This paper aims at analyzing credit quality characteristics of supervised Italian Mutual
Guarantee Credit Institutions (MGCIs) supporting Small and Medium Enterprises (SMEs). The
prevailing literature on this subject, mainly descriptive, highlights how informational
asymmetries and geographical proximity are able to justify their double-intermediation effect.
Our study instead focuses on supervised MGCIs and provides evidence on the determinants of
impaired guarantees in the current deteriorated economic environment. Moreover, we compare
the performance experienced by both MGCIs and Cooperative Banks (CBs) in order to assess
whether there are differences in terms of product, risk and portfolio management variances.
Furthermore, we analyze the geographical distribution within these intermediaries to control for
territorial biases. We provide evidence that the impairments of MGCIs are positively related
with the intermediaries’ size and negatively with the regulatory capital. On the other hand, the
CBs’ non-performing loans of are highly dependent on net loan interest income. Our results
show a difference in the credit portfolio quality between the two types of intermediaries
operating in the same region but only for the year 2011. Finally, we show that portfolio quality
is strongly influenced by the geographical area in which intermediaries are established only for
CBs.
