Local banks and credit: from crisis to the new regulatory proposals for the development of lending policies in favour of the real economy

Comparing the credit cooperative banks (CCBs) and banking groups operating in Italy, descriptive analyses show that the CCBs, unlike large banks, despite the economic downturn, have continued to extend credit to customers, but at the cost of a higher incidence of bad credit. This increased credit risk of local banks has been caused by management policy choices, such as the preference to modify the conditions applicable to credit supply and to engage firms in long-term credit relationships rather than initiate credit recovery procedures. An empirical analysis shows that this risk has also been caused by a higher incidence of environmental factors such as the spread of situations of crime and lower economic well-being, especially in southern Italy. We therefore offer some suggestions for strengthening the creditworthiness assessment models adopted by the CCBs through the greater integration of soft and hard information and also on the potential benefits in the event of adopting rules for the use of credits of "quality" as collateral for obtaining low-cost funds from the European Central Bank (ECB).