Bank capital in Italy (the impact of inflation and current prospects)

War and post-war inflationary movements have profoundly modified the ratios between “net worth” and “alien funds” of the Italian banking system, calling attention to the problem of bank capital, to which the present article is devoted. The author deals with the possibilities and the limits of a gradual strengthening of Italian bank capital, taking into account on the one hand the several items of the bank balance sheets which should be revalued, and on the other the changed economic and institutional conditions that would make a return to the pre-war coefficients impracticable and unnecessary. The author maintains that an effort for strengthening bank capital should come within the present aims of Italian banking policy. He concludes that “wishing to indicate a realistic and at the same time technically adequate proportion, one might consider an intermediary ratio between the ‘legal’ pre-war one (5% of deposits and current accounts) and the present average (2%); and consider the latter as a ‘limit’ ratio”. JEL: E31, G21