The Purpose of Bank Lending: Regulatory Asymmetry, Incentive Distortions, and Monitoring Gaps in Italian Credit Data

The stated purpose of bank lending is collected at origination but rarely subject to structured, observable ex-post verification. Bank of Italy supervisory reports show that 42% of the medium-to-long-term loan stock and 63% of new transactions carry no specific coded purpose (residual category DESINV998). This paper examines the problem from three complementary angles.

On the regulatory side, the banking prudential framework has remained anchored to a procedural-compliance logic — verifying that disbursement occurred in line with the credit committee decision — while public finance has, over thirty years, moved toward outcome-based legitimacy: from expenditure documentation (D.lgs. 123/1998) to milestone-conditioned payment (Reg. 2021/241 — RRF), to the codification of ex-ante/in-itinere/ex-post evaluation as a general principle (D.lgs. 184/2025).

On the incentive side, public guarantees can reduce or eliminate the lending bank's skin in the game and weaken the private incentive to monitor the use of funds. Open data published on the Italian SME Guarantee Fund show a pattern consistent with this distortion: in 2020 the share of transactions falling in clusters compatible with higher guarantee coverage ratios increased anomalously. This should be read as an indirect indicator of declarative incentive, not as a direct observation of the actual stated or end purpose of funds.

On the technological-institutional side, ex-post purpose verification is already in production at frontier intermediaries (AFC Digital Hub, Intesa Sanpaolo, operational since 2022), and the regulatory framework is converging — through the 2024 European AML package, the launch of AMLA, the European Green Bond Standard (Reg. 2023/2631), and the CSRD — towards stricter purpose-verification standards. Ordinary private bank credit remains among the least covered by specific standards.

The paper proposes a regulatory-symmetry framework: since a loan backed by a public guarantee is economically equivalent to an indirect public subsidy, the entity obligated to verify purpose should include the lending bank, not just the beneficiary's supervisory body. This proposal extends the logic of DPCM 84/2026 from the public-administration side to the financial-intermediary side.