This study investigates the impact of the ECB's Targeted Longer-Term Refinancing Operations (TLTROs) on Italian provinces’ economic development. The program provided preferential funding to banks conditional on them lending to firms. We find that TLTROs did not generate beneficial effects in terms of economic development across Italian provinces. The results show that average firm investment rate fell, driven by small and micro firms, who witnessed a decline in assets. This had a negative, albeit economically small, impact on per capita GDP and unemployment rates at the provincial level. TLTROs were associated with worsened economic conditions for those firms performing well in the pre-TLTRO period. Distressed (zombie) borrowers saw their investment increase, but their post-TLTRO performance did not improve. Overall, TLTROs did not spur economic development through the lending channel across provinces.

Following a natural disaster, the rate of economic growth recovers faster in less competitive banking markets. A 10% reduction in competition increases the rate of economic growth by 0.3%. In less competitive markets, banks respond to a disaster by increasing the supply of real estate credit by refinancing mortgage loans, but do not lend more to businesses or consumers. Instead, government agencies provide disaster loans to affected businesses and households. Smaller, profitable and well-capitalized institutions that rely more on traditional retail banking originate most mortgage credit.