Story of a insolvent bank

Thu, 08 Oct 2009 05:47:17 +0000
Num. 30

Luigi Franceschini and the "Piccolo Credito" bank, as remembered by his son.

This is a nice “vintage” photograph taken at the San Girolamo Piazza eighty years ago. It is a souvenir photo with a certain historical interest: the three people on the right were very important characters in the story of the insolvency of a Ferrara bank, the “ Piccolo Credito ” : my father, the lawyer Luigi Franceschini, who was the receiver appointed by the Court of Ferrara ; to his right,

Cavaliere Enrico Biucchi , a Bank of Italy official who had come to Ferrara to oversee the liquidation of the bank, and professor Ugo Obici, a representative of the creditors committee. My mother Angiolina is shown with a nice white hat that was fashionable at the time, then my cousin Renzo Laurenti, the daughter of Cavaliere Biucchi and two children: the daughter of Obici and myself in short pants. The Piccolo Credito Romagnolo bank was a prosperous institution in our city between 1897 and 1916. It was presided over by Count Giovanni Grosoli who was assisted by director and secretary Giuseppe Vicentini. This branch was transformed into a new bank on 1 May 1916, started off well and seemed highly promising. In the first few years of its existence «the institute backed solid, effective activities, particularly among the rural population, and assisted agriculture and small industries». The year 1916 closed with significant deposits of 29 million and this figure had doubled by 1917. In 1922 the deposits had risen to 91 million and two years later to 135 million. This growth was due to the widespread network of branches, the support of local producers, especially farmers, and the high interest rate offered to the customers. Howev er the new bank had a short, eventful life: the experience and professional competence of its directors did not always measure up to standard. Romeo Sgarbanti wrote that «the pressing need to gain maximum profit from the funds available forced the directors to pursue high-yield investments in order to meet the considerable deposit expenses, and in fact it was the errors made in placing the funds that undermined the prosperity of the bank». The inevitable insolvency procedures were initiated by a petition filed on 17 November 1928 by the chairman of the bank. He asked the Court of Ferrara for a composition with creditors which was justified by the «serious losses suffered due to the insolvency of another banking institute that Piccolo Credito had business dealings with…in addition to certain businesses… that the bank was sole proprietor of, resulting in the fact that it could not pay its creditors one hundred percent of what they were owed». The first report by the creditor committee addressed to the Court of Ferrara on 9 February 1929 outlined the dramatic situation: «…always, perhaps with the intent of making considerable profit, the directors of the Piccolo Credito bank threw money at certain industries, taking over companies that were on the brink of insolvency, thereby burdening itself with considerable liabilities and acquiring property at steep prices». The Ferrara people were happy to hear that the lawyer Franceschini had been appointed as receiver: the young professional had no political ties and was well-known and highly esteemed. Even the local newspaper acknowledged that this receiver was not involved in any of the political-banking matters going on at the time. He carried out his task quickly and fruitfully and within six months the liquidators were able to start paying the creditors to the extent required by law. His report to the liquidation committee of the bank documents what, however, had already been known: there was no political persecution of the bank directors, even though five of them were interned in accordance with the heavy-handed laws of the time. «Failure to pay in share capital or unlawful share capital payments, speculation on the stock market by the directors and their relatives, lines of credit and loans granted in excessive measures without taking the necessary precautions, failure to check financial statements» were the negative aspects of the bank management described by the receiver. Once he had finished that work, Mr. Franceschini was able to return to his civil law work and he held appointments with the court commissions, in the provincial health council, the municipal council for the banking sector, the provincial administrative committee and took part in numerous other insolvency proceedings. His fondest professional memories include attending the funeral services of Giovanni Boldini in Paris on 11 January 1931,along with Carlo and Luigi Sega, on the instructions of the artist’s brother, Gaetano, and the opening of probate proceedings. After the Second World War, he was an advisor with the Cassa di Risparmio di Ferrara for a number of years until he was forced to slow down and finally stop his professional activity altogether due to heart problems.