Ricerc@Sapienza

By building up a database comprehensive of sanctions towards Italian banks,
this research identifies few financial indicators explicative of enforcement actions
to provide banks with a forecasting model to evaluate their strategies’ suitability
for compliance and resilience to adverse shocks. The results, to the extent of both
variables selection and size of the marginal effects, are aligned with the output of
the stress tests. The variables positively affecting the resilience to adverse shocks are
the ones associated with a lower probability of sanctions. We find a strong predictive
power for assets and loans growth rates, indexes of productivity, efficiency and
risk, and capital and liquidity ratios. The model performs well in terms of forecast
accuracy, mainly taking into account the larger explicative power for sanctions
related to credit risk management.