Plugging the gaps

Italian banks have overhauled the risk management of their loan portfolios. But weaknesses still remain, particularly in the area of risk-adjusted pricing and credit risk transfer. Rachel Wolcott looks at what steps Italy’s banks are taking to fill the gaps

Italy’s banking sector has changed its attitude towards risk management over the past five years. Credit portfolio management and the use of robust internal ratings models were virtually unheard of a few years ago. Now, they form a vital part of Italian banks’ risk management functions.

However, there are still areas of weakness. The improvements in the management of their loan portfolios have yet to filter down to loan pricing. What’s more, there is a lack of tools available to