Belgium: Gianni Toniolo’s Legacy on the History of the Bank of Italy

The world of economic history mourns the loss of Gianni Toniolo, a prominent figure in Italy and Europe’s economic history, who unexpectedly passed away in November 2022. Just a few weeks before his untimely departure, Toniolo unveiled his latest work, the first volume of his groundbreaking history of the Bank of Italy, titled “Storia della Banca d’Italia. Tomo I. Formazione ed evoluzione di una banca centrale, 1893-1943” (History of the Bank of Italy. Part I. Formation and evolution of a central bank, 1893-1943) in Rome.

Toniolo’s extensive research into the history of the Bank of Italy offers profound insights into the complex realm of central banking, shedding light on the transformation of the Bank from an emission bank to a central bank. The evolution showcased a growing public character of the Bank, marked by a shift from commercial rivalry to collaboration with other banks.

In the early years, the Bank of Italy’s relationship with commercial banks was often characterized by rivalry and competition. Over time, the Bank gained a monopoly on banknote issuance but had to discontinue its commercial activities, while taking on supervisory responsibilities over commercial banks. Toniolo’s work traverses a turbulent period in Italy’s monetary history, marked by multiple banking crises. It highlights the overarching challenge of reconciling two conflicting objectives: maintaining the exchange rate of the lira and ensuring the stability of the banking system.

One distinctive aspect of Italy’s central banking experience is how the Bank of Italy’s development was intertwined with the process of nation-building. Unlike other countries where central banks followed the establishment of the nation-state, Italy’s central banking journey involved merging emission banks, a more intricate political endeavor.

The book follows a chronological structure divided into eleven chapters. The initial chapters delve into the origins and evolution of central banking concepts, highlighting forerunners in Genova, Venice, and Naples. Toniolo then delves into the precursors of the Bank of Italy, the emission banks that existed in various Italian states before unification.

The Bank’s history intersects with Italian political unification, and particular attention is paid to figures like Cavour, who advocated for a single emission bank. While not entirely successful, a dominant emission bank, the “Banca Nazionale nel Regno,” emerged as a result of mergers.

Chapter three explores the origins of the Banca d’Italia, particularly during periods of financial crises, which compelled the government to limit the number of emission banks to three. The Banca d’Italia was created in 1893 through the merger of several banks.

Subsequent chapters cover the first two decades of the Bank, addressing issues like cleaning up the bank’s balance sheet and the role of Bonaldo Stringher, who played a significant role in Italian monetary and financial policy. The Bank’s role during World War I is examined, with a focus on its financing contributions.

Chapter six discusses the period following World War I, often referred to as the “Age of the Central Banks.” International economic and monetary debates during this era were dominated by the re-establishment of the gold standard.

The book explores Mussolini’s rise to power in 1922 and his push for a “strong lira.” The subsequent return of the lira to the gold standard in 1927 is analyzed, despite the “Quota 90” being considered an overvalued exchange rate, leading to deflationary pressures in Italy’s economy.

Chapter eight delves into the Bank’s supervision experiences, highlighting some areas that resembled “Ponzi finance.” The Bank’s supervisory practices, particularly concerning the Banca Agricola Italiana, are critically examined.

The September 1931 devaluation of the pound sterling marked the beginning of the “Great Crisis,” explored in chapter nine. Mussolini insisted on maintaining the gold parity of the lira, leading the Bank of Italy to draw on its reserves and implement measures to limit capital outflows.

During these years, Italy was continuously engaged in wars, starting with Abyssinia, followed by Spain, and eventually World War II. Chapter ten discusses this period, highlighting an important reform of the “Servizio Studi,” the Bank’s economic analysis and research service.

Toniolo’s work provides invaluable insights into Italy’s central banking history, intertwined with political and economic transformations. His legacy is marked by meticulous research, shedding light on the challenges, successes, and complexities of central banking in Italy during this transformative period.

The first volume of Toniolo’s history concludes with Italy’s surrender to the Allies on September 8, 1943, marking a pivotal moment in the nation’s history.