Abstract
This work studies the effect of Italian regulation D.Lgs. No. 141/2010 (Law 141), introduced to transpose Directive 2008/48/EC of the European Parliament into the performance of credit intermediaries. Law 141’s entry into force provides an opportunity to study the effect of greater market entry barriers on sector profitability. The Italian case is particularly significant because it is characterized by strict application of the directive, a low level of financial literacy, and a distribution model that, for some kinds of personal loans, allows agents and brokers a significant role (Canales & Nanda, 2012). We study a panel of Italian agents and credit brokers, using a panel and difference-in-differences regression. The results show that, from 2009 to 2017, firm profitability was driven not by the increase in market entry requirements introduced by Law 141 but, rather, by firms’ size, efficiency, and business model.
Highlights
This work studies the effect of Italian regulation D.Lgs
It creates a new authority to supervise the sector – the Organismo Agenti e Mediatori (OAM) – financed by fees applied to the operators themselves
Law 141 introduces new requirements for credit market operators in terms of capitalization and professionalism; it creates a new specific authority, OAM, to supervise the sector, financed by fees applied to the operators themselves
Summary
This work studies the effect of Italian regulation D.Lgs. No 141/2010 (Law 141) on the performance of credit intermediaries. No 141/2010 (Law 141) on the performance of credit intermediaries This new regulation was introduced to transpose Directive 2008/48/EC of the European Parliament into law. It was approved to harmonize the substantial differences between the laws of the various member states in the field of credit for natural persons in general and consumer credit in particular... Consumer credit targets clients with a lower average income that could “suffer income shocks, credit withdrawals and unforeseen expenses on durables” and, who “make greater use of quick-access but high-cost credit items such as store cards and payday loans” A credit intermediary is a natural or legal person who is not acting as a creditor and who 1) presents or offers credit agreements to consumers; 2) assists consumers by undertaking preparatory work in respect of credit agreements other than as referred to in (1) or 3) concludes credit agreements with consumers on behalf of the creditor
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