The Real Effects of Bank Supervision: Evidence from On-Site Bank Inspections

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The Real Effects of Bank Supervision: Evidence from On-Site Bank Inspections

We show that bank supervision reduces distortions in credit markets and generates positive spillovers for the real economy. Exploiting the quasi-random selection of inspected banks in Italy, we show that financial intermediaries are more likely to reclassify loans as non-performing after an audit.

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