The development of research in banking history over the last decade or so has been able to show the importance of the local scale in the relationship between banks and corporations; it focuses on the theory of information asymmetries (and the analysis of different strategies to reduce them) and explains the almost natural link between local banks and small companies. A work of synthesis was needed which would have been able to answer the question: is there a European model for these relations? This book by Francesca Carnevali brings the comparative study which was lacking in banking history.

The author reminds us first of all of the important axes of development of the relationship between banks and companies in the nineteenth and twentieth centuries in continental Europe, underlining the permanent interpenetration of political and economic questions. At the end of the nineteenth century, continental Europe retained a banking system based on segmentation, regionally dispersed and having close links with local businesses. Though this was opposed by commercial banks, the intervention of public and semi-public institutions ensured that conflicts could result in adaptation. Thanks to the ensuing dialectical process between the state and social and economic groups, small capitalists represented a force capable of arbitrating the right–left conflicts. The local banking organisation was thus one of a number of different types of banks specialising in different customers and different geographical areas. Risk assessment was made easier and it created long-term commitments to customers. Monitoring costs were lowered. The 1970s marked a turning point in banking organisation. Deregulation was made necessary under the pressure of international competition. Banks were allowed to participate in capital market business and banking supervision became international. The 1978 European Monetary System affected several markets in which commercial banks were active (foreign exchange, loan and deposit market, bond market). The combination of liberalisation and more supervision meant more banking concentration and the continental system came closer to the British system. This change often proved negative for larger banks, which tended to abandon lending to smaller businesses. In Germany, the intense merger activity of the 1990s resulted in the closure of branches, which reduced the scope for relationship banking, increased credit shortage and damaged overall competitiveness. In France, there was a similar move, but the key banking groups made up of mutual banks increased their share of the market and French businesses increased the number of intermediaries from whom they borrowed. Thus the change did not lead to restriction in the supply of credits to small businesses that started relationships with more than one bank. Multibanking became the practice, which increased the businesses' bank credit. The Italian reorganisation was similar to that of France, except that firms continued to have a local bank as their main bank. There, local establishments have constantly shown better performance indicators than national ones. On the whole, in continental Europe, despite the consolidation process, the banking sectors are still varied. Multibanking has developed though and small firms still put pressure on governments to reduce the negative consequences of globalisation.

Contrary to the continental relationship banking model, the evolution of banking in Great Britain is characterised by the emergence of transaction banking, globally unfavourable to small companies. At the end of the nineteenth century, the banks could boast large deposits but were prevented by law from investing for commercial purposes. Not maintaining closer links with borrowers at local level, banks did not evolve in the same way as on the continent, and small businesses, not benefiting from state intervention or loans, declined. In the 1970s, the banking system was opened up to market forces. After the 1979 abolition of foreign exchange control on capital movement, other regulatory controls became superfluous and banks became more universal. In spite of less concentration than before, the ‘Big Four’ kept their hold on small business customers, all having the same charging structures. The Bank of England recommended the development of more sophisticated and systematic risk management techniques, but it was criticised because credit-scoring systems were viewed as remote and difficult to influence by small firms. Despite considerable effort, financing is still a problem in Great Britain, and this difficulty appears as a barrier to growth. The global trend is towards standardised approaches to risk assessment so the regional and local information is lost. At the end of this work, Francesca Carnevali's conclusion is clear and rests in favour of the restoration of the local banks, not only at the historical level but also as an economic tool for the future: ‘evidence from the past suggests … that abandoning local banking would be a mistake’ (p. 202). There are many who share this opinion.