This study analyzes bank lending behavior before and during the most recent financial crisis. Banks are more willing to grant loans during economic expansion. However, this behavior can result in reduced portfolio asset quality. The analysis tries to facilitate understanding of whether this relationship is always true. A second aim of the study is to highlight whether the impact of credit risk on bank lending behavior during a financial crisis is greater for banks that grew faster during the pre-crisis period than for other banks. The analysis is based on a sample of banks in Italy, an example of a country undergoing a credit crunch without a lending bubble burst. The essay shows that effectively, most of the banks that grew faster during a pre-crisis period show a higher growth of non-performing loans and a greater reduction in lending activity during a financial crisis. However, 34% of banks that grew faster during a pre-crisis period have a low growth of non-performing loans in the subsequent years. Finally, results suggest that credit risk negatively affects bank lending behavior, but we cannot emphasize a higher impact relative to fast banks with respect to other banks.

Cucinelli, D. (2015). Can speed kill? The cyclical effect of rapid credit growth: evidence from bank lending behavior in Italy. Intervento presentato a: ADEIMF associazione docenti di economia, intermediari e mercati finanziari, Piacenza.

Can speed kill? The cyclical effect of rapid credit growth: evidence from bank lending behavior in Italy

CUCINELLI, DORIANA
2015

Abstract

This study analyzes bank lending behavior before and during the most recent financial crisis. Banks are more willing to grant loans during economic expansion. However, this behavior can result in reduced portfolio asset quality. The analysis tries to facilitate understanding of whether this relationship is always true. A second aim of the study is to highlight whether the impact of credit risk on bank lending behavior during a financial crisis is greater for banks that grew faster during the pre-crisis period than for other banks. The analysis is based on a sample of banks in Italy, an example of a country undergoing a credit crunch without a lending bubble burst. The essay shows that effectively, most of the banks that grew faster during a pre-crisis period show a higher growth of non-performing loans and a greater reduction in lending activity during a financial crisis. However, 34% of banks that grew faster during a pre-crisis period have a low growth of non-performing loans in the subsequent years. Finally, results suggest that credit risk negatively affects bank lending behavior, but we cannot emphasize a higher impact relative to fast banks with respect to other banks.
No
slide + paper
Scientifica
non-performing loans; banks; bank lending behavior; credit risk; loans growth
English
ADEIMF associazione docenti di economia, intermediari e mercati finanziari
Cucinelli, D. (2015). Can speed kill? The cyclical effect of rapid credit growth: evidence from bank lending behavior in Italy. Intervento presentato a: ADEIMF associazione docenti di economia, intermediari e mercati finanziari, Piacenza.
Cucinelli, D
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/110962
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