TY  - JOUR
AU  - Guiso,Luigi
AU  - Sapienza,Paola
AU  - Zingales,Luigi
TI  - The Cost of Banking Regulation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12501
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12501
L1  - http://www.nber.org/papers/w12501.pdf
N1  - Author contact info:
Luigi Guiso
European University Institute
Economics Department
Villa San Paolo
50133 Florence
ITALY
Fax: 39-055-4685-902
E-Mail: luigi.guiso@eui.eu

Paola Sapienza
Kellogg School of Management
Northwestern University
2001 Sheridan Road, Evanston, IL 60208
Tel: 847/491-7436
Fax: 847/491-5719
E-Mail: paola-sapienza@northwestern.edu

Luigi Zingales
Booth School of Business
The University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-3196
Fax: 773/834-2081
E-Mail: luigi.zingales@ChicagoBooth.edu
AB  - We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation. We find that where entry was more restricted the cost of credit was higher and - contrary to expectations- access to credit lower. The only benefit of these restrictions was a lower proportion of bad loans. Liberalization brings a reduction in rates spreads and an increased access to credit at a cost of an increase in bad loans. In provinces where restrictions to bank competition were most severe, the proportion of bad loans after deregulation raises above the level present in more competitive markets, suggesting that the pre-existing conditions severely impact the effect of liberalizations.
ER  -