bank of Italy 2021a).

As regards Italy, in particular, the banking system played a key role during the COVID-19 emergency period in supporting households and firms. In fact, thanks to the important operational-financial support provided by banks, it was possible to implement the extraordinary public interventions undertaken by the Italian Government. These measures focused, on the one hand, on the strengthening of public guarantee programs (i.e. state coverage — with very high guarantee ratios, compared to the previous situation — granted to new loans or to operations already in place and extended or renegotiated) and, on the other hand, on the introduction of a debt moratorium for Small and Medium-sized Enterprises (SMEs), aimed at extending loans close to maturity, at suspending the payment of installments and at maintaining existing revocable credit lines.

This task fell on the banks’ organizational structure and employees. A quite significant burden, due to the complexity of procedures to be implemented, the articulation of documentation to be requested, received and processed to finalize the files, as well as the small size of each transaction (in absolute terms of the individual transaction amount, but relevant in relative terms for the size of the economic operators benefiting from it). Although Italian banks, similarly to other countries, had prior experience with credit-guarantee programs (both in normal economic conditions and in times of crisis), the whole banking system was particularly challenged by operational and legal difficulties, due to the exceptionally large number of applications, to the temporary closure of bank branches and shift to remote work, to the gradual implementation of a centralized online platform and standardized procedures, to legal requirements not relaxed under the credit support programs (credit assessments and anti-money laundering), as well as to the newness of the emergency regulation and its amendments (Anderson et al. 2021).

The above setting represents the background for this research, whose aim is to highlight three different issues related to the interaction dynamics between banks, Government and firms. First, how useful and relevant the intervention of the banking system was (with specific attention also to cooperative banks) to achieve the goals pursued by the Government with the main financial measures adopted to support enterprises. Second, to appreciate the exceptional nature of the commitment required of the banks, given the workload that was placed upon them, especially when compared to the periods immediately preceding and following the most acute emergency phase. Third, to identify which types of firms, industries and geographical areas benefited most from the banks’ support.

This work, first, provides a brief overview of the public measures adopted to cope with the emergency following the outbreak of the COVID-19 pandemic, at global, European and Italian levels. Subsequently, it performs a detailed analysis of operations of Italian banks following the application of the support measures, to appreciate their effectiveness in this emergency context. Given the different degrees of proximity characterizing Italian banks, the study will compare the effects of such actions on the financial system by considering all Italian banks, first and, later, focusing on cooperative banks, on the assumption that, probably, the latter’s more marked proximity to customers may have led to different behaviors and operating results (Beccalli 2023).

This paper is structured as follows. Section 2 discusses the role of financial intermediation (and, specifically, of banks) in implementing policies aimed at supporting specific parts or sectors of the real economy; in particular, support measures adopted by Governments in the main European countries and in Italy will be considered. Section 3 provides a measurement of the phenomenon in Italy, considering the major types of public financial intervention put in place, their number in terms of operations carried out, and of amounts disbursed and guaranteed (distinguishing, where possible, between types of beneficiaries). Section 4 concludes and offers some hints for further studies.

2. Literature Review

The role of banks in the development of economic systems, in general, and in the implementation of public interventions for growth and support of the economy or of specific industries or types of firms, in particular, is a major topic, that has been widely analyzed in the literature, from several perspectives.

In general terms, studies on the development of the main industrialized countries highlighted how, historically, banks have played a decisive role in industrialization processes — especially with their lending and payment services activities — and how their contribution has been crucially affected by political guidelines and governmental actions in the area of credit, also emphasizing how different geographical and temporal contexts may require different solutions, systems and functions (Cameron 1963, 1972).

Regarding the specific topic of public support to firms, literature studied different geographical areas and different periods, and was mainly concerned with issues like the needs of the specific segment of start-ups, the needs of SMEs as a whole, and the role of public credit facilities and of guarantee programs. In recent years, these issues have been investigated more intensively, in the light of the support measures taken in the aftermath of the great financial crisis of 2007–2008 (Caselli et al. 2021, Gai et al. 2016) and of the severe crisis brought about by the COVID-19 pandemic of 2020–2021.

As far as the start-up segment is concerned, the debate has often centered on the identification of phenomena of credit rationing for start-ups,^a as well as on the links between this rationing and difficulties in accessing equity markets, with the consequent need (when all this becomes relevant) for public intervention to support their development (Parker 2002), together with other different incentive and facilitation measures (Albanese et al. 2019).

