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The Bank of Italy from its inception to the 1936 Banking Law

The 1893 Banking Law and the Giolitti era

The first period in the history of the new bank runs from its inception in 1893 to the explicit declaration of its public nature, in 1936.

The 1893 Banking Law (Law 449 of 10 August 1893), instituting the Bank of Italy was fundamental. It redefined banknote circulation to base it on gold (more precisely: 40 per cent of notes issued had to be covered by gold reserves) and placed an absolute limit on issues. It created the conditions for restoring the health of the issuing banks. It began the transition towards a single bank of issue. And it established rules whereby the public interest took precedence over the profits of private shareholders (for example: government approval for the appointment of the head of the Bank of Italy - the Director General - and for changes to the discount rate).

During these years Giuseppe Marchiori, Director General from 1894 to 1900, steadily emarginated private shareholder interests and affirmed the Bank's pursuit of public purposes. Yet the Bank remained a private company, issuing banknotes under concession.

A very significant role in the development of the Bank was played by Bonaldo Stringher, who was appointed Director General in 1900. In the Giolitti era the Bank was able to reconcile (given a favourable economic climate) financial and exchange rate stability with support to economic activity. In 1902 the old parity between the lira and gold was reached; from then on Italy behaved as if it adhered to the gold standard, but, having learned from previous crises, did not officially declare the convertibility of the currency. In 1906 the Bank of Italy conducted the fair conversion of pre-existing irredeemable government bonds. Through this success the Bank confirmed its role as banker and hence as advisor to the government, in addition to the role of treasurer.

In parallel with the economic revival and industrialization, the credit system had changed: during the crisis of 1893-94 - which saw the failure of the largest two industrial credit banks - a new system evolved in which the bulk of credit business began to pass from the three surviving banks of issue (Banca d'Italia, Banco di Napoli and Banco di Sicilia) to the large mixed banks recently founded (Banco di Roma, Banca Commerciale Italiana and Credito Italiano).

In 1907 the Bank of Italy intervened effectively to prevent a serious financial crisis, reinforcing its role as lender of last resort and consolidating its reputation. To facilitate this work the system of monetary circulation was made more flexible with a law passed at the end of the year. The need for supervision of the banking system began to be felt.

On the eve of the World War I the Bank of Italy held a central position within the national financial system, thanks to the importance of its credit for the economy, its action to guarantee financial stability, its consolidation of the gold reserve and its assitance to the Treasury in public debt management.