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.
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.