The Question of the Rent Dissipation in the Notes Issuance Activity: The Case of the Italian Banking System before the Creation of the Bank of Italy

The aim of the paper is to study empirically the rent dissipation hypothesis in the case of Italy before the creation of the National Bank of Italy in 1893. The major bank of the state of Italy – the Banca Nazionale Sarda (BNS) – experienced over the period 1866-1893 a decrease in its profitability consistent with rent-seeking activity. The BNS was giving up present profit in order to maximize its chance to get the monopoly over notes issue. The rent seeking cost has been identified as the forgone profit borne by the bank’s shareholders and not the bribes offered to civil servants.