Keywords: Co-operative banks; Bank regulation; Proportionality; Community banks.
The principle of proportionality is fundamental in regulation and is solemnly stated in the European Treaty. However financial regulation is becoming more and more sophisticated, with high and largely fixed compliance costs. This note maintains that the recent Italian reform of banche popolari (cooperative banks) implies non proportional costs (in this case the forced transformation in joint stock banks for all institutions with total assets exceeding ¤ 8 bn). This is only the last example of a trend in regulation that may be harmful for banks, particularly small- and medium-size, that play an important role and that, as a wide body of research shows, can reach conditions of profitability and operating efficiency. As a matter of fact, the U s banking regulation is much more concerned about this principle and has organized its regulation and supervision in ways that take explicitly into account the need of avoiding undue costs for the category of community banks.