آیا ریسک پرتفوی بانک دوره ای می باشد؟: شواهد از ایتالیا با استفاده از یک بردار رگرسیون اتوماتیک

This study analyzes the procyclical behavior of the default rates of Italian bank borrowers over the last two decades. A vector autoregression (VAR) is employed to assess the extent to which macroeconomic shocks affect the banking sector (first round effect). The VAR also helps to disentangle the feedback effects from the financial system to the real side of the economy. We find evidence of the first round effect and some support for the feedback effect, which tends to operate when banks have thin capital buffers. From a policy perspective, our results confirm the importance for banks to keep capital well above the regulatory minimum in order to maintain an adequate credit supply also during contractions thus reducing second round impacts.

A large empirical literature has focused on the analysis of the effects of macroeconomic disturbances on the banking system. This stream of work is usually referred to as research on the procyclical nature of banks’ behavior. These studies consider the current macroeconomic conditions as the main exogenous determinants of banks’ soundness. Their goal is to assess to what extent the macroeconomy affects banks’ performance (cyclicality) and whether, in turn, banks’ reaction to changing macroeconomic conditions further influences the macroeconomy, amplifying its fluctuations (procyclicality). In general, the evidence arising from these investigations tends to confirm that banks’ balance sheets are affected, simultaneously or with some delay, by the business cycle and many authors claim that banks’ behavior is procyclical. However, most of them tend to assume, rather than really document, that procyclicality is a consequence of cyclicality. The main argument is that, in unfavorable phases of the business cycle, losses due to credit risk tend to deplete banks’ profits, which in turn may reduce capital buffers and thus banks’ willingness to lend. In particular, in those countries where bank lending is the main source of external financing for corporations, the decline in credit supply can reduce firms’ ability to invest, thus reinforcing recessionary impulses. However, the current literature largely neglects to empirically test the significance of such a feedback mechanism.

The aim of this paper is to shed some light on the relation between business cycle and banks’ behavior for the Italian banking system. Previous studies have mainly focused on the issue of cyclicality of banks’ operations, whereas the analysis of the feedback effect from the real economy to the banking system has been largely neglected so far. We employ a reduced-form VAR to assess the relevance of both the effect of the business cycle on banks’ borrowers default rates and the possible impact of banks’ reaction to loan losses on the real economy. The VARs allow to fully capture the interactions among the relevant variables analyzing their simultaneous responses to shocks of different nature.