The official site of Italy's central bank

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

The post-war years and the consolidation of the Bank's public role

During World War I the Bank assisted the Treasury massively: with direct credit, with help in arranging domestic war loans and with the management of foreign financial operations. The link between the lira and gold was abandoned and the state monopoly of foreign exchange was instituted.

With war's end, problems of reconversion to civilian uses threw many sectors of industry into crisis, and with them the credit institutions that had financed them, to the point of causing major banking failures. The Bank of Italy, with government approval, intervened with massive salvage operations. The foreign exchange monopoly was ended, but in the new circumstances a return to monetary normalcy was impossible. The existing instruments for the control of the money supply in being proved to be totally ineffective. Within the country and at international level, the question under debate was how to return to a system based upon gold. Italy took a conservative stance, in favour of the classic gold standard.

In a slightly inflationary situation the Fascist government revalued the lira in 1926, thereby deflating the economy. As part of the monetary stabilization plan and the return to the gold standard (effected by the Bank of Italy notwithstanding Stringher's doubts regarding the strong risk of deflation), within three years important reforms were made. The Bank of Italy was given the monopoly on banknote issue and assigned to manage the clearing houses, central nodes of a modern payment system. A law was enacted to protect savings. Banks' new special obligations were established, including a minimum capital requirement. The Bank of Italy was given new powers of control, the kernal being supervision of the banking system. The reforms were completed in 1927-28 with the fixing of a new gold parity for the lira and the re-establishment of convertibility into gold or convertible foreign currency (gold exchange standard), the introduction of the obligation to maintain a gold or hard currency reserve of at least 40 per cent of the money in circulation, and the redefiniton of relations with the Treasury.

As a result of these provisions, the Bank, abandoning its old role of "bank of issue", became a true central bank and overseer of the credit system. The Bank's fundamental character as a public institution was reinforced. In 1928 a new Statute was approved, creating the post of Governor at the top of the Directorate (composed of Governor, Director General and Deputy Director General). Responsibility for setting the discount rate passed from the Executive Board to the Governor, still subject to government approval.