NPLs have been addressed, both by traditional literature and competent authorities, almost looking at the financial impact on the intermediary stability, mostly neglecting effects in terms of banking system stability and wealth distribution. The research looks both at the micro and micro economic effects of NPLs, blending the traditional risk management approach with the ethical finance approach to evaluate the potential strategies in terms of: (i) micro and macro financial stability; (ii) wealth distribution among bank's shareholders, private stakeholders and Governments. To achieve the aim, we implement a building block approach analyzing the following topics: (i) specific literature; (ii) the accounting treatment of NPLs; (iii) the evolution of NPLs in Italy and in Europe; (iv) alternative NPLs management strategies suggested by the ECB; (v) the EU regulatory framework impacting on the implementation of different strategies; (vi) the financial architectures that can be used to implement different strategies.
This would allow us to build up a valuation model useful to estimate the impact of the different NPLs management strategies in terms of: (i) stability of the single bank in the perspective of risk management; (ii) sustainability of the single bank in terms of performance; (iii) stability of the banking system; (iv) efficiency of the banking system in channeling credit to real economy; (iv) wealth distribution among the different stakeholders involved; (v) impact on public intervention.
The final output of the research is represented by a valuation model useful for bank's managers and policy makers to evaluate the best strategies to optimize the management of NPLs portfolios, blending different perspectives: micro and macro financial stability, wealth distribution and State intervention.
The final output of the research is represented by a valuation model useful for bank's manager and policy makers to evaluate, on a case by case basis, the best strategies to optimize the management of NPLs portfolios.
The innovativeness of this research is represented by a valuation model that blends the traditional risk management approach with the ethical finance approach in order to evaluate the potential strategies in terms of: (i) micro and macro financial stability; (ii) wealth distribution among bank's shareholders, private stakeholders and Governments.