Credit Risk in Banks’ Exposures to Non‐Financial Firms

17 Pages Posted: 16 Nov 2018

See all articles by Matteo Accornero

Matteo Accornero

Bank of Italy

Giuseppe Cascarino

Bank of Italy

Roberto Felici

Bank of Italy

Fabio Parlapiano

Bank of Italy; Sapienza, University of Rome; TSBE - Tasmanian School of Business

Alberto Maria Sorrentino

Bank of Italy

Date Written: November 2018

Abstract

This paper outlines a framework based on microdata and a structural model to gauge credit risk in banks’ exposures to non‐financial firms. Sectoral risk factors are accounted for using a multi‐factor model. We use expected and unexpected losses as indicators of credit risk stemming from the corporate sector as a whole, and we put forward a measure of systemic risk relevance of economic sectors. We apply the model to the Italian economy, showing the sensitivity of credit risk indicators to different characteristics of default risk, cyclicality and concentration of economic sectors.

Keywords: credit risk, sectoral risk, systemic risk, structural multi‐factor model

Suggested Citation

Accornero, Matteo and Cascarino, Giuseppe and Felici, Roberto and Parlapiano, Fabio and Sorrentino, Alberto Maria, Credit Risk in Banks’ Exposures to Non‐Financial Firms (November 2018). European Financial Management, Vol. 24, Issue 5, pp. 775-791, 2018, Available at SSRN: https://ssrn.com/abstract=3285363 or http://dx.doi.org/10.1111/eufm.12138

Matteo Accornero (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giuseppe Cascarino

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberto Felici

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Fabio Parlapiano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

HOME PAGE: http://www.bancaditalia.it/

Sapienza, University of Rome ( email )

Via del Castro Laurenziano, 9
Rome, Rome 00161
Italy

HOME PAGE: http://https://web.uniroma1.it/dip_management/

TSBE - Tasmanian School of Business ( email )

Private Bag 84
Hobart, TAS 7001
Australia

HOME PAGE: http://www.utas.edu.au/business-and-economics/home

Alberto Maria Sorrentino

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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