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Internal ratings, credit growth and Npls: an empirical analysis

Author

Listed:
  • Marina Damilano

    (Università di Torino)

  • Paola De Vincentiis

    (Università di Torino)

  • Eleonora Isaia

    (Università di Torino)

  • Patrizia Pia

    (Università di Torino)

Abstract

In this paper, we investigate how the use of internal credit rating systems impacted the lending activity in Italy, during the 2010-2014 downturn. We argue that Irb models, both validated by supervisory authorities or adopted only for management purpose, contributed to reduce the offering of credit, given their rigidity that do not consider – or very little – soft information. Further, we explore the relation between Irb systems and not-performing loans, to test the claimed superiority of Irb methods in measuring credit risk. We find a negative correlation between Irb and credit reduction, whereas a positive correlation with Npls

Suggested Citation

  • Marina Damilano & Paola De Vincentiis & Eleonora Isaia & Patrizia Pia, 2016. "Internal ratings, credit growth and Npls: an empirical analysis," BANCARIA, Bancaria Editrice, vol. 12, pages 24-45, December.
    • Handle: RePEc:ban:bancar:v:12:y:2016:m:december:p:24-45
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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