Regarding SMEs, numerous studies have highlighted their difficulties in accessing credit, leading to a funding gap, compared to larger firms.^b Indeed, their smaller size, their organizational and structural characteristics, and the existence of information asymmetries in the financial markets make SMEs’ access to the different financing channels more limited in terms of both quantity and duration (and, basically, more expensive). This is particularly true in the presence of regulatory measures limiting the risk exposure of the banking system and/or of restrictive monetary policies (Udell 2015). Hence the need for public financial interventions — including soft loans, guarantees and securitization — aimed at helping SMEs overcome this gap.^c

With reference to public guarantee programs, previous studies considered several problems and here are some examples (Gozzi & Schmukler 2015). The first problem relates to the financial sustainability of these programs, due to frequent deficits between fees received, on the one hand, and administrative and loan loss costs, on the other, resulting in the need for additional Government support to the institutions issuing guarantees. A second problem concerns the ability of public guarantee programs to generate financial additionality, i.e. to produce additional credit for the firms targeted by the programs and/or to allow better financing conditions in terms of interest rates and duration, as well as their ability to generate economic additionality, i.e. to contribute to the improvement of the economic performance of supported firms.^d Last, but not least, the different characteristics of the guarantee schemes are considered, in terms of entities entrusted with managing them, operating rules, guarantee ratio and pricing.

Literature also investigated the functions performed by public guarantee programs for SMEs, identifying the presence of net economic benefits concerning: the suitability to stimulate the growth of real economy, especially in local markets, by fostering investment, employment and per capita income dynamics^e; the ability to reduce pro-cyclicality in financing SMEs, firms that tend to be more exposed to unsecured credit restrictions in case of recessive phases^f; the possibility of mitigating the effects of macroeconomic shocks, observing significant effectiveness of credit guarantees in favoring the expansion of SME financing (both secured and unsecured) in periods of generalized economic difficulty of credit applicants.^g

As mentioned, recent studies examined the actions taken in the aftermath of the Great Financial Crisis of 2007–2008 (GFC) and the subsequent downturns of various economies, as well as, most recently, the sudden and severe crisis brought about by the 2020–2021 COVID-19 pandemic, which is the subject of this paper. As a preliminary remark, we would like to highlight just two elements for analysis and discussion. First, the experience gained in the years of the GFC and in those immediately following, highlighted the importance of appropriately defining size, articulation and specific modalities of public intervention, in order to adequately respond to situations of exceptional difficulties of SMEs, arising from likewise exceptional difficulties of the economic-financial systems.^h Second, the timeliness of support interventions and the ability to transmit them quickly through banking relationship lending channels proved to be quite important factors in supporting SMEs during the pandemic crisis.ⁱ

In what follows, we propose two specific focuses on studies which analyzed support measures and Government interventions first at a global level and then at a European and Italian level.

2.1. The main actions in the global framework

Globally, it was clear from the outset that the pandemic situation and the consequent restrictive measures taken were leading to a severe slowdown or even gridlock in the economies of many countries, causing firms in many sectors to suffer falls in sales, liquidity shortages and/or depletion of cash reserves and a marked reversal of current and prospective profitability.

Due to a large number of firms simultaneously involved in the liquidity crisis and the likelihood of a chain extension, the risk of its transformation into a global solvency crisis was also growing: this would have jeopardized the medium-to-long-term survival of many firms and led to closures or bankruptcies, loss of human and organizational capital, disruption of international supply chains, reduction of investments, risks of propagation of the crisis to the financial sector and of long-term negative effects on employment, productivity, growth and welfare.^j Aware of these risks, the Governments of many countries rapidly adopted important intervention policies to support firms’ liquidity, based on a wide range of measures: in addition to the monetary and regulatory policy interventions by central banks,^k these further measures included direct and indirect support for wage payments, postponements of tax and social security payments and financial support (OECD 2020).

Still at a global level, SMEs were particularly hard hit by the outbreak of the pandemic crisis, especially — but not only — those operating in the sectors most affected by the restrictive measures: OECD monitoring of research carried out in more than 30 countries shows that 70–80% of SMEs suffered a sharp drop in revenues^l and this drop was between 30% and 50%.^m It also appears that many SMEs, one year after the start of the emergency, were still in a weak situation, especially in the case of young firms, start-ups, self-employed and women-led firms. The literature highlighted several reasons for the greater vulnerability of SMEs to the crisis triggered by the pandemic: more than proportional presence in the most suffering industries; greater basic financial fragility and lower liquidityⁿ; weakness in supply chains; backwardness in digital technologies; operational constraints and limits to the ability to innovate processes, products and services (for those SMEs already operating since some time) (OECD 2021a).

