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The Organization of Lending and the Use of Credit Scoring Techniques in Italian Banks

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Author Info

  • Albareto, Giorgio

    ()
    (Bank of Italy)

  • Benvenuti, Michele

    ()
    (Bank of Italy)

  • Mocetti, Sauro

    ()
    (Bank of Italy)

  • Pagnini, Marcello

    ()
    (Bank of Italy)

  • Rossi, Paola

    ()
    (Bank of Italy)

Abstract

This paper examines the results of a survey carried out in 2007 by the Bank of Italy concerning different characteristics of the organization of lending activities. Between 2003 and 2006 the physical distance between the headquarters and the branches increased, the limits to the decision-making process of loan officers were eased, their mobility raised, and the use of economic incentives to reward their activity expanded. The huge heterogeneity in organizational structures persists even within relatively homogenous size classes. The diffusion of statistical models to assess credit risk (scoring) accelerated recently particularly among large banks, boosted by the new Basel Capital Accord. Scoring is either very important or determinant in decisions on credit extension while it is rarely influential in setting interest rates, the duration of the credit, and the amount and type of collateral required. The survey shows that banks have been progressively adapting their organizational structure in order to incorporate the credit scoring tools into their lending processes.

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File URL: http://www.capco.com/capco-institute/capco-journal/journal-32-applied-finance
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Bibliographic Info

Article provided by Capco Institute in its journal Journal of Financial Transformation.

Volume (Year): 32 (2011)
Issue (Month): ()
Pages: 143-158

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Handle: RePEc:ris:jofitr:1520

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Related research

Keywords: banking organization; delegation; distance; credit scoring; local branch manager; small business lending;

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Cited by:
  1. Leandro D’Aurizio & Tommaso Oliviero & Livio Romano, 2012. "Family firms and the agency cost of debt: The role of soft information during a crisis," Economics Working Papers ECO2012/22, European University Institute.
  2. Masazumi Hattori & Kohei Shintani & Hirofumi Uchida, 2012. "Authority and Soft Information Production within a Bank Organization," IMES Discussion Paper Series 12-E-07, Institute for Monetary and Economic Studies, Bank of Japan.
  3. repec:cge:warwcg:166 is not listed on IDEAS
  4. Crawfordy, Gregory S & Pavaniniz, Nicola & Schivardi, Fabiano, 2013. "Asymmetric Information and Imperfect Competition in the Loan Market," CAGE Online Working Paper Series 167, Competitive Advantage in the Global Economy (CAGE).
  5. Marcello Pagnini & Silvia Del Prete & Paola Rossi & Valerio Vacca, 2013. "Lending Organization and Credit Supply During the Crisis," ERSA conference papers ersa13p673, European Regional Science Association.
  6. Silvia Del Prete & Stefano Federico, 2014. "Trade and finance: is there more than just 'trade finance'? Evidence from matched bank-firm data," Temi di discussione (Economic working papers) 948, Bank of Italy, Economic Research and International Relations Area.

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