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The retail activity of foreign banks in Italy: effects on credit supply to households and firms

  • Luigi Infante


    (Bank of Italy)

  • Paola Rossi


    (Bank of Italy)

This 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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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 714.

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Date of creation: Jun 2009
Date of revision:
Handle: RePEc:bdi:wptemi:td_714_09
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