With reference to financial measures to support SMEs’ liquidity, two macro types of actions have been taken at the global level: on the one hand, the postponement or reduction of payments, such as moratoria in the repayment of debts and rebates or reductions in fees and interest on financial debts; on the other hand, financial support through debt instruments and, to a lesser extent, equity, such as extended and simplified loan guarantees, direct financing through public institutions, support to non-banking financing channels, as well as equity or quasi-equity transactions, including convertible financing.

OECD data (OECD 2021a) for 55 countries in the period February 2020–February 2021 show that the number of countries that adopted financial support measures came right after those related to wage subsidies (the latter adopted in 51 countries, i.e. 92.7% of the total) and payment deferrals (adopted in 50 countries, i.e. 90.9%; the deferrals category, however, includes debt moratoria, implemented by 34 countries, or 61.8%). In fact, the third and fourth most widespread types of policies were direct financing (48 countries, or 87.3%) and loan guarantees (46 countries, or 83.6%). Less widespread, but still significant, was the use of equity instruments (20 countries, or 36.4%). Loan guarantees were more widely used in high- and upper-middle-income countries, while the use of moratoria was quite differentiated across countries. The following features were also observed: a wide variability in the intensity of measures, with higher income countries allocating more resources, in terms of Gross Domestic Product (GDP) impact, to support through loans, equity and guarantees; differentiations in the preference for financial measures involving direct public disbursements, or for public guarantee schemes involving no such direct disbursements (OECD 2021a).

The size of the interventions, globally, was also very considerable. Surveys by the International Monetary Fund show that, up to the end of September 2021, in the 22 leading advanced economies, the incidence on GDP of support measures with a direct impact on the state budget (such as liquidity disbursements and deferrals of tax and social security payments) and that of credit support measures averaged 11% and 10%, respectively; in particular, in Germany and Italy, the incidence of financial measures reached uppermost unprecedented values close to 30% of GDP (Hong & Lucas 2023).

Measures to support entrepreneurial activities were fast, but they also involved the need for frequent adjustments that affected their relevance and effectiveness. In general, empirical evidence shows that unemployment, output declines and bankruptcies were limited, although it was observed that intervention schemes supported both non-performing firms and firms not needing them at all and taking advantage of these facilities (OECD 2022).

2.2. The European framework

At the European level, the picture is quite complex and characterized by the simultaneous presence of interventions by the European Union and by single national Governments (Anderson et al. 2021).

As far as EU initiatives are concerned, the European Commission and the European Investment Bank Group introduced a package of measures, with differences depending on the country concerned and the stage of the crisis (European Commission 2023). First, alongside targeted interventions for sectors that were in particular difficulty (such as cultural, creative and cinematographic activities) or in need of strengthening (such as investments in agriculture and equipment, in rural areas and in the less developed regions), there were interventions generally aimed at SMEs, the self-employed and mid-capitalization firms, as well as measures in favor of new investments, with a focus on innovation, digitalization and projects related to the environment and climate change. Second, the methods were different, ranging from loans on favorable terms, to securitization aimed to free up resources, to leasing. In addition, the choice of operating in collaboration with banking or financial operators in individual countries, through the conclusion of special agreements, was widespread. Finally, the presence of guarantees issued by the European Fund for Strategic Investments or the Pan-European Guarantee Fund was frequent (European Commission 2023).

Regarding the actions implemented by individual EU member states, previous literature identified these distinctive features (European Commission 2021, Anderson et al. 2021):

• generalized deployment of a broad and flexible range of instruments to meet diversified needs, since it was not considered appropriate to concentrate resources into a single pivotal measure (“there was no silver bullet”);

• the need to change objectives over time, shifting from the urgency of providing liquidity to meet short-term payment obligations of firms, to the need to support the solvency of those with prospects of continuity;

• the prevailing use of existing public structures, typically national or regional promotion institutions, by adapting and enhancing their functions, and the contextual widespread use of traditional financial institutions (banks and equity and quasi-equity funds) as the main channel for providing solvency support;

• mitigation of the risk of financing companies with no prospect of continuity (so-called zombie lending), achieved through the involvement of the private sector, by providing mechanisms of co-participation into: credit risk, in particular by issuing public guarantees that, in many cases, did not cover 100% of the loan granted by the bank or financial institution; equity risk, by making joint investments in the equity of firms by Governments and venture capital operators; the overall financial risk of the firm, by combining public financing with other sources of private debt or equity financing;

• in several countries, taking actions to support venture capital funds, in order to foster continuity in the circuits for channeling equity to companies, by making direct public investments in venture capital equity of or by facilitating the placement of their shares on secondary markets;

• use by several countries, in addition to the more traditional instruments, of a wide range of financial instruments, such as subordinated loans, mezzanine financing, equity loans, bridge financing, public grants (in some cases to be partly repaid if specific targets were met), or even hybrid schemes (e.g. blending of loans and grants);

• overall, large and less selective aid for smaller firms, mainly for financing working capital or other short-term needs and, much less frequently, for investments;

• support directed almost exclusively to national firms and/or through national financial intermediaries, entailing the risk of a retreat within the boundaries of each individual country.

