Prudential Regulation of Large Loans in the Italian Banking System
The control of large loan exposures is a field of prudential regulation in which Italian banks are subject to rules far more permissive than those usually applied in other industrial countries. In this chapter we shall analyse the structure and rationale of the regulations in force, with a view to measuring how they match the standards set out in the EEC Recommendation of 22 December 1986, to which Italian regulators are expected to comply within a relatively short period of time.1 We shall also examine extensively the several sets of available data on large loan exposures in order to get an idea of the dimensions of the concentration problem and of its intrinsic riskiness. Finally we shall suggest some of the interim steps that the banking authorities may take in order to restore the effectiveness of the controls on large exposures in forms that are consistent both with the EEC principles and with their changing attitude in operating prudential regulation.
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