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Are Banks Catching Corona? Effects of COVID on Lending in the U.S

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  • Beck, Thorsten
  • Keil, Jan

Abstract

Exploiting geographic variation in the exposure of U.S. banks to COVID-19 and lockdown policies we find that banks more exposed to pandemic and lockdown policies show an increase in loss provisions and non-performing loans. While we observe an increase in corporate, especially small business, lending growth, this is driven by government-guaranteed loans. Finally, we observe a reduction in the number and average amount of syndicated loans for banks more affected by the pandemic as well as an increase in interest spreads and decrease in maturities. These findings point to a negative impact of the pandemic and swift reactions by banks.

Suggested Citation

  • Beck, Thorsten & Keil, Jan, 2021. "Are Banks Catching Corona? Effects of COVID on Lending in the U.S," CEPR Discussion Papers 15869, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15869
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    Cited by:

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    2. Özlem Dursun-de Neef, H. & Schandlbauer, Alexander, 2021. "COVID-19 and lending responses of European banks," Journal of Banking & Finance, Elsevier, vol. 133(C).
    3. Dunz, Nepomuk & Hrast Essenfelder, Arthur & Mazzocchetti, Andrea & Monasterolo, Irene & Raberto, Marco, 2023. "Compounding COVID-19 and climate risks: The interplay of banks’ lending and government’s policy in the shock recovery," Journal of Banking & Finance, Elsevier, vol. 152(C).
    4. Feyen, Erik & Alonso Gispert, Tatiana & Kliatskova, Tatsiana & Mare, Davide S., 2021. "Financial Sector Policy Response to COVID-19 in Emerging Markets and Developing Economies," Journal of Banking & Finance, Elsevier, vol. 133(C).
    5. Leonardo Bonilla-Mejía & Mauricio Villamizar-Villegas, 2022. "The Leading Role of Bank Supply Shocks," Borradores de Economia 1205, Banco de la Republica de Colombia.
    6. Shabir, Mohsin & Jiang, Ping & Wang, Wenhao & Işık, Özcan, 2023. "COVID-19 pandemic impact on banking sector: A cross-country analysis," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    7. Amal Alabbad & Andrea Schertler, 2022. "COVID-19 and bank performance in dual-banking countries: an empirical analysis," Journal of Business Economics, Springer, vol. 92(9), pages 1511-1557, November.
    8. Forbes, Kristin & Friedrich, Christian & Reinhardt, Dennis, 2023. "Stress relief? Funding structures and resilience to the covid shock," Journal of Monetary Economics, Elsevier, vol. 137(C), pages 47-81.
    9. Duan, Yuejiao & Fan, Xiaoyun & Wang, Yu, 2022. "Economic policy uncertainty and bank systemic risk: A cross-country analysis," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    10. Norden, Lars & Mesquita, Daniel & Wang, Weichao, 2021. "COVID-19, policy interventions and credit: The Brazilian experience," Journal of Financial Intermediation, Elsevier, vol. 48(C).
    11. Li, Xiang, 2022. "The role of state-owned banks in crises: Evidence from German banks during COVID-19," IWH Discussion Papers 6/2022, Halle Institute for Economic Research (IWH), revised 2022.
    12. Keil, Jan & Ongena, Steven, 2024. "The demise of branch banking – Technology, consolidation, bank fragility," Journal of Banking & Finance, Elsevier, vol. 158(C).
    13. Anna Burova & Alexey Ponomarenko & Svetlana Popova & Andrey Sinyakov & Yulia Ushakova, 2022. "Measuring Heterogeneity in Banks’ Interest Rate Setting in Russia," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(14), pages 4103-4119, November.
    14. Thiago Christiano Silva & Carlos Eduardo de Almeida & Solange Maria Guerra & Benjamin Miranda Tabak, 2024. "COVID-19 and Credit Reallocation: evidence from bank branch lending in Brazil," Working Papers Series 601, Central Bank of Brazil, Research Department.

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    More about this item

    Keywords

    Covid-19; Banking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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