World Savings Day is celebrated on October 31, and this year marked a special occasion because of its 100 anniversary. Fabio Panetta, the Governor of the Bank of Italy, where the event was launched for the first time, commented on the importance of this date in a public letter that I took the liberty to translate into English (Section 2).
In his letter, the governor beautifully covers changes in savings patterns in the past 100 years and the role that savings and investment play in personal well-being and local development—a must-read.
1) WORLD SAVING DAY. ITS ORIGIN
Let´s start from the beginning. You might wonder what Savings Day is all about.
The World Savings Day was inaugurated on October 31, 1924, during the First International Savings Bank Congress in Milan, Italy, where Italian professor Filippo Ravizza designated the event’s final day as “International Saving Day.”
This day was dedicated to raising global awareness about the importance of saving, with a focus on promoting financial prudence worldwide. The savings banks collaborated with schools, the clergy, and various cultural, sports, professional, and women’s groups to advance this initiative.
Delegates from 29 countries came together to highlight the significance of saving for both individual well-being and economic stability. Typically observed on October 31, World Savings Day may shift in countries that coincide with a public holiday, ensuring banks remain open to facilitate deposits.
The concept of World Savings Day had precedents; countries like Spain and the United States had previously introduced national savings days to encourage citizens to save for a better quality of life and economic security. In Germany, public trust in savings needed restoration after the monetary reforms of 1923, which resulted in many lost savings.
After World War II, World Savings Day grew in popularity, peaking between 1955 and 1970 and becoming a tradition in certain countries. In Austria, the “Sparefroh” (or “Happy Saver”) became an iconic savings mascot, achieving widespread recognition and even inspiring a namesake street.
Today, World Savings Day emphasizes efforts in developing countries to reach unbanked populations. Through collaborations with NGOs, savings banks play a crucial role in promoting savings and expanding financial inclusion to increase account ownership among underserved communities.
To better understand the two-fold role of saving practices for individual well-being and economic stability and development, let´s give a bit to the letter of the Italian Governor of the Bank of Italy. You will see he makes an excellent case highlighting these key aspects:
A) We save to:
– stabilize consumptions through different stages in life (allocate funds when they will be needed)
– build an emergency fund in case of unexpected expenditures
– set aside the required amount for significant purchases (home, etc.)
– Invest (start a business or buy investment products)
B) Saving choices depend on several factors: income, presence of welfare, personal wealth, and the market-expected investment returns
C) Over the years, the savings rate of Italians decreased
D) Investments are accounted as a sub-set of savings
E) To protect savings, a country relies on three pillars: (1) a stable growth-oriented economy, (2) Monetary Stability and (3) Financial Stability.
2) WORLD SAVINGS DAY 2024. ONE HUNDRED YEARS OF SAVING CULTURE
ACRI, Association of Foundations and Savings Banks
1924-2024. One Hundred Years of Savings Culture
Speech by the Governor of the Bank of Italy
Fabio Panetta, Rome, October 31, 2024
Introduction
Mr. President of the Republic, Authorities, Ladies, and Gentlemen,
One hundred years ago, on the occasion of the celebrations for the founding of the Cassa di Risparmio delle Provincie Lombarde (Savings Bank of the Lombardy Provinces), World Savings Day was established. Since then, this event has annually renewed attention to the role of savings.
To save means to transfer resources from the present to the future: we save to stabilize consumption throughout the various stages of life, to cope with unexpected events such as job loss or illness, to finance education, to purchase a home, or to start a business.
The ability to save depends on income prospects throughout one’s life cycle, although current income constraints become more pressing for those who, like many young people, struggle to access credit. The social protection system also plays an important role: a generous pension and an efficient healthcare system reduce the need to set aside resources. Finally, saving choices depend on wealth—both inherited and intended for future generations – as well as expected returns.
Savings provide stability for family life, but they are also a resource for business investment. Savings and economic and social progress are closely connected. The Italian Constitution recognizes this by stating in Article 47 that “the Republic encourages and safeguards savings in all its forms.”
1. One Hundred Years of Savings in Italy
In 1924, when we began celebrating this day, Italians’ savings had reached a level comparable to other advanced economies, thanks to the economic growth of the “Giolittian era” and the substantial remittances from Italians abroad. Bank deposits and postal savings accounts accounted for 27% of GDP.
However, subsequent historical events—the Great Depression, the war, and post-war inflation—severely reduced the financial wealth of an entire generation. By 1948, the value of bank and postal deposits had plummeted to 10% of GDP.