The need for compliance with EU state aid rules led most member states to design their solvency support instruments within the State Aid Temporary Framework, although, in some cases, the need for speedy approval led to the use of other state aid regulations. These interventions were the subject of extensive literature, which considered various aspects of the problem (liquidity, systemic risk, etc.) and covered various geographical areas (global, European, and individual countries) (Berger et al. 2021). Compliance with these rules resulted, on the one hand, in additional safeguards against the financing of distressed or over-indebted firms and, on the other hand, in some rigidities, in particular the six-year duration limit for loans, since some member states would have preferred a longer repayment period to further ease firms’ payment commitments and favor business continuity in the medium to long term.

With reference to the evaluation of the effectiveness of public financial support interventions during the COVID-19 crisis activated in Europe, we would like to point out Dursun-de Neef and Schandlbauer (2021), who present a study concerning credit operations during the first period of the pandemic in a large sample of European commercial banks (also located in non-EU countries, such as Great Britain, Norway and Switzerland). The work shows how in this acute crisis phase, characterized by great uncertainty and by the release of emergency measures, the intensity of public interventions implemented in individual European countries has been a relevant factor in fostering an adequate response from the credit system and, at the same time, in reducing the risk of zombie lending policies. In fact, the urgency to ensure the liquidity of economic operators posed the need to intervene to avoid excessively restrictive reactions by banks (credit crunch), but also the opposite need to avoid excessive credit support for companies that had no prospect of continuity.

Falagiarda et al. (2020) highlight the importance of timeliness in supporting the economy since the very first burst of the crisis. They show that lending dynamics were proportionally stronger in countries with a higher take-up of guaranteed loans (Fig. 1). Focusing on gross new lending, in Spain and France, where fiscal support for firms was delivered mainly via guarantee schemes, about 65% and 70% respectively of new lending volumes in the period April–July consisted of guaranteed loans. In Germany and Italy, guaranteed loans represented about 20% of new lending flows over this period, whereas they accounted for a negligible share of new lending in other euro area countries.

2.3. The Italian framework

In Italy, the financial measures introduced to support economic activities in the face of the crisis triggered by the health emergency, similarly to other countries, were adopted with a very tight timeframe and were also subject to modifications over time, as well as to extensions of their deadlines. In particular, the Italian Government intervened several times with “omnibus” decree-laws (containing many different measures related to the emergencies gradually posed by COVID-19), which typically, when converted into law by Parliament, were subject to amendments and adjustments. As noted by Urbani (2022), the situation of objective urgency in which these regulations were issued led to not always straightforward formulations and gave rise to the need to clarify the functional modalities of the instruments introduced and to set up adequate operational and IT procedures. In addition, the need emerged to assess the possible side effects (particularly on the regulatory and prudential profiles of the banking system) and, in perspective, on the exit strategy from these measures (Urbani 2022, De Mitri et al. 2021).

In particular, the most relevant financial emergency measures introduced in Italy in the March–October 2020 period, intervened addressing both very short-term liquidity needs (through moratoria) and short- and short-to-medium-term liquidity–solvency needs (through loans backed by public guarantees), thus avoiding the occurrence of massive chain defaults of economic activities (Bank of Italy 2021b). The Italian Government’s choice was to make greater use of the leverage of bank loans and similar, rather than the one, although used, of non-repayable grants: a choice that made it possible to reduce the short-term pressure on the public budget, but which entails the need to carefully monitor the medium-term evolution of the beneficiaries, due to possible future negative consequences.^o In addition, the credit system was entrusted with the role of managing moratoria, credit analyses and lending activities in favor of a very large number of economic operators, including small and very small ones: this, on the one hand, entailed operational and IT problems (and the related costs) for the management of moratoria and of access to public guarantees; on the other hand, thanks to these guarantees, led to the containment or reduction of the credit risk borne by financing institutions and of the related capital absorption.

Two measures were strongly incisive and of particular interest to our purposes. We are referring, first, to Decree-Law 18/2020, issued in mid-March 2020, which introduced, as a matter of urgency, numerous and heterogeneous measures, aimed at countering the immediate effects of the outbreak of the epidemic and the consequent lock-down. Second, we refer to Decree-Law 23/2020 issued in early April 2020, which introduced other numerous and heterogeneous measures, again as a matter of urgency, in the face of the worsening health and economic situation in the country.

