TRIMming Banks Discretion

Seminar summary

Banks can reduce the amount of capital required by supervisors to fund their activities by using the discretion built into their internal models. To address this strategic behavior, the European Central Bank launched the Targeted Review of Internal Models (TRIM) to reduce banks’ discretion. TRIM provides us with a quasi-natural experimental design that allows us to analyze the impact of this shift on financial stability and credit allocation. Using confidential data from the European Credit Register and the TRIM exercise, we show that banks’ ability to screen borrowers improves and the risk of loan portfolios decreases. Following the ECB’s review of internal models, banks offer better loan terms to retain and attract high-quality borrowers. Improvement in loan terms favours access to credit for young firms.

How to attend this seminar

We welcome you to join us online on Wednesday 6 March 2024 at 2pm.

This seminar is free to attend, we ask that you contact the organiser Dr Anna Sarkisyan for details on how to join.

Speaker bio

Professor Franco Fiordelisi

Franco Fiordelisi is a Professor of Banking and Finance at Essex Business School of the University of Essex and director of the Financial Technology Centre EsseX (FinteX). He is also the President of the Financial Intermediation Network of European Studies (FINEST). His research revolves around different aspects of bank management, financial risk management, and Fintech. His work has been published in international academic journals (such as the Journal of Financial and Quantitative Analysis, Review of Finance, Journal of Financial Intermediation, and Journal of Corporate Finance). He is currently an associate editor of the Journal of Financial Stability, European Journal of Finance, and Economic Modelling.