Network Resilience and Assessment of the Credit Granting Policy

Anna Grazia Quaranta, Els Heinsalu, Marco Patriarca, Francesca Pampurini
2020 International Journal of Business and Social Science  
In the credit risk context, the dynamics of contagion are extremely important because the problems of a firm may be transferred to the entire bank customers 'network, causing a chain of defaults. The paper shows in a concrete example how the knowledge of the network's structure, implicit in the relationships between a bank's customer firms, can help a bank to understand whether, and to what extent, the difficulties of one firm can produce negative effects on the others via a contagion
more » ... and give useful information to assess the quality of the credit granting policy. The approach we propose should be useful for both bank managers (to assess the borrower's selection process quality) and Regulatory Authorities (to evaluate the systemic risk propagation process).We study the resilience of the network implicit in an exclusive and unique dataset that includes the cross-relationships, during a five years period, among the firms that are customers of an Italian commercial bank.
doi:10.30845/ijbss.v11n8p5 fatcat:qi6uuoxwqvc3nmitqtef3sme4q