Bank Credit Risk Management and Risk Culture

Abstract

The recent financial turbulence and the increase of the non-performing loans in banks’ credit portfolio highlighted the importance of the banks’ credit risk management and the need to spread the risk culture across the bank organization. This chapter provides an overview of the state-of-art of the credit risk management of a sample of Italian banks. The methodology uses a survey investigating the credit risk management framework of a sample of 27 institutions. Tha dataset has been obtained through a questionnaire sent in the first half of 2016. The results indicate that the banks surveyed have established an adequate organizational design for their credit risk management. The banks have implemented a proper communication system, disseminating the risk culture across the entire organization. However, smaller banks still maintain a more simplified risk management system and, consequently, a smaller team dedicated to credit risk management.