IRB approach can squeeze credit supply- Bank of Italy paper
Costs of credit for private firms from IRB-regulated banks rises as instability increases, paper says
A working paper published by the Bank of Italy examines whether the internal ratings based approach to regulation has had an effect on credit supply.
Raffaele Gallo asks whether adopting the IRB approach has led to Italian banks’ loans to firms have become more sensitive to financial market conditions.
Gallo uses data for Italian banks and loans for the period 2008 to 2018, and looks at the difference in loans to private and public companies. He employs the VSTOXX index as a proxy for
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