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Time to Extend Credit? Bank Credit Lines During the COVID-19 Pandemic in Russia

Author

Listed:
  • Maria Semenova

    (Center for Institutional Studies and School of Finance, HSE University)

  • Polina Popova

    (Center for Institutional Studies, HSE University)

Abstract

This study focuses on the effect the COVID-19 pandemic had on the drawdown of bank credit lines in Russia. Using bank-level data for all Russian banks for 2017–2020, we document that the first quarter of the pandemic saw a significant increase in the probability that banks have positive granted credit lines, which – given that banks do not tend to extend credit limits at the beginning of an economic crisis – could be a signal that borrowers drew down funds within existing credit limits where possible, increasing the overall credit risk of the banking sector. The following quarters showed a gradual decrease in the inability of pre-pandemic models to estimate the probability that lines of credit would be granted, meaning that the banks adapted to the new economic reality. This is the first study examining the COVID-19 shock on credit line drawdowns using publicly available bank-level data.

Suggested Citation

  • Maria Semenova & Polina Popova, 2023. "Time to Extend Credit? Bank Credit Lines During the COVID-19 Pandemic in Russia," Russian Journal of Money and Finance, Bank of Russia, vol. 82(2), pages 106-119, June.
    • Handle: RePEc:bkr:journl:v:82:y:2023:i:2:p:106-119
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    References listed on IDEAS

    as
    1. Gabriel Jiménez & Jose A. Lopez & Jesus Saurina, 2009. "Empirical Analysis of Corporate Credit Lines," The Review of Financial Studies, Society for Financial Studies, vol. 22(12), pages 5069-5098, December.
    2. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
    3. Daniel L. Greenwald & John Krainer & Pascal Paul, 2020. "The Credit Line Channel," Working Paper Series 2020-26, Federal Reserve Bank of San Francisco.
    4. Acharya, Viral & Almeida, Heitor & Ippolito, Filippo & Perez, Ander, 2014. "Credit lines as monitored liquidity insurance: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 112(3), pages 287-319.
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    More about this item

    Keywords

    bank; credit line; Russia; COVID-19;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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