These painful experiences heightened society’s attention to savings, and newly-formed republican institutions took notice; the inclusion of savings protection in our Constitution is a rare case in the international context.
From the post-war period to the early 1990s, Italian households saved an average of one-quarter of their income annually. (Figure 1; GDP and Household Budget).
Notes:
consumi= consumption;
PIL= GDP;
Reddito= Revenues;
Saggio di Risparmio = Savings Rate.
The savings rate began to decline in the 1980s, dropped more rapidly after 1992, and has stabilized at around 10% in the 21st century.
This decrease in the propensity to save is due to several factors. In the 1980s, a generous pension system contributed to this decline. Later, macroeconomic conditions impacted savings. The 1992 currency crisis and subsequent fiscal consolidation squeezed disposable income, prompting households to reduce their savings rate to support consumption.
Moreover, from the late 1990s, low interest rates following the introduction of the euro and easier access to credit favored current consumption over future consumption.
More recently, savings have been affected by the global financial crisis, the sovereign debt crisis in the euro area, and, finally, the pandemic.
Demographic factors have also contributed to the decline. The aging population has exacerbated the reduction in the savings rate: there is an increase in the proportion of elderly individuals who draw on their wealth to finance expenses, leading to negative savings. The resources set aside by younger workers are limited by their low income.
But it’s not only households that save: in this century, corporate savings have become increasingly significant, accounting for two-thirds of private savings in the past decade. (Figure 2; gross savings).
NOTES:
- amministrazioni pubbliche= public administrations
- imprese= companies
- famiglie= families
- totale= Total
Overall, the annual flow of private savings now exceeds 400 billion euros, amounting to one-fifth of national income. However, only a portion of this finances investments in Italy. In the five years preceding the pandemic, domestic resources invested abroad averaged 2.5% of GDP; if used to finance productive capital within Italy, they could have increased domestic investments by nearly one-fifth.
2. A Stable, Growth-Oriented Economy
The strength of the real economy is the primary pillar strategy to safeguard savings.
A strong economy is one that grows and invests, generating jobs, income, and profitable opportunities for saving. Conversely, an economy vulnerable to shocks risks frequent recessions, which tend to reduce the accumulation of savings.
In this century, the Italian economy has faced challenging times. Between 2000 and 2019, real per capita GDP slightly declined, in contrast to a 25% increase in other European countries, which, however, also lagged behind the United States.
I have previously discussed this disappointing trend and its causes: low innovation capacity and limited investments, a fragmented production system focused on traditional sectors, and deficiencies in public administration and infrastructure, coupled with low labor market participation.
High public debt amplifies these weaknesses, exposing the economy to market volatility and limiting our ability to effectively respond to adverse circumstances. Interest expenses consume significant resources, which we could otherwise invest in education, infrastructure, and healthcare.
In recent years, the Italian economy has shown encouraging signs of improvement. Following the last decade’s crisis, the production system underwent a deep and painful restructuring process, emerging stronger.
These changes help explain the Italian economy’s resilience to recent shocks. Since late 2019, our GDP has grown by 5.5%, compared to 4.1% in France and just 0.2% in Germany.
The global economy is now in a phase of uncertainty and weakness. According to the International Monetary Fund, global GDP will grow by just over 3% in 2025, lower than the average of previous decades. The euro area economy remains sluggish (Fig. 3; Euro Area GDP Growth Rate and Contributions of Domestic and External Demand), hindered by still-high real interest rates and the fading of fiscal stimulus from past years. The Italian economy is feeling the effects.
Long-term trends are even more concerning: conflicts, fragmentation in global trade, divided geopolitical blocs, a Europe suffering from demographic decline, accumulating delays, and losing influence in international relations.
In such a context, the European Union and Italy need profound reforms.
In Europe, we must revive the spirit of unity that allowed for the adoption of the Next Generation EU program, which has since waned. Numerous areas require intervention: we must fully leverage the single market, launch joint projects in innovation and technology, beginning with digital and green transitions; reduce foreign dependencies in energy and defense; simplify regulations; establish a central and autonomous fiscal capacity; and tackle the demographic challenge.
Italy bears a significant responsibility in lending credibility to the European project by implementing the investments and reforms outlined in the National Recovery and Resilience Plan, reducing the public debt-to-GDP ratio, and addressing unresolved issues I have previously mentioned.
3. Monetary Stability
Monetary stability is the second pillar for protecting savings. Inflation worsens resource allocation and erodes the real value of savings.
For its first two decades, the monetary union maintained moderate inflation. However, the pandemic and energy shock disrupted this stability: in 2022, consumer prices rose by 10% in the euro area and by 12% in Italy.
