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AbstractIn the aftermath of the Great Recession, the number of bank branches declined in most developed countries. In this paper, we investigate how banks have downsized their branch networks in Italy, by comparing the pre‐ and post‐crisis spatial distribution of branches. By using a detailed data set that includes a wide set of controls for the characteristics of each bank branch, we estimate the probability of a branch being closed as a function of its distance from both proprietary and competitors' branches. We find that banks are more prone to close branches in those areas where other proprietary branches are closer and where competitors' branches are closer. This indicates that, since the start of the crisis, banks have closed branches especially in those areas where their proprietary network was relatively more populated and the competition was fiercer.

This book describes various approaches in modelling financial risks and compiling ratings. Focusing on emerging markets, it illustrates how risk assessment is performed and analyses the use of machine learning methods for financial risk assessment and measurement. It not only offers readers insights into the differences between emerging and developed markets, but also helps them understand the development of risk management approaches for banks. Highlighting current problems connected with the evaluation and modelling of financial risks in the banking sector of emerging markets, the book presents the methodologies applied to credit and market financial risks and integrated and payment risks, and discusses the outcomes. In addition it explores the systemic risks and innovations in banking and risk management by analyzing the features of risk measurement in emerging countries. Lastly, it demonstrates the aggregation of approaches to financial risk for emerging financial markets, comparing the experiences of various countries, including Russia, Belarus, China and Brazil.

A vast literature has emphasised that small banks are at a comparative advantage in lending to small businesses. In this paper, we show that, in addition to bank size, loan officers' authority affects banks' specialisation in small business lending. By using a unique dataset based on a survey of Italian banks, we find that loan officers' authority has a key role in explaining bank specialisation in small business lending. In particular, banks that delegate more decision‐making power to their loan officers are more willing to lend to small firms than other banks. We use several proxies for measuring loan officers' authority: their discretion in loan approval and in setting loan interest rates, the amount of money up to which they are allowed to lend autonomously, their turnover, their compensation schemes and the kind of information (soft vs. hard information) used both for screening and monitoring purposes.