In this legal framework, two types of interventions (Urbani 2022, De Mitri et al. 2021) are noteworthy.

Article 56 of the Decree-Law 18/2020 provided measures directed at smaller economic operators, who had been particularly hit in terms of revenues and operating cash flows, and it aimed at intervening on liquidity in the very short term. This was a moratorium lato sensu, as it also interested short-term credit lines of micro-enterprises and SMEs affected by the pandemic, provided that their credit exposures were not already classified as impaired. The intervention was implemented through measures aimed at the temporary non-revocability by banks of existing revocable credit facilities and outstanding credit lines for advances on trade receivables; the extension, upon request, of the maturity date for bullet loans falling due; the total or limited suspension, upon request, of the payment of loan-installments or of lease-installments falling due in the short term; and the rescheduling of the repayment plan for mortgages, installment-loans and leases.^p In relation to these operations, lenders (i.e. the banking system) were given the opportunity to apply for guarantees from the Central Guarantee Fund for SMEs.

Shortly after, Articles 1 and 13 of Decree-Law 23/2020 created the conditions for massive access by firms to credit assisted by public guarantees issued through SACE^q and the above-mentioned SMEs Central Guarantee Fund, in both cases with very high guarantee ratios.

3. Effectiveness: Financial Interventions by Italian Banks in the COVID-19 Period

Within this complex framework, the Italian banking system played a key role, both in terms of granting various types of moratoria and of refinancing or granting new loans.

As far as moratoria are concerned, a study by the Bank of Italy (De Mitri et al. 2021) highlights the following: moratoria, as a whole (considering both those under law protection and those on a negotiated basis), was a very important instrument to support companies’ liquidity, both in terms of amount of credit lines and number of subjects involved^r; access to moratoria was concentrated in the spring of 2020, at the outbreak of the pandemic crisis and consequent issuance of the aforementioned Decree-Law 18/2020; moratoria mainly concerned the suspension of mortgage installments; more than two-thirds of the loans to which the suspension was applied related to micro-businesses; about 40% of the moratoria went to operators in the trade or in the hotels and restaurants industries; firms that requested moratoria are more likely to have experienced payment difficulties and to have a less balanced financial structure, but even less exposed firms opted to postpone repayment of financial debts, to protect themselves in a period of high uncertainty.^s

Regarding the refinancing and new financing backed by public guarantees, during the COVID-19 pandemic, the entire Italian banking system acted in support of households and firms, providing operational and financial support in carrying out the various public interventions launched by the Government. These measures, as seen, consisted of initiatives centered, on the one hand, on the strengthening of public guarantee programs (i.e. state coverage — with very high guarantee ratios compared to the previous situation — granted to newly issued loans, or to already existing and extended or renegotiated operations) and, on the other, on the introduction of a debt moratorium for SMEs with the aim of extending maturing loans, suspending the payment of installments and keeping existing revocable credit lines operational.

These measures followed one another — in particular, from March 2020 to June 2022 — generating quite effective responses from the banking system in Italy, including the cooperative banking system. In fact, “in the absence of support measures, the pandemic crisis would have resulted in a significant credit restriction for smaller firms — structurally dependent on bank financing — and, probably, in more difficult access to credit even for medium-sized enterprises and those with no more than 499 employees (mid-caps). The heterogeneity of the effects of the pandemic on the production system was reflected in the use of the measures, which was higher for the industries severely affected by the consequences of the health emergency: 40% of the firms that benefited from the guarantees and 36% of those that used the moratoria were active in the trade, accommodation and catering industries” (Bank of Italy 2021b).

That said, and considering the extent to which public interventions through the financial sector helped to support the Italian real economy during the emergency (Brighi et al. 2022), hereafter we offer an analysis of the banks’ commitment in terms of the number and total amount of publicly guaranteed operations implemented. This commitment should also be put in relation to the intensity of the work carried out: think of the complexity of the procedures to be implemented, the multiplicity of the documentation to be requested, received and processed to finalize the files, as well as the often small amounts — in absolute terms of the individual operation, but relevant in relative terms compared to the size of the economic operators benefiting from it — of each operation carried out.

In this paper, the methodology applied is based on a series of descriptive statistics on quantitative data concerning two specific phenomena. First, the set of interventions assisted by the Central Guarantee Fund for SMEs operated by the entire Italian banking system for the period from January 2018 to July 2023 will be analyzed, highlighting data on the most acute emergency phase, i.e. in the period from March 2020 to June 2022. In a second moment, because of the specificity and proximity of cooperative banks to those subjects (households and SMEs) that had to face the pandemic period with greater difficulty, our analysis will emphasize the actions carried out by the cooperative banking system with the support of the Guarantee Fund, with a reference to microcredit operations as well.

