Abstract
Using data from the Survey on Italian Household Income and Wealth (SHIW) gathered by the Bank of Italy, I test the effect of community banks on the probability of households becoming insolvent during the crisis. I find that a higher presence of community banks in local markets increases bankruptcies. This outcome is mainly driven by households living in small towns, where the competitive pressure from medium–large banks is lower. However, a higher use of transactional lending could mitigate the lower efficiency of community banks in screening and monitoring processes, while relationship lending does not seem to help community banks in loan underwriting procedures.
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Notes
- 1.
In the first part of the 1990s state-owned banks had around 70 % of the market in terms of total assets, while more recently the share has been close to zero.
- 2.
In accordance with the Bank of Italy’s definition of small and very small banks, I consider community banks to be those institutions with total assets of up to €9 billion (the Federal Reserve’s definition is based on a threshold of $10 billion).
- 3.
Data and statistics described and analyzed in this chapter, when referring to individual characteristics, relate to those of the householder, that is the person earning the highest income.
- 4.
SHIW weights are constructed to account for imperfect coverage, for eligibility and for attrition because of households being interviewed in previous surveys (panel units).
- 5.
- 6.
Correlations between exogenous variables do not signal matters of colinearity.
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Milani, C. (2017). Community Banks and Lending Technologies: Evidence from the Italian Retail Market. In: Miklaszewska, E. (eds) Institutional Diversity in Banking. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-42073-8_5
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