Analyses carried out at the Bank of Italy show that, after adjusting for the risks that materialized, the geographical differential disappeared in the early nineties. The spread between lending and deposit rates has narrowed further and now stands at 4.5 percentage points. The growth in competition has contributed to a substantial redistribution of banks’ shares of the loan market.
The major changes that occurred after the ceiling on bank loans was removed were followed by further large shifts in the two years 1989-90 and from 1995 onwards. In the last three years the market shares that changed hands each year were equal to around 4 per cent of the total loan portfolio on average, excluding the amounts directly affected by mergers.