The development of branches, or the use of existing institutes as correspondents, are often seen as two alternative strategies when banks expand their operations beyond their original market, in particular when they cross the national borders. As a matter of fact, in theory the two approaches seem to carry different advantages and disadvantages (Cerutti et al. 2007; Fiechter et al. 2011). Historical evidence, however, points towards the opposite direction: phases of geographic expansion of business activities tend to be characterised by the parallel increase in the number of branches and in the set of banks used as correspondents. Still, it remains unclear whether this is the result of individual banks that, in their expansion, point predominantly on one of the two strategies (that remain therefore two alternatives) or whether this is the consequence of the parallel use of them to perform the various operations linked to the process of geographic development. If the second happened to be true, that branching and the use of correspondent would appear more as complementary strategies rather than alternative ones.
The paper makes reference to this conceptual framework to explore the so-far neglected topic of the business model adopted by the main Italian banks of issue (firstly by the Banca Nazionale, henceforth BN, then by the Banca d’Italia, henceforth BdI) up to the 1920s in the expansion of their commercial activity both internationally and into the regions progressively annexed to the Italian Kingdom. The paper therefore aims at contributing to Italian banking history and, at the same time, at using the Italian mirror to inquiry into a general key aspect of banking history and banks functioning. The double focus on both the international and the national dimension allows comparing and contrasting the choice of different strategies in diverse contexts, also considering that the national expansion took place in areas characterised by deep and persistent cultural, institutional, and economic differences vis-a-vis the market of origin.
The paper first reconstructs the development of the network of branches and of correspondent banks since the completion of the first phase of the “lightning speed” expansion of the 1860s analysed by Chiaruttini (2020). While the literature suggests that by the end of the 1860s the BN already had a widespread network of branches and correspondents, available evidence shows that the process of expansion continued in the following decades. The paper thus inquiries into the issue of whether this expansion happened “in waves” or in a continuous fashion and what was the dynamic between the development of branches and correspondent banks, considering that the latter increased much more substantially than the former. In this regard the paper explores various possible explanations behind this model of business growth. Firstly the case that, at least to some extent, it was an “organic” development due to external pressure from institutional players (i.e. the government) or specific exogenous circumstances leading to an “adaptive” form of business organisation. Beyond this possibility, the paper also considers the impact of actual corporate elements, for instance the general increase in business activities and/or the progressive expansion of branches activities outside their original geographic competence due to market integration.
Marianna Astore is Marie Sklodowska-Curie Fellow at Paris School of Economics (Paris). She received her Ph.D. in Economics and Social Sciences from Università Politecnica delle Marche (Ancona) and, before joining PSE, held a post-doctoral position at Bocconi University (Milan). Her main areas of research are Italian monetary history and business history in the interwar period. She is currently working on her Horizon 20202 project EUROCBH (Europe and Its Central Banks: Lessons from History). Among her papers, ‘We can't pay’: how Italy dealt with war debts after World War I (with Michele Fratianni, published in Financial History Review, 2019).
Paolo Di Martino is Associate Professor of Economic History at the Department of Economics and Statistics (ESOMAS) of the University of Turin (Italy). Before obtaining this position he was Reader in International Business History at the University of Birmingham (UK), Lecturer in International Economic History at the University of Manchester (UK) and the University of Bristol (UK). He has been visiting scholar at the London School of Economics and the University of Siena (Italy). His main research interests concern the impact of legal institutions on economic activity, and financial, monetary and banking history. His work has been published, among others, in the academic journals Economic History Review, Financial History Review, Business History, Enterprise and Society, and Business History Review.