The European Central Bank’s monetary tightening has helped bring down inflation as quickly as it previously rose: price growth is now around 2% for the first time since 2021. The ECB has thus been able to lower the reference rate at three consecutive meetings starting in June.
However, monetary conditions remain tight and require further loosening. With inflation back under control, we must be mindful of the sluggishness of the real economy: without a sustained recovery, there is a risk of pushing inflation well below the target—a scenario that monetary policy would struggle to counteract and one that we must avoid.
4. Financial Stability
Financial stability is the third pillar for safeguarding savings. Financial crises pose a threat to savers due to the wealth destruction they cause.
The Banks
In the past decade, the Italian banking system was impacted by two recessions in close succession. Between 2008 and 2014, GDP declined by 9%, leading to a surge in business failures and unemployment. Non-performing loans rose to 10% of total loans, resulting in significant losses for banks, which, in some cases, led to full-blown crises.
That situation is now a memory. The Italian banking system is well-capitalized and profitable today. The stock market valuations of major banks exceed their book values (Fig. 4; Ratio of Market Value to Book Value of Listed Banks“), indicating investors’ confidence in the banks’ future income-generating capabilities.
These improvements reflect, in addition to favorable conditions in recent years, efficiency gains achieved by intermediaries and the strengthening of prudential regulations.
Public support granted during the pandemic, including the expansion of state guarantees on loans to small and medium-sized enterprises, played a crucial role. Now that conditions allow, it is appropriate to return to a system of guarantees that operates under standard criteria.
Looking ahead, high capital levels and the expected reduction in profitability may drive banks towards mergers, including cross-border mergers. This transition should enhance efficiency and create strong, profitable intermediaries better positioned to serve the real economy.
The solidity of banks would benefit from greater integration of the European banking market, enabling them to operate in multiple countries, diversify risks, and strengthen the provision of services to families and businesses. Completing the Banking Union, establishing a European deposit guarantee fund, and improving the bank resolution framework are essential steps.
Equally necessary is the creation of a European capital market. The primary condition for achieving this goal—though not the only one, but the most important—is introducing a European risk-free asset, which is essential for core financial market activities.
Non-Banking Intermediaries
Non-bank intermediaries have become major financial players globally and within the euro area. In Italy, their weight is still lower than that of banks but is growing rapidly (Fig. 5; Financial Activity of Banks and Non-Bank Intermediaries“).
Non-bank finance enables savings diversification and provides a prime source for financing innovative projects, but it can also make the financial system more complex and risky. The Bank of Italy supervises nearly 650 non-bank operators with diverse activities and risks. However, effective oversight requires strong international cooperation alongside national controls.
It is essential to coordinate across regulatory and supervisory systems to monitor the activities of intermediaries operating across borders. This applies to foreign intermediaries offering financial services in Italy under the European single passport. This model offers advantages in competition and choice for savers but assumes that oversight is highly effective across all countries—an assumption not always met.
We need to strengthen and harmonize the regulations and supervisory practices for non-bank intermediaries across countries. The Bank of Italy works toward this goal at the European level and within the Financial Stability Board.
5. The Role of the Bank of Italy in Protecting Savings
Protecting savings goes beyond supervising financial intermediaries; it also involves ensuring the proper functioning and integrity of the entire financial system.
This means working to enhance citizens’ economic and financial literacy, empowering them to make prudent investment decisions. It means providing tools to assert savers’ rights in a timely and low-cost manner. It means shielding the financial system from potential disruptions due to money laundering or terrorist financing. It also entails a direct commitment to countering cybersecurity risks to financial and market infrastructures, ensuring that financial intermediaries implement necessary measures against such risks. Finally, it means ensuring the efficiency and security of the payment system, which forms the backbone of the financial system.
The Bank of Italy performs all these tasks, collaborating with law enforcement, the judiciary, and other national and international regulatory and supervisory bodies.
Savings inherently involve a forward-looking perspective, motivated sometimes by uncertainty and concern, but more often by trust and optimism. Adam Smith once noted that “the principle that drives saving is the desire to improve one’s condition; a desire that… arises from birth and never leaves a person”.
As a source of stability and progress for families, savings are essential for a nation’s economic and civic advancement.
The protection of savings, enshrined in the constitutional mandate, is at the heart of the Bank of Italy’s mission.
However, it is essential that all those entrusted with managing citizens’ savings act with integrity, upholding the highest ethical and professional standards.
Only in this way can we ensure that savings remain a source of prosperity and progress for present and future generations, enabling us to look to the future with foresight and confidence.
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