Credit Demand and Supply in Italy During the Financial Crisis

43 Pages Posted: 28 Oct 2010

Date Written: April 23, 2010


The paper analyzes developments in bank lending in Italy during the financial crisis, assessing the relative contribution of demand and supply factors to lending deceleration. We find that the slowdown in lending was mainly due to a reduction in demand. For households, this can be attributed to the weakness of the real estate market and to the fall in consumption; for firms, a diminution in financing needs, due in turn to the sharp contraction of investment. Credit market indicators and empirical studies suggest that lending growth may also have been curbed by tensions in credit supply. These tensions mainly reflected the increase in borrower risk, as well as the impact of the crisis – especially in its first phase – on banks’ capital, liquidity, and ability to access external funding. Econometric analyses corroborate these indications, suggesting that the overall impact of banks’ conditions on the lending slowdown was modest. Over the next few months, supply tensions could persist, but the risk of a limitation of credit will be moderated by the economic recovery and the consequent reduction in borrower default risk. There will also be support from public interventions, which have provided financial support to firms, improving their creditworthiness, and strengthened banks’ capital and liquidity position.

Note: Downloadable document is in Italian.

Keywords: credit demand and supply, financial crisis, Italian economy

JEL Classification: E51, E58, E65

Suggested Citation

Panetta, Fabio and Signoretti, Federico Maria, Credit Demand and Supply in Italy During the Financial Crisis (April 23, 2010). Bank of Italy Occasional Paper No. 63, Available at SSRN: or

Fabio Panetta

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
+39 06 4792 4143 (Phone)
+39 06 4792 3723 (Fax)

Federico Maria Signoretti (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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