Organized Crime and Banks: Assessing the Effects of Anti-Mafia Police Actions on Lending

The Impact of Anti-Mafia Police Actions on Banking and Economic Activity

Introduction

Organized crime, particularly Mafia infiltration, has long distorted economic and financial systems in various regions, especially in Italy. The presence of Mafia-connected firms disrupts fair competition, impairs innovation, and creates an uneven market landscape. This article explores recent research that examines how targeted anti-Mafia police operations influence banks’ lending behaviors and the broader economic environment.

Effects of Dismantling Mafia-Connected Firms on Bank Lending

A comprehensive study analyzing 667 Mafia-connected firms alongside detailed loan-level data from the European Central Bank reveals that police actions removing Mafia influence lead to increased bank lending to non-criminal businesses in affected areas. Specifically, lending volume to legitimate firms increases by approximately 0.8%, translating into an injection of around €1.38 billion. This effect intensifies in regions with heavy Mafia activity, reaching up to a 2.1% increase — equivalent to €3.62 billion.

This lending surge reflects a revitalization of local economies once criminal monopolies are dismantled. Legitimate firms gain confidence to expand and innovate within a safer and more transparent market environment. The removal of coercive and corrupt Mafia-linked practices restores trust, encouraging firms to seek financing for growth.

Rising Borrowing Costs Amid Increased Lending

Despite the positive lending trends, borrowing costs rise following anti-Mafia interventions. Banks increase interest rates due to heightened perceptions of credit risk exposed by these operations. Newly revealed information about Mafia infiltration introduces uncertainties regarding residual criminal influences and economic stability, prompting banks to adopt a cautious stance.

The study found that this risk perception varies by bank type. Local and domestic banks, benefiting from close relationships and deep local knowledge (soft information), maintain stable interest rates. In contrast, non-local and foreign banks, relying more on hard data and lacking nuanced local insights, raise borrowing costs due to increased informational asymmetry.

Bastian Schwind-Wagner_Follow "Anti-Mafia police actions lead to increased bank lending to legitimate firms but also higher borrowing costs due to newly exposed risks. Local banks adapt better thanks to their deeper knowledge of the area, highlighting the importance of transparency and localized information in fostering economic recovery after organized crime is dismantled."

Mechanisms Driving Changes in Lending Practices

Two primary mechanisms explain these outcomes:

1. Intermediation Effect: The elimination of Mafia-connected firms creates a safer economic environment fostering competition and growth. This encourages legitimate businesses to seek additional financing, increasing demand for loans.
2. Information Effect: Anti-Mafia actions reveal previously hidden criminal links, providing banks with new information that reshapes risk assessment. While this transparency benefits long-term financial health, it also temporarily increases perceived risks, affecting lending terms.

Banks with prior exposure to Mafia-affiliated clients use accumulated private knowledge to better assess risks, allowing more measured lending decisions. Conversely, banks without such relationships face greater uncertainty and tend to increase interest rates.

Broader Economic Implications: Productivity Gains

The removal of Mafia influence also yields macroeconomic benefits. Municipalities affected by anti-Mafia operations experience significant productivity improvements, particularly in areas previously dominated by rent-extraction practices. The exit of inefficient criminal firms reallocates resources toward more efficient businesses, enhancing overall economic performance.

By fostering a competitive landscape free from corruption and coercion, these interventions promote better capital allocation and stimulate regional economic growth.

Conclusion

The dismantling of Mafia-connected firms through police actions significantly reshapes banking practices and local economies. While lending volumes to legitimate firms increase, borrowing costs rise temporarily due to adjusted risk perceptions. The differential responses between local and non-local banks highlight the importance of localized knowledge in managing informational asymmetries.

Ultimately, anti-Mafia interventions contribute not only to improved financial intermediation but also to economic revitalization by promoting transparency, competition, and productivity growth. These findings underscore the value of continued efforts to combat organized crime for the benefit of financial health and broader societal welfare.

Dive deeper

• Research ¦ Buchetti, Bruno and Fabrizi, Michele and Ipino, Elisabetta and Miquel-Flores, Ixart and Parbonetti, Antonio, Organized Crime and Banks: Assessing the Effects of Anti-Mafia Police Actions on Lending (June, 2025). ECB Working Paper No. 2025/3060, Available at SSRN: https://ssrn.com/abstract=5290101 or http://dx.doi.org/10.2139/ssrn.5290101 ¦ Link ¦ Disclaimer: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.