The concentration risk measuring approaches differ based on the attention paid to the individual counterparts (single name approach) and/or the role attributed to the sectoral/geographic portfolio distribution. The specific characteristics of a financing contract may affect the level of effectiveness of the two approaches for assessing the portfolio concentration risk. In fact, the differences between commercial credit and financial credit are deemed relevant in the literature in order to justify the presence of structural differences in the customer portfolio of intermediaries specialized in one or the other credit typologies. All of those differences could influence significantly the estimates of risk exposure and the choice of the correct methodology could influence the amount of capital necessary to offer credit. The analysis of one of the most relevant markets for factoring lending (Italy) highlights significant differences in the portfolio of intermediaries specialized in the traditional credit offer with respect to factoring companies. In fact, the credit portfolio of the latter appears to be structurally more concentrated, particularly when using the single name assessment approach. With respect to bank credit in commercial lending, the greater concentration of the customer portfolio has no repercussions on the risk of the transaction and the behavior of major creditworthy customers seems to be not so relevant.

Gibilaro, L., Mattarocci, G. (2009). Concentration in lending: commercial vs financial credits. ACADEMY OF BANKING STUDIES JOURNAL, 8(1), 91-108.

Concentration in lending: commercial vs financial credits

MATTAROCCI, GIANLUCA
2009-01-01

Abstract

The concentration risk measuring approaches differ based on the attention paid to the individual counterparts (single name approach) and/or the role attributed to the sectoral/geographic portfolio distribution. The specific characteristics of a financing contract may affect the level of effectiveness of the two approaches for assessing the portfolio concentration risk. In fact, the differences between commercial credit and financial credit are deemed relevant in the literature in order to justify the presence of structural differences in the customer portfolio of intermediaries specialized in one or the other credit typologies. All of those differences could influence significantly the estimates of risk exposure and the choice of the correct methodology could influence the amount of capital necessary to offer credit. The analysis of one of the most relevant markets for factoring lending (Italy) highlights significant differences in the portfolio of intermediaries specialized in the traditional credit offer with respect to factoring companies. In fact, the credit portfolio of the latter appears to be structurally more concentrated, particularly when using the single name assessment approach. With respect to bank credit in commercial lending, the greater concentration of the customer portfolio has no repercussions on the risk of the transaction and the behavior of major creditworthy customers seems to be not so relevant.
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/11 - Economia degli Intermediari Finanziari
English
Senza Impact Factor ISI
Gibilaro, L., Mattarocci, G. (2009). Concentration in lending: commercial vs financial credits. ACADEMY OF BANKING STUDIES JOURNAL, 8(1), 91-108.
Gibilaro, L; Mattarocci, G
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/18734
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