1,720,970 research outputs found
The role of institutions in supporting SME financing through the trade credit channel: an empirical analysis of Italian provinces
No full textTrade credit is a relevant channel through which institutional development affects the real economy. When contract enforcement is weak and trust is low, firms engage in opportunistic behavior that is likely to disproportionally penalize small firms, characterized by weak bargaining power with respect to their larger customers or suppliers. This mechanism is particularly relevant during periods of sharp tightening of credit conditions from banks. Exploiting regional variation in Italy, the paper finds that institutional development mitigated the impact of the financial crisis, particularly for smaller firms, by limiting the adverse effects of the trade credit channel on their liquidity conditions
Regulating the banking sector to support credit access: evidence from small business
Full text linkThis study investigated the effectiveness of regulatory interventions in mitigating the harmful effects of financial crises on small firms. We examine the impact of a support factor implemented by European policymakers on Italian micro-, small-, and medium-sized enterprises (MSMEs) between 2007 and 2017. The analysis uses a difference-in-differences approach to assess the credit conditions of these firms. Contrary to expectations, our results show that MSMEs in Italy continue to face credit constraints even after the introduction of the support factor. In contrast, we find that structural factors and portfolio effects play a more important role in promoting favorable credit conditions for small firms. Our results highlight the importance of considering these factors in conjunction with regulatory interventions to achieve better outcomes. This study has implications for policymakers and stakeholders, particularly in assessing the appropriateness of extending support factors for different policy purposes
Asset correlations and bank capital adequacy
No full textThis paper addresses the estimation of confidence sets for asset correlations used in credit risk portfolio models. Research on the estimation of asset correlations using endogenous probabilities of default estimations has focused on the impact of concentration risk factors, such as firm size and industry. The empirical evidence from Italian small- and medium-size companies shows that the assumptions underlying the Basel Committee regulatory capital risk weight function are not substantiated. The regulatory impact is that the capital adequacy is significantly compromised, driving an adverse selection, which favors the worst companies, and transferring the procyclical effects from firms to banks
The transmission channels between the financial and the real sectors in Italy and the crisis
No full textInequality, debt and financial crisis - the case of Italy
No full textThis Forum aims to systematically describe and analyse the evolution of national financial systems within the EU over the past three decades. It analyses the processes of financialisation that have dominated this period as well as the causes and consequences of the financial crisis from the perspectives of five individual member states - Germany, France, the UK, Italy and Spain. Furthermore, policy proposals which could change the role of the financial system to better serve economic and social objectives are also put forward
Credit Transition and Structural Shocks
No full textCredit risk involves not only the complexity of screening but also monitoring and esti-
mating rating transition. The adoption of inadequate transition matrices causes a mis-
evaluation of credit risk, a consequent misallocation of capital, with the prospect that the
lending process will be a®ected by increasing transaction costs and limited rationality,
especially after a shock. Comparing the mover–stayer and the Markov chain approaches
to estimate the SME rating transition matrix, we ̄nd that the risk of a structural credit
shock imposes °exible estimates not constrained by the long-run trajectory of borrowers.
Improved migration estimation mitigates adverse selection in banks' lending behavior.
This conclusion is particularly true during economic downturns with the consequence of
reducing the cyclicality and empowering the resilience of banks
Credit risk migration and economic cycles
No full textThe misestimation of rating transition probabilities may lead banks to lend money incoherently with borrowers’ default trajectory, causing both a deterioration in asset quality and higher system distress. Applying a Mover-Stayer model to determine the migration risk of small and medium enterprises, we find that banks are over-estimating their credit risk resulting in excessive regulatory capital. This has important macroeconomic implications due to the fact that holding a large capital buffer is costly for banks and this in turn influences their ability to lend in the wider economy. This conclusion is particularly true during economic downturns with the consequence of exacerbating the cyclicality in risk capital that therefore acts to aggravate economic conditions further. We also explain part of the misevaluation of borrowers and the actual relevant weight of non-performing loans within banking portfolios: some of the prudential requirements, at least as regards EMS credit portfolios, cannot be considered effective as envisaged by the regulators who developed the “new” regulation in response to the most recent crisis. The Mover-Stayers approach helps to reduce calculation inaccuracy when analyzing the historical movements of borrowers’ ratings and consequently, improves the efficacy of the resource allocation process and banking industry stability
Rating trajectories and Credit Risk Migration: Evidence for SME's
No full textThe misestimation of rating transition probabilities may lead banks to lend money incoherently with borrowers’ default trajectory, causing both a deterioration in asset quality and higher system distress. Applying a Mover-Stayer model to determine the migration risk of small and medium enterprises, we find that banks are over-estimating their credit risk resulting in excessive regulatory capital. This has important macroeconomic implications due to the fact that holding a large capital buffer is costly for banks and this in turn influences their ability to lend in the wider economy. This conclusion is particularly true during economic downturns with the consequence of exacerbating the cyclicality in risk capital that therefore acts to aggravate economic conditions further. We also explain part of the misevaluation of borrowers and the actual relevant weight of non-performing loans within banking portfolios: prudential prescriptions cannot be considered as effective as expected by regulators who have designed the “new” regulation in response to the most recent crisis. The Mover-Stayers approach helps to reduce calculation inaccuracy when analyzing the historical movements of borrowers’ ratings and, consequently improves the efficacy of the resource allocation process and banking industry stability
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