Abstract:
We investigate the extent to which crime, and the inability to effectively suppress it, affect the performance of local banks in terms of credit extension, asset quality, and profitability. The analysis focuses on cooperative banks in Italy, typically small institutions with strong ties to their local communities, over the period 2013–2023. The findings suggest that both crime and judicial inefficiency, even when considered separately and after controlling for banks' operational efficiency, significantly influence credit extension and the incidence of non-performing loans. While their impact on overall profitability appears limited, non-interest income is significantly reduced.
