Alternative classifications of Italian banks:Do different grouping rules mislead results on the risk profile of banks?

The Italian banking system is under the scrutiny of both the monitoring authority and public opinion after the bankruptcy of some important banks. Among other reasons, analysts underline the riskier attitude of specific types of banks (e.g., cooperative banks). Cooperative banks represent the largest proportion of banks under the commissioner. The label “cooperative banks” includes both banche popolari and credit cooperative banks, which might be similar from the ownership point of view but differ in many other aspects. As a result, the list of intermediaries facing financial distress includes local, cooperatively owned and small banks. However, the regulator intervention functions under the institutional classification, not the banks’ actual behaviour. This paper tests whether banks are adequately classified through their usual institutional tags (i.e., banche di credito cooperativo, banche popolari, commercial or savings banks) or whether other features provide a better description of banks’ attitude towards risks. For this reason, alternative classifications are introduced and compared. The main finding is that more than the institutional classification, the ownership and the de facto operating pattern are the aspects that characterise the risk behaviour of Italian banks.