The innovative contribution of the whole analysis depends on the use of a proprietary dataset based on data and information provided by Mediocredito Centrale (MCC) and by National Microcredit Institution (Ente Nazionale per il Microcredito — NMI) that is not publicly available. Data concern the amount and number of support measures offered by different categories of Italian banks to firms operating in different industrial sectors. This dataset made it possible to analyze and discuss the phenomenon of Government support and the role of different banking intermediaries from a completely new perspective.

3.1. Analysis of extensions and new lending by the Italian banking system

The work by the entire Italian banking system (including cooperative banks) in carrying out credit operations assisted by the public guarantee provided by the Central Guarantee Fund for SMEs is summarized in Table 1, which shows for the period January 2018–July 2023 and for the emergency period (March 2020–June 2022) the number of operations carried out, the countervalue of the amounts financed, as well as the amounts guaranteed. With reference to the entire period from January 2018 to July 2023, the total number of transactions implemented with customers to support the public interventions amounted to 3,258,690. The vast majority of these transactions (2,746,282 or 84.3% of the total) were concentrated in the period from March 2020 to June 2022. This gives an idea of the magnitude of the commitment required of the banking system during the emergency period and how much this affected the activities of each bank, given its organizational structure and the considerable fragmentation of operations, to apply the new urgent measures. The total value of the amounts involved in the emergency period March 2020–June 2022 is also highly significant: €253.2 billion, or 74.7% of the entire January 2018–July 2023 period.^t

Table 2 details the operations carried out, grouping them according to the type of intervention, the so-called “access procedure”, focusing specifically on three macro-categories. The first one is “Letter m 30k” that refers to the granting of small-amount new loans pursuant to Letter m) of the Decree-Law 23/2020 to SMEs and individuals engaged in business, arts or professions, up to a maximum amount of €30,000, disbursed automatically following formal verification of requirements, without a creditworthiness analysis and fully guaranteed. The second category is “Art. 56 subsidiary” that refers to operations under the Special Section of Article 56 of the Decree-Law 18/2020 for the granting of subsidiary guarantees (up to a maximum of 33%) by the Central Guarantee Fund in favor of firms and professionals benefiting from moratoria under law protection. The third category is “Other Operations”, including different support measures proposed during the period, essentially provisions of financing — new or partially replacing existing ones — supported by public guarantees.^u Note that operations carried out under Letter m) of the Decree-Law 23/2020 were 1,184,760 out of a total of 3,258,690 operations for the entire period and of 2,746,282 operations in the emergency period. Therefore, over one-third of the operations carried out throughout the entire period were of very small amounts and, as it will be seen more in detail, they essentially went to support very small firms, professionals and similar subjects. Art. 56 subsidiary guarantees interventions under the Special Section of Decree-Law 18/2020 amounted to 694,901 during the period (i.e. just over one-fifth of the total). In both cases, considering the subjects who could access them, transactions were of very limited amounts, for an average value of each intervention of just under 20,000 euro, for those under Letter m), and about 39,000 euro, for those under Article 56.

The third category (Other Operations), mainly constituted by the so-called “Rating Models”^v category, accounts for 42.3% in number but represents a largely predominant overall value of disbursed and guaranteed loans (equal to 85.2% and 87.9%, respectively). These operations have an average financed value of around €210,000 and an average guarantee ratio of around 80% of the amount of the loan.

Tables 3–5 show — for the entire period from January 2018 to July 2023 and for the period from March 2020 to June 2022 — the distribution of interventions by Italian banks in relation to the size class of customers (Table 3), the industry (Table 4) and the geographical macro-area (Table 5).

In the period January 2018–July 2023, 67% of beneficiaries were “Micro” subjects; if “Small” subjects are also considered, this percentage rises to almost 90% (Table 3). This confirms the extent to which public support policies have prioritized the most fragile economic players. The sectors that benefited the most in terms of operations and related amounts financed and guaranteed were Retail trade and Manufacturing, which accounted for almost three-quarters of the operations carried out and about 80% of the amounts disbursed and financed (Table 4). With reference to the breakdown of interventions both by size class of customers and by industry, no different distribution can be observed between the entire period and the specific emergency period March 2020 to June 2022. Finally, looking at the geographical macro-areas, interventions were more concentrated in the North of the country (overall half of the operations, Table 5); interventions in the other areas of the country were nearly equally distributed, although with a slight prevalence of operations in the South and the Islands.

Overall, it can be observed that many burdens were placed on the Italian banking system, but this, however, allowed firms, professionals and similar entities to benefit from substantial and generalized support during the most acute phase of the emergency period.

