Investing in Italy | RBS Remembers

RBS remembers

Investing in Italy

The first annual report of the British Italian Corporation, 1916 © RBS


Italy in 1914 was nominally allied with Germany and Austro-Hungary, but declined to enter the war when it broke out that summer. For the first 9 months of the war, questions lingered over whether Italy would remain neutral or enter the war – and if the latter, on which side.

One of our constituent banks, London County & Westminster Bank, saw an opportunity in this uncertainty. Unlike most other British banks, it already had interests in continental Europe, in the shape of a Paris branch. In January 1915, it began considering the possibility of opening an office in neutral Italy.

The bank sent one of its most trusted officials on a ten-day trip to Italy, to investigate the possibilities. He reported that Italy was well-placed to develop rapidly after the end of hostilities, but that in the immediate term its economy was suffering. Exports were down, and tourism income almost wiped out. This raised the prospect of securing a bargain. Meanwhile, the British government was likely to be supportive, because increased British presence in Italy would diminish German influence there. The mixture of financial motives and patriotic intentions is evident in the words used in the official’s report on his trip: if a British bank were to establish itself in Italy, he wrote, ‘the effect would be most beneficial, politically, economically and morally; and the material results quite appreciable.’

Despite the favourable report, the bank’s board was not sure. It calculated that an Italian operation would cost around £400,000 to establish, and even if business went well, it couldn’t hope to match that value in deposits for several years. The bank had no shortage of options for investing, ranging from customers keen to borrow to expand their businesses, all the way up to war loans and government credits. Starting an Italian subsidiary just wasn’t appealing enough. The board resolved not to proceed.

Not long afterwards, in May 1915, Italy entered the war as one of Britain’s allies. The following year, another idea was put forward for encouraging trade between Britain and Italian business. In February 1916 a British Italian Corporation was proposed, to be funded by the British banks. The government was enthusiastic, and even offered the Corporation a 10-year subsidy to help it get established. London County & Westminster Bank was one of its largest investors, putting forward £100,000. Among other banks, the response was mixed. Some of our constituents invested, but others refused. Williams Deacon’s Bank, for example, was not keen, but felt obliged to take part until it found out that some of the London banks had refused. It promptly withdrew.

The British Italian Corporation was not a success. It made heavy losses in the post-war shipping slump, and was finally sold to an American bank in 1930.


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