Modeling non performing loans probability in the commercial banking system: efficiency and effectiveness related to credit risk in Italy
In this paper we model the effect of the non performing loans on the cost structure of the commercial banking system. With this aim, we comment on an increase in the non performing loans by studying the consequences of such a change on the cost function and compute the probability of failure of maintaining a performing loan as such. In so doing we are convinced that geography does matter and evaluate the risk propensity of the bank towards the nonperforming loans accordingly. We finally stress that traditional efficiency indicators of cost elasticity do not fit properly with such a problem and propose a measure based on the costs for managing and monitoring the loans which, according to the related density function, will reveal effectively as non performing.
Year of publication: |
2009
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Authors: | Maggi, Bernardo ; Guida, Marco |
Institutions: | Facoltà di Economia, Università degli Studi di Roma "La Sapienza" |
Subject: | Non performing loans probability | Bank management | Cost function | Efficiency and effectiveness indicators | Flexible forms |
Saved in:
freely available
Extent: | application/pdf |
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Series: | |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Number 1 29 pages |
Classification: | G21 - Banks; Other Depository Institutions; Mortgages ; D24 - Production; Capital and Total Factor Productivity; Capacity ; C33 - Models with Panel Data ; C51 - Model Construction and Estimation ; L23 - Organization of Production |
Source: |
Persistent link: https://www.econbiz.de/10004963431