IMPACT OF BASLE 2 ON ITALIAN IMPACT OF BASLE 2 ON ITALIAN BANK LOANS: CAPITAL BANK LOANS: CAPITAL REQUIREMENTS ASSESSMENT, REQUIREMENTS ASSESSMENT, EFFECTS OF COLLATERALS AND EFFECTS OF COLLATERALS AND PRICING SIMULATIONSPRICING SIMULATIONS
R. De Lisa, F. Poli, F. Vallascas
Cagliari, 26 may 2007
Literature reviewLiterature review Basel Committee’s QISs (last QIS 5 – June 2006). Bocchi & Lusignani (2004): sample of loan portfolios of
15 medium size banks (loans to firms with annual turnover < 50 miln Euros).
Gai & Rossi (2003): sample of 41.000 Tuscanian firms. Fabi, Laviola, Marullo Reedtz (2003): Altman & Sabato (2005): sample of 20.000 italian SMEs. De Lisa, Marchesi, Vallascas (2006): estimation of
capital requiments for Italian bank loan portfolios (loans to firms), effects of collaterals and pricing implications.
Aims of the studyAims of the study Determine capital requirements
under Basle 2 (IRBF and Standardized) for bank loan portfolios disaggregated by type of borrower, type of loan and geographycal area
Estimate effects of personal guarantees and collaterals on capital requirements for …
Italian bank loan Italian bank loan portfolio’s mixportfolio’s mix
NORTH WEST NORTH EASTT
CENTRE
SOUTH ITALY
% LOANS TO FIRMS RETAIL 25,76 35,78 24,05 29,25 28,53 CORPORATE (SME) 10,40 12,43 10,39 8,99 10,69 CORPORATE 31,50 17,52 27,40 11,14 23,73
% LOANS TO FAMILY BUSINESS RETAIL 5,48 7,48 6,47 10,16 6,96 CORPORATE (SME) 0,21 0,26 0,21 0,18 0,22
% LOANS TO HOUSEHOLDS MORTGAGES 21,58 20,82 24,50 28,10 23,07 OTHER LOANS 5,06 5,72 6,99 12,18 6,80
Capital adequacy ratios Capital adequacy ratios (IRBF vs Standardized without guarantees and (IRBF vs Standardized without guarantees and collaterals)collaterals)
FIRMS AND FAMILY BUSINESS NORTH WEST NORTH EAST CENTRE SOUTH ITALY
RETAIL 4,62 4,28 5,01 5,30 4,79 CORPORATE 8,55 7,68 9,57 9,58 8,72 CAR 6,88 5,68 7,54 6,75 6,73
HOUSEHOLDS
NORTH WEST NORTH EAST CENTRE SOUTH ITALY MORTGAGES 4,84 4,21 5,68 6,59 5,15 OTHER LOANS 4,02 3,65 4,48 4,91 4,20 CAR 4,68 4,09 5,41 6,08 4,93
TOTAL CAR 6,29 5,26 6,87 6,48 6,20
FIRMS AND FAMILY BUSINESS NORTH WEST NORTH EAST CENTRE SOUTH ITALY
CAR 7,15 6,82 7,11 6,68 5,65
HOUSEHOLDS NORTH WEST NORTH EAST CENTRE SOUTH ITALY
CAR 3,41 3,49 3,51 3,77 3,53
TOTAL CAR 6,15 5,94 5,98 5,51 5,95
IRBF
STAND
Main findingsMain findings
Impact of collaterals and guarantees Impact of collaterals and guarantees on CARs for loans to firms on CARs for loans to firms (IRBF vs STAND)(IRBF vs STAND)
HYPOTHES ES % lonas with personal guarantees
20,25%
% loans with collaterlas 4,28% % loans without guarantees
75,48%
PD of guarantor 0,45%
FIRMS AND FAMILY BUSINESS NORTRH WEST NORTH EAST CENTRE SOUTH ITALY
CAR WITHOUT COLLATERALS
6,88 5,68 7,54 6,75 6,73
CAR WITH COLLATERALS
6,24 5,26 6,77 6,19 6,13
% CHANGE -9,50 -7,55 -10,56 -8,93 -9,24
FIRMS AND FAMILY BUSINESS NORTH WEST NORTH EAST CENTRE SOUTH ITALY
CAR WITHOUT COLLATERALS
7,15 6,82 7,11 6,68 6,99
CAR WITH COLLATERALS
6,20 5,96 6,18 5,85 6,08
% CHANGE -13,26 -12,64 -13,07 -12,43 -12,99
IRBF
STAND
Main findingsMain findings
Capital release and Capital release and volume of additional loans volume of additional loans to firmsto firms
Impact on loan rates Impact on loan rates (Estimation without collaterals and personal (Estimation without collaterals and personal guarantees)guarantees)
5,34%
5,17%
5,61%
5,95%
5,46%
5,10%
4,90%
5,39%
5,75%
5,23%
5,23%
5,08%
5,50%
5,85%
5,33%
5,16%
4,92%
5,48%
5,78%
5,25%
0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00%
NORTH WEST
NORTH EAST
CENTRE
SOUTH
ITALY
Loan rates
BASLE 1 FAMILY BUSINESS IRBF FAMILY BUSINESS BASLE 1 FIRMS IRBF FIRMS
Impact on loan rates for all firms - IRBF - Impact on loan rates for all firms - IRBF - (with and without collaterals and personal (with and without collaterals and personal guarantees)guarantees)
5,24%
5,77% 5,47%
4,92%
5,15%
5,00%
5,37%
4,75%
4,97%
5,16%
0,00%
1,00%
2,00%
3,00%
4,00%
5,00%
NORTH WEST
NORTH EAST
CENTRESOUTH
ITALY
IRBF WITHOUT COLLATERALS (Average rate) IRBF WITH COLLATERALS (Average rate)
Main findingsMain findings
Suggestion for further research
MethodologyMethodology