Further reducing the number of San Marino’s banks by creating a large public hub alongside a private institution. That is the proposal put forward by Nicholas Perpiglia, president of GEN SM, who is weighing in on the future of the Titano’s financial system and calling for the question of bank mergers to be addressed.
Perpiglia says he discussed the idea with a former senior executive at one of San Marino’s main banks and received a favourable assessment: «One large bank as a state group and one private bank would be enough for San Marino».
The proposal rests above all on the size of the market. In 2008 bank deposits amounted to 14.5 billion euros; today they stand at 7.3 billion. A drop of roughly 50% that, according to Perpiglia, should push towards further consolidation.
«A bank has very high fixed costs, from governance to compliance to IT systems, and in San Marino we pay them four times over, for just over thirty thousand inhabitants», observes the president of GEN SM.
The system has already gone from twelve institutions to four, but through a process marked by liquidations and rescues, often funded with public money. Capital positions have improved, with non-performing loans falling from 61% in 2019 to under 15%, yet some weaknesses remain.
Perpiglia also points to the assessments of the International Monetary Fund, which continues to flag capitalisation and profitability problems at some banks. The combined equity of the system, he notes, amounts to 361 million euros.
The proposed solution is a San Marino Banking System (SBS), built around a large public group and a private bank. A scenario that, according to Perpiglia, could also find room in the political debate, given that the PSD has already signalled openness to consolidation operations involving both public and private capital.
The difficulties would not be few: balance sheets to clean up, agreements between shareholders, protection of jobs and the need for management independent of politics. On top of these would come resistance from those unwilling to give up control of individual institutions.
The association agreement with the European Union, signed on 19 October, is another variable. Access to the single market could offer new opportunities to San Marino’s banks, but it will be gradual and will also bring new competitors into the domestic market.
Finally, Perpiglia opens a reflection on the Central Bank of San Marino. With a more concentrated banking system, he believes it would be worth considering a leaner and less costly supervisory structure, without calling into question its existence or its independence.
«San Marino has already cut the number of its banks, almost always in the most damaging way. Today it has tidier accounts, a signed European agreement and a few years ahead of it. Perhaps this is the moment to choose, rather than to endure», concludes the president of GEN SM.
