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Frequency vs. Size of Bank Fines in Local Credit Markets


  • Francesco Marchionne

    (Indiana University)

  • Michele Fratianni

    (Kelley School of Business, Bloomington, Indiana, USA and Universita' Politecnica delle Marche, Ancona, Italy)

  • Federico Giri

    (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche, Ancona, Italy)

  • Luca Papi

    (Di.S.E.S. - Universita' Politecnica delle Marche)


We examine how banking supervisors affect credit at the local level by charging fines to individual banks. Using a macro approach to capture the direct effect on the fined bank and the indirect effect on the other banks operating in the local credit market, we estimate reputational, reallocation and balance sheet effects on Italian provinces over the period 2005-2016 by a fixed effects model and instrumental variables. Provincial gross bank loans expand after a fine independently of its size. The impact of fine frequency depends on the size of the provincial banking sector, but neither on bank governance/ownership nor crises. No statistically significant evidence supports reputational or balance sheet effects. Instead, our results suggest that it would behoove bank supervisors to favor frequency over size of bank fines. Bank fines seem to work more like a good housekeeping seal of approval, enhancing transparency and effective banking practices.

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  • Francesco Marchionne & Michele Fratianni & Federico Giri & Luca Papi, 2021. "Frequency vs. Size of Bank Fines in Local Credit Markets," Mo.Fi.R. Working Papers 169, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:169

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    References listed on IDEAS

    1. Diana Bonfim & Geraldo Cerqueiro & Hans Degryse & Steven Ongena, 2020. "On-Site Inspecting Zombie Lending," Swiss Finance Institute Research Paper Series 20-16, Swiss Finance Institute.
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    More about this item


    fine frequency; fine size; bank credit; local markets; supervision;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment

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