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The treatment of SMEs loans in the New Basel Capital Accord: some evaluations

Author

Listed:
  • Fabrizio Fabi

    () (Banca d'Italia, Vigilanza Creditizia e Finanziaria, Servizio Concorrenza, Normativa e Affari Generali, Roma (Italy))

  • Sebastiano Laviola

    () (Banca d'Italia, Vigilanza Creditizia e Finanziaria, Servizio Concorrenza, Normativa e Affari Generali, Roma (Italy))

  • Paolo Marullo Reedtz

    () (Banca d'Italia, Vigilanza Creditizia e Finanziaria, Servizio Concorrenza, Normativa e Affari Generali, Roma (Italy))

Abstract

In April 2003 the Basel Committee on Banking Supervision issued a third consultative paper on the new Basel Capital Accord (Basel II). The document contains substantial changes with respect to the previous proposal of January 2001, on which improvements were requested, among other aspects, regarding the too severetreatment foreseen for loans to small and medium sized enterprises (SMEs). The aim of this paper is to analyse the treatment of SME loans under the Basel II framework and to provide an empirical evaluation of the impact of the different proposals on a large hypothetical portfolio of Italian corporations. Our simulations indicate that the prudential treatment of SME loans foreseen in the last consultative document of theBasel Committee is not penalizing with respect to the current situation. Therefore, we should not expect a reduction of credit or an increase in interest rates on loans to this type of borrowers.

Suggested Citation

  • Fabrizio Fabi & Sebastiano Laviola & Paolo Marullo Reedtz, 2004. "The treatment of SMEs loans in the New Basel Capital Accord: some evaluations," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 57(228), pages 29-70.
  • Handle: RePEc:psl:bnlqrr:2004:12
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9821/9706
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    References listed on IDEAS

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    1. Edward I. Altman & Andrea Resti & Andrea Sironi, 2002. "The link between default and recovery rates: effects on the procyclicality of regulatory capital ratios," BIS Working Papers 113, Bank for International Settlements.
    2. Eva Catarineu-Rabell & Patricia Jackson & Dimitrios Tsomocos, 2005. "Procyclicality and the new Basel Accord - banks’ choice of loan rating system," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 537-557.
    3. Ayuso, Juan & Perez, Daniel & Saurina, Jesus, 2004. "Are capital buffers pro-cyclical?: Evidence from Spanish panel data," Journal of Financial Intermediation, Elsevier, pages 249-264.
    4. Gordy, Michael B., 2003. "A risk-factor model foundation for ratings-based bank capital rules," Journal of Financial Intermediation, Elsevier, vol. 12(3), pages 199-232, July.
    5. Philip Lowe, 2002. "Credit risk measurement and procyclicality," BIS Working Papers 116, Bank for International Settlements.
    6. Eva Catarineu-Rabell & Patricia Jackson & Dimitrios Tsomocos, 2005. "Procyclicality and the new Basel Accord - banks’ choice of loan rating system," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 537-557, October.
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    Citations

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    Cited by:

    1. Maximilian J.B. Hall, 2004. "Basel II: panacea or a missed opportunity?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 57(230), pages 215-264.
    2. Sebastiano Laviola & Juri Marcucci & Mario Quagliariello, 2006. "Stress testing credit risk: experience from the italian FSAP," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 59(238), pages 269-291.

    More about this item

    Keywords

    Banking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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