Search results for "Credit risk"
showing 10 items of 59 documents
Efficiency, endogenous and exogenous credit risk in the banking systems of the Euro area
2005
The implantation of the Euro in 11 of the EU states has driven the big banks to expand their presence in other European countries, which may have negative consequences on their credit risk in view of the disadvantages involved in entering new markets. The aim of this study is to analyse the efficiency and the credit risk of the banks of the most important countries of the Euro area, using a one-stage parametric stochastic procedure that allows one to identify whether the behaviour towards risk of the banks analysed was more cautious or more reckless during the period analysed. The results indicate that adjustments for risk are important in the case of profit efficiency but not in the case o…
Transmission of Sovereign Risk in the Euro Crisis
2012
We assess the role of financial linkages in the transmission of sovereign risk in the Euro Crisis. Building on the narrative approach by Romer and Romer (1989), we use financial news to identify structural shocks in a vector autoregressive model of daily sovereign CDS premia for eleven European countries. To estimate how these shocks transmit across borders, we use data on cross-country bank exposures to sovereign debt. Our results indicate that cross-border financial exposures constitute important transmission channels. A 10-percent decrease in the exposure to Greek debt reduces, on average, the transmission rate of sovereign risk by 9.4 percent. Decomposing these effects, we find that exp…
Political, Institutional, and Economic Factors Underlying Deficit Volatility
2013
It is well known that fiscal policy can counter-cyclically smooth out the effect of unexpected shocks and public deficit volatility may reflect the (optimal) policy response to them. However, the welfare losses associated to fiscal instability are also an important challenge for many countries, as it typically implies an inefficient allocation of resources, higher sovereign risk premium and an inadequate provision of public services. In this paper, we empirically analyze the political, institutional, and economic sources of public deficit volatility. Using the system-generalized method-of-moments (GMM) estimator for linear dynamic panel data models and a sample of 125 countries analyzed fro…
Credit Risk and Simulated Spreads Risk Adjusted for Italian Regions.
2009
We analyse the idiosyncratic and systematic elements influencing Italian firms’ probability of default (PD) and examine the relationship between credit risk and borrowing conditions at a regional level. This paper, using regression analysis, examines the causal relationship between PD of a representative sample of Italian firms, together with accounting variables at firm level and macroeconomic data. The underlying hypothesis examines if the riskiness of Italian firms is influenced exclusively by their specific characteristics or, more generally, depends also on the spatial environment where they operate. According to the literature, the interregional differentials in the cost of money depe…
A comment on mortgage procylicality
2012
This paper comments on mortgage procyclicality. A framework for credit constraints along the lines of Kiyotaki and Moore (1997) is applied to illustrate a potential regime shift in the credit risk assessments of mortgagees. Depending on the relationship between house price growth and the alternative rate of return the weight given to collateral and debt-servicing ability may vary according to the house price cycle as mortgagees engage in search-for-yield. The regime shifts induced by increased global liquidity and expectations of continued housing appreciation might stimulate owner-occupation and LTV-ratios and induce mortgage procyclicality.
Dynamics of Lending Rates in the Baltic Countries: Influence of Funding Costs of Banks and Risk Factors
2017
In the Baltic countries, lending rates have been among the highest in the euro area mainly reflecting national differences in the market structure as well as relatively strict credit standards applied by banks in response to the changes in their perception of risk. In this context, the deeper econometric analysis could provide additional information about the common and diverging aspects of the dynamics of lending rates in the Baltic countries. Therefore, the aim of the paper to explore the pass-through of funding costs of banks to lending rates in different lending segments in the Baltic countries during the period of 2005–2015 taking in account risk considerations. To reach the set aim, a…
Am I riskier if I rescue my banks? Beyond the effects of bailouts
2021
Abstract We examine the relationship between bank bailouts and sovereign risk in 35 countries and 19 bailouts from 2005 to 2015. Bailouts negatively affect sovereign ratings, with rating agencies consistently perceiving higher risk when a country’s banking system has been rescued (risk-increasing effect). The increase in public debt as a result of the bank bailouts is the main mechanism through which the risk-increasing effect occurs. Moreover, financial soundness and banking market structure shape the impact of bailouts on sovereign risk. In particular, proactiveness in undertaking public bailouts for banking systems that are largely distressed – that is, risky and low profitable – and hig…
Am I riskier if I rescue my banks? The unintended effects of bailouts
2021
We examine the relationship between bank bailouts and sovereign risk in 35 countries and 19 bailouts during 2005–2015. Bailouts negatively affect sovereign ratings, with rating agencies consistently perceiving higher risk when the country’s banking system has been rescued (risk-increasing effect). Financial soundness and banking market structure shape the impact of bailouts on sovereign risk. In particular, proactiveness in undertaking public bailouts for banking systems that are largely distressed -risky and low profitable- and highly concentrated seems to lead to lower increases in sovereign risk. However, the strength of the connection between the public sector and the banking system nei…
A qualitative analysis of bank credit risk disclosure: Evidence from the Canadian and Italian banking sectors
2022
This paper aims to analyze bank credit risk disclosure practices in two different geographical contexts characterized by a homogeneous regulatory framework (Canada and Italy), by means of a qualitative content analysis methodology. We employ an innovative approach, which allows us to investigate both the qualitative and quantitative profiles of disclosures. Unlike an entirely quantitative approach, this comprehensive methodology allows us to analyze in depth the disclosure practices of Canadian and Italian banks and detect their commonalities, differences, points of strength, and weaknesses. Our results show that although there are some variations in the disclosure practices of Canadian and…
Credit Risk Disclosure Practices in the Annual Financial Reporting of Large Italian Banks: An Empirical Study
2018
The purpose of this paper is to evaluate the qualitative and quantitative profiles of the disclosure of credit risk in banking institutions. The authors employ content analysis to conduct an empirical study on a sample of large Italian banks. The sample represents approximately 60% of the Italian banking industry in terms of total assets.