Credit Risk Management of Property Investments through Multi-Criteria Indicators

Marco Locurcio, Francesco Tajani, Pierluigi Morano, Debora Anelli and Benedetto Manganelli
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Marco Locurcio: Department of Civil, Environmental, Land, Building Engineering and Chemistry, Polytechnic University of Bari, Via Orabona 4, 70125 Bari, Italy
Francesco Tajani: Department of Architecture and Design, Sapienza University of Rome, Via Flaminia 359, 00196 Rome, Italy
Pierluigi Morano: Department of Civil, Environmental, Land, Building Engineering and Chemistry, Polytechnic University of Bari, Via Orabona 4, 70125 Bari, Italy
Debora Anelli: Department of Architecture and Design, Sapienza University of Rome, Via Flaminia 359, 00196 Rome, Italy
Benedetto Manganelli: School of Engineering, University of Basilicata, Viale dell’Ateneo Lucano, 85100 Potenza, Italy

Risks, 2021, vol. 9, issue 6, 1-23

Abstract: The economic crisis of 2008 has highlighted the ineffectiveness of the banks in their disbursement of mortgages which caused the spread of Non-Performing Loans (NPLs) with underlying real estate. With the methods stated by the Basel III agreements, aimed at improving the capital requirements of banks and determining an adequate regulatory capital, the banks without the skills required have difficulties in applying the rigid weighting coefficients structures. The aim of the work is to identify a synthetic risk index through the participatory process, in order to support the restructuring debt operations to benefit smaller banks and small and medium-sized enterprises (SME), by analyzing the real estate credit risk. The proposed synthetic risk index aims at overcoming the complexity of Basel III methodologies through the implementation of three different multi-criteria techniques. In particular, the integration of objective financial variables with subjective expert judgments into a participatory process is not that common in the reference literature and brings its benefits for reaching more approved and shared results in the debt restructuring operations procedure. Moreover, the main findings derived by the application to a real case study have demonstrated how important it is for the credit manager to have an adequate synthetic index that could lead to the avoidance of risky scenarios where several modalities to repair the credit debt occur.

Keywords: NPLs; mortgage loan; risk analysis; MCDA; AHP; PROMETHEE (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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