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SME Credit Access After Basel III. Does Size (and Quality) Matter?

In: Access to Bank Credit and SME Financing

Author

Listed:
  • Pietro Vozzella

    (University of Siena)

  • Giampaolo Gabbi

    (University of Siena and SDA Bocconi School of Management)

Abstract

We address the estimation of asset correlation for credit risk assessment in the Italian market and its impact on SME credit access. The empirical evidence demonstrates that assumptions underlying the regulatory capital formula are not substantiated, and benefits received from the respect of granularity could be reduced or even removed. This outcome could depend on the positive relationship between asset correlation and default probability, the negative relationship between asset correlation and size and the positive link between default correlation and default probability. The regulatory impact is that the goal of levelling the playing field could fail, a regulatory arbitrage opportunity could be created and certain firms, clustered by size and industry, could suffer from the credit crunch.

Suggested Citation

  • Pietro Vozzella & Giampaolo Gabbi, 2017. "SME Credit Access After Basel III. Does Size (and Quality) Matter?," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Stefania Rossi (ed.), Access to Bank Credit and SME Financing, chapter 8, pages 203-224, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-41363-1_8
    DOI: 10.1007/978-3-319-41363-1_8
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