3.2. Insights into the role of the cooperative banking system

In this section, a specific analysis of the behavior of the Italian cooperative banking sector^w in supporting firms, self-employed and similar entities is conducted, to highlight any specificities and peculiarities due to the, often mentioned, greater proximity to customers, usually represented by smaller economic operators. In this regard, it should be noted that the available data — unlike the previous section — are updated as of December 31, 2022: however, comparisons with the entire banking system are effective, as it has been seen (see Table 1) that, once the emergency phase was over, these actions are largely reducing, gradually bringing them to the levels of the previous years 2018 and 2019.

Table 6 shows the incidence of the number of transactions and the amount financed and guaranteed carried out by cooperative banks, compared to the entire Italian banking system. A gradual and higher incidence of operation by cooperative banks is observed from 2020 onwards, from around 9% to around 12%, both in terms of number of transactions and amounts disbursed and guaranteed. It emerges, overall, how the cooperative banking system put its organization at the disposal of facilitating public support for the Italian production system in a proportionally greater way. In fact, cooperative credit banks carried out their operations with the Central Guarantee Fund assistance for a greater share compared to the weight of total financing provided to enterprises. For the entire 2018–2022 period, the weight of financing to firms in the cooperative banking system within the overall banking system was around 10.5% (Banfi & Pampurini 2023); this weight was 10.7% in the case of transactions financed by the Central Guarantee Fund and 11.0% if we refer to the amount of the guarantee on the financing provided (Table 6).

The relevance of the commitment by cooperative banks emerges with greater prominence if we consider the impact of the operations on smaller beneficiaries, who accessed the small-amount interventions under Letter m) of Decree-Law 23/2020: in this case, the percentage over the total financed and guaranteed with the assistance of the Central Guarantee Fund grows, reaching 14.9%. If the size of the subjects financed and assisted by the Central Guarantee Fund is also analyzed and firms defined as Micro are considered, the share of the Fund’s interventions due to cooperative banks’ activities grows further to 15.4%. This highlights the strong commitment by cooperative banks during the emergency phase, during which they provided essential support, particularly for very small customers who therefore found “proximity” to be a decisive factor in their business.

Table 7 shows that the transactions set up by cooperative banks in the public interventions framework amounted to 370,862 and that — similarly to what has been seen above for the entire banking system — almost all of them (331,546 or 89.4% of the total) were concentrated in the period March 2020–June 2022, with heavy impacts in terms of their organization and commitment of their staff, especially considering the rather small size of these banks. It is also of great significance the total value of transactions carried out during the March 2020–June 2022 emergency period: 27,168 million euros, accounting for 81.3% of the entire 2018–2022 period.

Analyzing the operations by cooperative banks from the “access procedure” point of view (Table 8), it emerges that the operations carried out in the emergency period under Letter m) amounted to 171,523 out of a total of 331,546. Therefore, more than half of the operations were of very small amounts and, as it will be better seen soon, went essentially to support very small firms, professionals and similar subjects. Article 56 subsidiary guarantee interventions under Decree-Law 18/2020 amounted to 59,682 during the period (i.e. just under one-fifth of the total). In both cases, these were operations that, considering the subjects who could access them, were of very small amounts, for an average value of each intervention made by the cooperative banking system just over €20,000 for those under Letter m) and about €33.000 for those under Article 56.

Looking at all Other Operations, remembering that they were almost entirely composed of the “Rating Models” category, they weigh a little less than one-third, as the number of operations in the period, but represent a largely predominant share in total value disbursed and guaranteed: their average financed value is about €220.000, with an average guarantee of just over 80% of the amounts lent.

Similar to the previous section, Tables 9–11 show, for the entire period 2018–2022 and for the period March 2020–June 2022, the distribution of public support actions in relation to the size class of the beneficiary customers of cooperative banks (Table 9), to the sector of economic activity (Table 10) and to the macro-area (Table 11).

Consistent with the characteristics of cooperative banks’ customers, in the 2018–2022 period, 78% of the beneficiaries were “Micro” firms and, if “Small” firms are also considered, this percentage rises to 95%, with the Trade and Manufacturing sectors benefiting from the largest share both in terms of operations and of related amounts financed and guaranteed (Table 10). Finally, looking at the geographical macro-areas, the picture is substantially in line with the one for the entire banking system, since the operations carried out by cooperative banks were also more concentrated in the North of the country, where overall half of the operations were carried out (Table 11). The only difference is that, for the banking system as a whole, operations in the South and Islands areas are (albeit slightly) higher than in the Centre; conversely, operations carried out by the cooperative banking system are lower in the South and Islands than in the Centre. This can be explained by a less widespread presence of cooperative banks in the southern areas of Italy.

