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Archive » September 2016 » Do Italian banks have a competitive disadvantage in lending?

Do Italian banks have a competitive disadvantage in lending?

Giovanni Ferri, Zeno Rotondi
September 2016 - n. 9
Jel codes: G21, G28, G32

We hypothesize that, with respect to banks from other European countries, Italian banks suffer a competitive disadvantage in business lending. We estimate two cross sections of about 100 European banks for 2013: the first on the determinants of exposure to credit risk on performing business loans, the second on the determinants of non performing business loans. The results confirm our hypothesis and call for system solutions to remove Italian banks' competitive disadvantage. The high road is launching a large-scale plan of government guarantees to support business lending. We argue that this public intervention would be compatible with the public finance balances. Showing that the competitive disadvantage in business loans for Italian banks affects not only retail Smes but also corporate Smes and is greatest for large corporates, we argue that it is necessary, as in Germany, to allow also midsized enterprises to access public guarantees.


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