Italy, and Europe as a whole, need a robust banking system of sufficient scale to compete with its American and Chinese counterparts. A “large” banking system is essential to channel Italian—and more broadly European—savings toward European companies, fostering innovation, growth in the productive system, and GDP expansion. Today, our system is certainly healthy, but not large enough. Savings, which for Italy represent a true “natural resource,” are still too often directed toward external economies through the purchase of financial products created elsewhere and benefiting others.

Last night in London, the Italian Embassy hosted a dialogue between Francine Lacqua, Editor-at-Large and Anchor of Bloomberg Television, and Stefano Caselli, Dean of SDA Bocconi School of Management, on “The evolution of the banking and finance sector: What’s next in Italy & Europe.” The event was organized by the Embassy, SDA Bocconi, and Brunswick.

The discussion, introduced by Ambassador Inigo Lambertini, opened with an assessment of the health of the European banking and financial system. “European banks, and Italian banks above all, are in excellent health,” Caselli said, “so much so that many of them are in a position to finance growth through acquisitions. Some would also be able to expand abroad, but cross-border takeover bids face resistance, including from governments. At the same time, there is an absolute need to grow, especially in investment banking and asset management. For the cross-border M&A process to truly take off, overcoming national resistance, perhaps two or three major deals would need to intersect, with different banks from the same country acting as both acquirer and target.”

“There is no doubt that Europe needs a Banking Union,” Caselli stated, “and cross-border M&A is one of the two main ingredients. The other is a regulation that allows banks to deploy in one country the capital they have raised elsewhere.”

Any other outcome would leave the financial system—still bank-centric in Europe—unable to finance the growth of those European champions capable of expanding, attracting talent, and creating supply chains in which local SMEs can also find a competitive place.

Prompted by Lacqua on Milan’s attractiveness to foreigners relocating there, Caselli emphasized the importance of incentives. “Just as tax incentives contribute to the decision of those who move to Milan from abroad, other incentives should encourage the use of savings to support growth. As for Milan, the city is indeed capable of attracting human capital, starting with the growing number of students who come from abroad to study at its universities. They do so because of the social environment and the culture, which are the aspects we should promote.”

SDA Bocconi School of Management