To complement the role of the banking system in supporting economic operators belonging to the smaller size segments, some data on operations within the activities of the National Microcredit Institution (Ente Nazionale per il Microcredito) are proposed below.

First, applications received during 2018–2022 from banks affiliated with the National Microcredit Institution are considered. As can be seen in Table 12, 9562 applications for a total amount of €117.8 million were received by these banks during this period. Among them, 3372 (35.3%) were requests received by the affiliated cooperative banks, for a total amount of €47.5 million corresponding to 40.3% of the total amount requested. Regarding the actual amount of financing disbursed at the acceptance of applications submitted, the total number of applications fulfilled was 4758, 1971 of which were from cooperative banks: the latter thus account for 41.4% of the total number of fulfilled transactions. Turning to the amounts disbursed, they accounted for a total of €123.1 million, of which cooperative banks disbursed €49.5 million or 40.2% of the credit lent in support of microcredit.

Second, we report some data on the guarantees granted by the SMEs Guarantee Fund for microcredit activity outstanding at the end of 2022. There are 20,349 accepted transactions, with a financed amount of €484.1 million; of these, 3962 are accepted transactions by cooperative banks, with a financed amount of €96.0 million. In terms of weights, transactions accepted by cooperative banks account for 19.5% of total transactions and the respective countervalue turns out to be 19.8% of total guarantees granted by the Fund (Ente Nazionale per il Microcredito 2023).

4. Conclusions

This study investigated the impact on the Italian banking system of the public financial measures adopted following the outbreak of the COVID-19 pandemic with the aim of verifying whether the central role of the Italian banking system as an effective channel to support households and firms during a particularly sensitive period can be confirmed.

After analyzing the main works that in previous literature described the characteristics of the articulated public policy interventions to support economies, with the aim of understanding their essential features and economic rationale in different emergency contexts, we proceeded to “measure” the intensity and pervasiveness of the set of interventions adopted in Italy, taking into consideration data starting from 2018, with the aim of capturing the dynamics occurred during the period of the pandemic crisis. The study was performed both at the level of the entire banking system and considering the specific cooperative banking sector, because of its nature of greater proximity and closeness to potentially more fragile customers and therefore particularly significant for our purposes. The innovative contribution of this analysis is based on a unique and proprietary dataset with data and information provided by MCC and by the National Microcredit Institution about the support measures offered by Italian banks to firms.

According to our first research question, the analyses on the extensive and detailed information collected indicate that the Italian banking system showed great responsiveness and made an overall effort, probably unprecedented, to cope with tasks that strained its organizational structure, due to the number of operations and their complexity (especially during the emergency period, i.e. the most acute and most worrying phase). The focus operated with reference to cooperative banks highlighted even more how important they are in the Italian financial system, confirming themselves as strategic partners for the entrepreneurial initiatives of small economic entities.

With respect to the second and third research questions, the picture that emerges shows how effective the Italian banking system was in supporting the real economy under conditions of acute and persistent economic and social crisis. Alongside this result, however, which finds clear empirical evidence in the collected data, what further characterizes what happened in the emergency period is a set of circumstances whose effects are believed to be long-lasting (if well managed). One of the main practical implications of this result, which could be useful both to bank managers and the Regulatory Authorities, is that, in the difficulty of the moment and thanks to the quite considerable efforts made by Italian banks, the customer relationship has been strengthened through the renewed emphasis on the centrality of credit to support families and firms. There are also signs of improvement in the image and reputation of banks, precisely because of the ability they showed to provide tangible and immediate solutions to customers’ needs at a time of extreme difficulty. As discussed in the work, despite it is quite early to draw final conclusions, recent analyses from the Bank of Italy show that no relevant worsening in credit quality took place in the Italian banking system in the aftermath of the crisis and of the related emergency financing. It is, therefore, important to keep on working in this direction, in times of less emergency but still characterized by a difficult and uncertain economic scenario. The challenge for the Italian banking system is to combine, in a balanced and dynamic manner, the needs for rationalization of banks’ structures with customer relationship models based on understanding their needs and aimed at providing timely and proactive solutions. This would make it possible to maintain, and possibly increase, a reputational asset that is a key component of the stability of the Italian banking system. Further developments of this research should focus on long-term effects of these policies because, as known, the dynamics of non-performing loans requires several years to unfold.

ORCID

Alberto Banfi  https://orcid.org/0000-0003-3164-8937

Alberto Marchesi  https://orcid.org/0000-0002-1067-4020

Francesca Pampurini  https://orcid.org/0000-0001-6624-2772

Notes