Preserving financial stability in times of crisis. A tale of two public banks: Monte dei Paschi di Siena and Banco di Sicilia, 1929-1940

In this paper, we investigate the contrasting business strategies and models adopted by two major Italian public banks in the 1930s. Monte dei Paschi di Siena and Banco di Sicilia are interesting case studies for a number of reasons: their strong regional connections; their prolonged struggle for political independence from the national monetary authorities; their common attempt to modify the scale and scope of their business with the creation of integrated banking groups; and their early internationalization of activities. We examine how the two banks were affected by (and involved in) the major financial and economic crisis of the 1930s and show how external shocks altered their banking strategies and models. We also reconstruct the role played by the banking authorities and other important stakeholders.