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This study investigates the main factors driving the evolution of the securitization of loans to Italian small and medium-sized enterprises (SMEs). The value of securitization increased in last two years, even though it has not been used as collateral for central banks. The disposal of non-performing loans (NPLs) may have been rather triggered by increasing attention of the international institutions to such an issue, within the general purpose of financial stability. The purpose of this paper is to interpret such a phenomenon focusing on Italian banks and restricting the analysis to the case of securitizations backed with loans to small and medium-sized enterprises (SMEs). The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs). It was found that the public guarantee had a positive impact on SME securitization, whereas securitization in other sectors has not been affected significantly. Such evidence suggests that, in the absence of a public guarantee, the financial stability target would have been at risk, and the effectiveness of collateral-based policies in the recent past must be improved to enhance access to credit for SMEs.

Credit institutions often refuse to lend money to small firms. Usually, this happens because small firms are not able to provide collateral to lenders. Moreover, given the small amount of required loans, the relative cost of full monitoring is too high for lenders. Group lending contracts have been viewed as an effective solution to credit rationing of small firms in both developing and industrialized countries. The aim of this paper is to highlight the potential of group lending contracts in terms of credit risk management. In particular, this paper provides a theoretical explanation of the potential of group lending programs in screening good borrowers from bad ones to reduce the incidence of non-performing-loans (NPL). This paper shows that the success of firms involved in selected group lending programs is due to the fact that co-signature is an effective screening device: more precisely, if lenders make a proper use of co-signature to screen good firms from bad ones, then only firms that are good ex-ante enter group lending contracts. So, the main argument of this paper is that well designed group lending programs induce good firms to become jointly liable, at least partially, with other good firms and discourage other – bad-firms to do the same. Specifically, co-signature is proven to be a screening device only in the case of a perfectly competitive bank sector.

This investigation exploits a new database, which merges the balance sheet items of Italian banks with sanctions by Bank of Italy and CONSOB in the last decade. We highlight the informative content of sanctions as key for the success of the supervisory activity. First, we evaluate the effects of sanctions on bank performance: we find a negative impact, more pronounced for those banks that were repeatedly sanctioned, for reasons mainly related to risk assessment and funding strategies. Second, we identify a set of bank ratios related to sanctions: we find a strong predictive power of indicators related to efficiency, productivity, and both funding and asset management. Overall, we show that after the first sanction several banks were not able to correct their strategies to avoid further penalties, because likely they were not provided with enough information on the motivations behind sanctions, hence on the required adjustments.

This paper analyzes the welfare effects of the recently revised Italian corporate law, that allows limited liability companies (so called societa a responsabilita limitata) to replace the fulfillment of strict capital requirements with the subscription of insurancecontracts that make capital available in case of default. We find that such insurance contracts are not convenient for insurers. However, if a benevolent planner is willing to subsidize insurers' expected losses, these contracts turn out to be welfare improving for a wide range of the relevantparameters. By calibrating the model with Italian data, we find that social welfare is maximized when the premium charged by the subsidized insurance companies is about 10% of total capitalrequirements; moreover, in this case the planner faces negligible expected losses.

This paper focuses on how structural funds from the EU might alleviate the credit crunch on Italian SMEs. We found that resources directly available to SMEs represent only 0.19% of 2013 loan facilities: moreover, the allotted resources for SMEs in 2014–2020 programs is expected to be even less. Not only are available resources scarce, but they are also allocated in an inefficient way through procedures that are not always transparent. We conclude that it would be very useful to improve efficiency and transparency, by adopting simpler procedures and reducing compliance costs.