Cross-Country Differences in How Behavioral Biases Affect Decision-Making in the Bank Industry: Evidence from Italy and Serbia

Since non-performing loans, despite the implementation of the Basel accords, which should have improved creditworthiness estimation, are strongly affecting European banks’ liquidity and stability, there could be a behavioral bias behind banks misallocation of capital. The purpose of this study is to investigate whether behavioral biases affect credit allocation in different ways in different countries. Particularly, we investigated how certain characteristics of the applicants, such as race, age, gender and education, affect bank officers’ decision-making process. The study was conducted submitting face-to-face questionnaires to 299 officers, 212 in Italy and 87 in Serbia, working in the credit chain. Running a Mann-Whitney U test on the mentioned two independent samples, result show that Italian officers are more influenced by behavioral biases than their Serbian colleagues when they have to decide whether or not to approve a loan application.