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Loan Loss Provisioning and Relationship Banking in Italy: Practices and Empirical Evidence

Author

Listed:
  • Matteo Alessi

    (Federcasse and University of Rome Tor Vergata)

  • Stefano Di Colli

    (Federcasse and John Cabot University)

  • Juan Sergio Lopez

    (Federcasse, Rome)

Abstract

A panel of Italian banks for the period 2006-2012 is used in this paper to examine LLP main determinants. Our analysis also focuses on the determinants of the sub-components of LLP, i.e. provisions associated to Bad Loans and Impaired Loans and Bad Loans and Impaired Loans Coverage Ratio. A specific analysis for cooperative credit banks is provided. We find that Loan Loss provisioning for Italian banks seems to be driven principally by non-discretionary behavior. Economic fluctuations, according to our results, do not play a significant role, nor do signaling and income smoothing. Provisioning strategies for cooperative credit banks also seem to be affected by collateralized loans.

Suggested Citation

  • Matteo Alessi & Stefano Di Colli & Juan Sergio Lopez, 2014. "Loan Loss Provisioning and Relationship Banking in Italy: Practices and Empirical Evidence," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 111-129, June.
    • Handle: RePEc:trn:csnjrn:v:3:i:1:p:111-129
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    Cited by:

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    2. Forgione, Antonio Fabio & Migliardo, Carlo, 2018. "Forecasting distress in cooperative banks: The role of asset quality," International Journal of Forecasting, Elsevier, vol. 34(4), pages 678-695.
    3. Se-Hak Chun & Namnansuren Ardaaragchaa, 2024. "Analysis of Factors Affecting the Loan Growth of Banks with a Focus on Non-Performing Loans," JRFM, MDPI, vol. 17(5), pages 1-9, May.
    4. Luminița Gabriela Istrate, 2019. "The Role of Credits and Bank Guarantee Letters in Financing Trading Companies," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 601-606, August.
    5. Aristei, David & Gallo, Manuela, 2019. "Loan loss provisioning by Italian banks: Managerial discretion, relationship banking, functional distance and bank risk," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 238-256.
    6. Jari-Mikko Meriläinen, 2019. "Western European Stakeholder Banks’ Loan Loss Accounting," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(2), pages 185-207, October.
    7. Luminita Gabriela ISTRATE, 2020. "Integration Of Macroeconomic Variables In The Analysis Of Credit Risk And The Impact On The Rate Of Return Of Companies And The Degree Of Corporate Indebtedness," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 14(1), pages 173-181, November.

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    More about this item

    Keywords

    loan loss provisions; bank lending; financial system cyclicality;
    All these keywords.

    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

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