No abstract

A domestic credit insurance contract is a policy that covers the risk of the nonpayment of future commercial credit as a result of the failure to pay within the agreed terms and conditions (protracted default) or the insolvency of the buyer. To evaluate the effective level of financial protection offered by trade credit policies, we collected a database of contracts issued between 2006 and 2013 by a number of Italian insurance companies, which account for 80-85% of the Italian market. We find that, to be considered as able to mitigate credit risk, the policies must have their contract clauses changed. In that case, such a policy, if accepted by the supervisory authority, could permit banks to reduce the capital requirement connected with the discount of trade credits. These results are particularly important for insurance companies.

PurposeThe purpose of this paper is to verify recovery risk management capabilities by lessors. It tests several hypotheses and finds out interesting specific results for lessors.Design/methodology/approachThe approach is empirical: two different database of leasing contracts are analysed with econometric methodologies.FindingsThere is clear evidence that: lessors are ex ante able to balance the probability of default and the loss given default case by case, using proper contract structures; and they carefully manage recovery procedures and strategies according to operations' characteristics.Research limitations/implicationsThe data used are large enough, but come from institutions concentrated in Italy. Future research could be extended to other relevant countries.Practical implicationsResults presented are verified in leasing companies which made a limited use of rating systems and credit risk model: they have been achieved by the continuous improvements of traditional lending practices. The development of modern reliable systems can enhance risk management capabilities; our findings can help building more structured and advanced credit risk management tools.Originality/valueThe paper adds to the literature in the sense that gives clear evidence of a neglected but important fact of real world credit markets: financial intermediaries have the capability of properly assessing risk components and manage loss given default (LGD) in order to control overall credit risk.

Non-Performing Exposures delle banche: diktat impazienti e soluzioni nazionali vs gestione paziente e Asset Management Companies a livello europeo di Rainer Masera

No abstract