Economic and Financial Determinants of the Italian Local Government Ratings: An Empirical Analysis

Abstract

This research originates from some starting-points, for example the difficulty in evaluating the financial needs of local governments, that have modified their funding policies as time goes on; the lack of banking standardized systems of internal assessment of their creditworthiness (unlike corporate); an evaluation so based on ratings for the major local governments; the noted inefficiency of these external judgements for both public and private counterparts; the provisions of Authorities (Bank of Italy and Basel Committee) by which banks have to check internally ratings. While treasury services of local governments are mostly managed by even the smallest Italian banks, innovative financing services are supplied by a few operators with a heterogeneous supply, and local governments themselves use not much these instruments selecting the best supply each time. The relationship between banks and local governments has to be developed, on the one hand, researching the main partner and, on the other hand, developing the local territory. In this framework banks, especially local ones, have a strategic opportunity to take as well in order to approach SMEs.