TITLE:
Does the New Basel Accord Affect Credit in Italy?
AUTHORS:
Mario Mustilli, Eugenio D’Angelo, Francesco Campanella, Domenico Graziano
KEYWORDS:
Credit Crunch, Basel Accord, Italian Credit Market
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.7 No.4,
March
31,
2017
ABSTRACT: The
purpose of this study is to investigate the effect of the Basel regulation on
the amount of credit in Italy. The research sample is composed by 343 Italian
banks that operated in Europe in 2014. Data were gathered from Bank scope
(Bureau Van Dijk database), from Data Stream (Thomson Reuters) and from the
annual reports of banks under investigation. After having investigated the
relationship between variables, using the Pearson correlation analysis, the
research hypotheses have been investigated using the regression analysis (OLS).
The research shows that, in Italy, the increase in regulatory capital required
by Basel III agreements and the default probability level of client portfolios
of the banks would have a major role in the recent contraction of credit. A
more efficient solution to reduce the current state of the credit crunch and at
the same time increase the solidity of the banking system, could be represented
by an intervention in the system of evaluation of creditworthiness and the
relationship between banks and enterprises. Such new regulation should reduce
the high probability of default (PD) of client portfolios, which seems to be
more critical than market risk and operational risk in limiting the amount of
credit.