IMF Staff Country Reports

This Selected Issues paper compares Sammarinese banks with nearby Italian banks with similar business models, highlighting gaps in asset quality, capital adequacy, and cost efficiency. Individual banks can boost profits by reducing the high operating costs and increasing the share of income-generating assets. If within bank consolidation is insufficient to restore competitiveness, system-wide consolidation can be considered to achieve economies of scale. It is key to improve the competitiveness of the banking sector well-ahead of the 15-year time frame granted by the EU association agreement. The analysis shows most San Marino banks need to catch up in terms of asset quality, capital adequacy and cost efficiency. A system-level consolidation can be considered. The banking sector remains oversized. The number of bank branches needs to be reduced by more than two thirds to reach the EU level. The share of income-generating assets should also be increased.