We analyze what are the main pricing components for performing loans. By exploiting a survey conducted by the authors in AIFIRM (2021), we provide empirical evidence about whether and to what extent various pricing components are related to the interest income ratio. Our main findings are that banks’ interest income is positively related to the adoption of advanced internal risk-based models, the calculation of the break-even rate, and the implementation of the risk-adjusted profitability measures in the pricing, while it is negatively linked to higher market competition, a decentralized pricing function (allowing more customer-oriented loans prices).
Risk-Adjusted Loan Pricing
Scardozzi Giulia
2022-01-01
Abstract
We analyze what are the main pricing components for performing loans. By exploiting a survey conducted by the authors in AIFIRM (2021), we provide empirical evidence about whether and to what extent various pricing components are related to the interest income ratio. Our main findings are that banks’ interest income is positively related to the adoption of advanced internal risk-based models, the calculation of the break-even rate, and the implementation of the risk-adjusted profitability measures in the pricing, while it is negatively linked to higher market competition, a decentralized pricing function (allowing more customer-oriented loans prices).I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
