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The misestimation of rating transition probabilities may lead banks to lend money incoherently with borrowers’ default trajectory, causing both a deterioration in asset quality and higher system distress. Applying a Mover-Stayer model to determine the migration risk of small and medium enterprises, we find that banks are over-estimating their credit risk resulting in excessive regulatory capital. This has important macroeconomic implications due to the fact that holding a large capital buffer is costly for banks and this in turn influences their ability to lend in the wider economy. This conclusion is particularly true during economic downturns with the consequence of exacerbating the cyclicality in risk capital that therefore acts to aggravate economic conditions further. We also explain part of the misevaluation of borrowers and the actual relevant weight of non-performing loans within banking portfolios: some of the prudential requirements, at least as regards EMS credit portfolios, cannot be considered effective as envisaged by the regulators who developed the “new” regulation in response to the most recent crisis. The Mover-Stayers approach helps to reduce calculation inaccuracy when analyzing the historical movements of borrowers’ ratings and consequently, improves the efficacy of the resource allocation process and banking industry stability.
Camilla Ferretti; Giampaolo Gabbi; Piero Ganugi; Federica Sist; Pietro Vozzella. Credit Risk Migration and Economic Cycles. Risks 2019, 7, 109 .
AMA StyleCamilla Ferretti, Giampaolo Gabbi, Piero Ganugi, Federica Sist, Pietro Vozzella. Credit Risk Migration and Economic Cycles. Risks. 2019; 7 (4):109.
Chicago/Turabian StyleCamilla Ferretti; Giampaolo Gabbi; Piero Ganugi; Federica Sist; Pietro Vozzella. 2019. "Credit Risk Migration and Economic Cycles." Risks 7, no. 4: 109.
The literature dedicated to the problems of transboundary pollution often aims to verify what the environmental and energy interactions between countries are. Little attention is paid to the financial relations of the phenomenon. We analyze how financial, environmental and energy flows have been redistributed within the main Mediterranean countries, with particular reference to pollution. Applying advanced methods of correlation, we verify the dynamics of transfer processes with the aim of assessing whether the link between economic and financial and environmental flows might support the hypothesis that rich countries export environmental emissions to poor ones. Our results show that richer countries have a significant propensity to export energy, financial flows and polluting emissions. The imbalance is even greater for emissions with local impact. This process is accompanied by a substantial increase in the financial activities of the North Mediterranean countries to the detriment of those of the South, which progressively increase their indebtedness. We find out that the economic and financial development of the North Med is accompanied by an increasing environmental impact measured by the various types of emissions covered by our study. The research shows how the most industrialized countries of the Mediterranean area are increasing the economic and financial gap with respect to the Southern Mediterranean countries.
Pietro Vozzella; Franco Ruzzenenti; Giampaolo Gabbi. Energy and Environmental Flows: Do Most Financialised Countries within the Mediterranean Area Export Unsustainability? Sustainability 2019, 11, 3736 .
AMA StylePietro Vozzella, Franco Ruzzenenti, Giampaolo Gabbi. Energy and Environmental Flows: Do Most Financialised Countries within the Mediterranean Area Export Unsustainability? Sustainability. 2019; 11 (13):3736.
Chicago/Turabian StylePietro Vozzella; Franco Ruzzenenti; Giampaolo Gabbi. 2019. "Energy and Environmental Flows: Do Most Financialised Countries within the Mediterranean Area Export Unsustainability?" Sustainability 11, no. 13: 3736.
We address the estimation of asset correlation for credit risk assessment in the Italian market and its impact on SME credit access. The empirical evidence demonstrates that assumptions underlying the regulatory capital formula are not substantiated, and benefits received from the respect of granularity could be reduced or even removed. This outcome could depend on the positive relationship between asset correlation and default probability, the negative relationship between asset correlation and size and the positive link between default correlation and default probability. The regulatory impact is that the goal of levelling the playing field could fail, a regulatory arbitrage opportunity could be created and certain firms, clustered by size and industry, could suffer from the credit crunch.
Pietro Vozzella; Giampaolo Gabbi. SME Credit Access After Basel III. Does Size (and Quality) Matter? Access to Bank Credit and SME Financing 2016, 203 -224.
AMA StylePietro Vozzella, Giampaolo Gabbi. SME Credit Access After Basel III. Does Size (and Quality) Matter? Access to Bank Credit and SME Financing. 2016; ():203-224.
Chicago/Turabian StylePietro Vozzella; Giampaolo Gabbi. 2016. "SME Credit Access After Basel III. Does Size (and Quality) Matter?" Access to Bank Credit and SME Financing , no. : 203-224.