The retail activity of foreign banks in Italy: effects on credit supply to households and firms
AbstractThis paper investigates the effects of the increasing activity of foreign banks in Italy, distinguishing between credit granted to households and firms. Foreign banks display a differentiated degree of business expansion across the provinces, we exploit this variability to measure how foreign banks affect competition and test it with reference to: i) a market share instability index ; ii) interest rates; iii) the collateral requested. Our results, over the period 1997-2006, show that an increase in foreign intermediaries’ market share leads to a less stable market share index. As for mortgage loans to households, this enhanced competitive pressure implies a reduction in the average interest rate applied and an increase in the loans granted with respect to collateral. We do not find a significant impact on the average interest rate conditions applied to firms, although, in the most recent period, a reduction in the collateral on loans with longer maturity has emerged.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 714.
Date of creation: Jun 2009
Date of revision:
foreign banks; credit market competition;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-16 (All new papers)
- NEP-BAN-2009-08-16 (Banking)
- NEP-COM-2009-08-16 (Industrial Competition)
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- Ugo Albertazzi & Margherita Bottero, 2013. "The procyclicality of foreign bank lending: evidence from the global financial crisis," Temi di discussione (Economic working papers) 926, Bank of Italy, Economic Research and International Relations Area.
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