The modern banking industry was invented in Italy. Lombard streets around the world are named after the bankers from Lombardy in the Middle Ages, when Lombard was just a different name for pawn shop. Florentine bankers Bardi and Peruzzi funded the King of England’s Hundred Year War against France and eventually went bankrupt. Nowadays, Monte dei Paschi di Siena, the oldest bank in the world, is a main international financial story as it risks sinking amid risky derivatives exposure and bribery scandals: here again, the story is the name and its history rather than the systemic risk it poses to an otherwise sound industry. Italy is possibly the sole major country on both shores of the Atlantic where no state bank bailout was needed in the aftermath of the Lehman triggered crisis. The system as it is now – two pillars, Intesa San Paolo and Unicredit, three or four mid sized players among which Monte and some 800 local banks, most of them co-operative lenders – is the outcome of a major reform launched some 20 years ago. It was possibly the most successful reform even done in post WWII Italy, even though this has hardly been recognized. Until the early Nineties, the banking landscape here was dominated by a dozen of major commercial player, entirely, directly or indirectly, state-controlled. After several rounds of privatisations and mergers it was transformed into a modern, publicly owned and efficient industry compared to that, let’s say, of Germany. The limit of the reform is paradoxically that it went perhaps too far, considering the conservative environment of the rest of continental Europe. Major players from Germany, France and Spain have found in Italy an open and profitable market, but the same can’t be said of their Italian counterparts. It’s not by chance that Unicredit, the most internationalised Italian bank, found its lebensraum in Eastern Europe and Turkey. Foundation is a word one looking into Italian banks has to learn. The term stands for local government sponsored entities which hold significant, but minority, stakes into large commercial banks. The foundation is the link between the bank and its “territory”, were families used to grow and businesses prosper like in the wealthy pockets of Tuscany, Piedmont, Lombardy or Emilia Romagna, now dented by the crisis — which expects to be given a special attention by its lender of choice. Turin based Compagnia di San Paolo and Milan’s Fondazione Cariplo are the guys who expect Intesa to give special attention to their territories, while Turin’s CRT along with its Verona’s and Bologna’s fellow Foundations, believe their territories to deserve more attention than Unicredit stakeholders in Germany, Poland and Turkey. Foundations’ finances were hit badly by the financial crisis and they were forced to dilute their equities as big banks had to tap the capital market amid the crisis, while at the same time the weight of international investors – from the Arab Gulf, to Moscow, to the US – grew significantly, specially at Unicredit.