We investigate the effect of board interlocks with financial institutions on the relationship between their ownership structure and the cost of debt. In Italy, companies’ ownership is largely concentrated and the system is strongly debt-oriented with financial institutions being the primary source of funding for companies. This makes the Italian context suitable to examine debt-equity agency conflicts and, more specifically, to question whether having direct internal monitoring channels (i.e. presence on the board of directors) is valuable for financial institutions when determining loan conditions. Using a panel of 250 Italian non-financial listed companies over the period 2000-2012, we show that while concentrated ownership has an increasing effect on the cost of debt, financial directors moderate this relationship. Further, the presence of a family block holder exacerbates the agency conflict with debt holders. We find that financial interlocking directorates act as an even more important tool in mitigating the agency cost of debt in such cases. Our results are robust to a set of firm-specific characteristics and support the idea that board interlocks with financial institutions provide firms with an effective monitoring device in solving debt-equity agency conflicts.