Does the New Basel Accord Affect Credit in Italy?

Abstract

The purpose of this study is to investigate the effect of the Basel regulation on the amount of credit in Italy. The research sample is composed by 343 Italian banks that operated in Europe in 2014. Data were gathered from Bank scope (Bureau Van Dijk database), from Data Stream (Thomson Reuters) and from the annual reports of banks under investigation. After having investigated the relationship between variables, using the Pearson correlation analysis, the research hypotheses have been investigated using the regression analysis (OLS). The research shows that, in Italy, the increase in regulatory capital required by Basel III agreements and the default probability level of client portfolios of the banks would have a major role in the recent contraction of credit. A more efficient solution to reduce the current state of the credit crunch and at the same time increase the solidity of the banking system, could be represented by an intervention in the system of evaluation of creditworthiness and the relationship between banks and enterprises. Such new regulation should reduce the high probability of default (PD) of client portfolios, which seems to be more critical than market risk and operational risk in limiting the amount of credit.

Community banks' capital requirements and regional housing tenure

“…The development of the real estate market is largely attributed to the support of credit, and the expansion of credit is closely related to bank capital (Gambacorta & Mistrulli, 2004; Schwert, 2018), which plays a critical role in absorbing losses and meeting long‐term funding needs for continuous operations. An increase in bank capital requirements may have a negative impact on credit business, which might change banks' attitude towards real estate, affect the market price of real estate, and impact the market demand and housing ownership to a large extent (Chambers et al, 2009; Mustilli et al, 2017). Other possible channels or contributing factors to credit supply have been investigated in previous studies.…”