The Italian CCBs Reform and Usury Credit Risk : A Quantitative Analysis

The aim of the paper is twofold. First of all, it highlights some weak points of the new reform of the Italian cooperative credit banks (i.e. the Law 08 April, 2016). Furthermore, after a sectioning of the cooperative credit trends during recent years, it aims to emphasize a possible risk of the new reform of the Italian cooperative credit banks (CCBs). In particular, we evaluated the possible effect of such reform in terms of an increase in the demand and supply credit over the legal/formal channel. For this purpose, we take into account the role played by local banks, and in particular cooperative credit, in the supply of loans to small- and medium-sized enterprises (SMEs). It is well known that the individuals most exposed to usurious credit's risk belong to this category.Considering that the foundation of cooperative credit, rural and artisan banks had an essential role in the fight against usury, in this paper we estimated the possible risk of illegal credit that could originate from the Italian CCBs reform. To this end, we proposed a dynamic model of an embedded mortgage plan with a variable usurious rate. This rate is a function of time, and it influences the probability for the usurer to gain the collateral. The guarantee is the main scope of the usurer because it allows to pursue his/her money laundering purposes