Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis
TLDR
In the case of the COVID-19 crisis, banks drew funds on a massive scale from pre-existing credit lines and loan commitments in anticipation of cash flow disruptions.Abstract:
In March of 2020, banks faced the largest increase in liquidity demands ever observed. Firms drew funds on a massive scale from pre-existing credit lines and loan commitments in anticipation of cash flow disruptions from the economic shutdown designed to contain the COVID-19 crisis. The increase in liquidity demands was concentrated at the largest banks, who serve the largest firms. Pre-crisis financial condition did not limit banks’ liquidity supply. Coincident inflows of funds to banks from both the Federal Reserve’s liquidity injection programs and from depositors, along with strong pre-shock bank capital, explain why banks were able to accommodate these liquidity demands.read more
Citations
More filters
ReportDOI
How Valuable is Financial Flexibility When Revenue Stops? Evidence from the Covid-19 Crisis
TL;DR: The COVID-19 shock creates a sudden temporary sharshortfall in revenue for firms as discussed by the authors, and they expect firms with greater financial flexibility to be better able to fund.
Journal ArticleDOI
Consumer Spending Responses to the COVID-19 Pandemic: An Assessment of Great Britain
TL;DR: In this article, the authors examined consumer spending responses to the onset and spread of COVID-19, and subsequent government imposed lockdown in Great Britain, GB (England, Scotland, Wales).
Journal ArticleDOI
COVID-19 pandemic and firm performance: Cross-country evidence
Shiwei Hu,Yuyao Zhang +1 more
TL;DR: In this article, the authors assess the impact of the COVID-19 pandemic on corporate performance and show that firm performance deteriorates during the CO VID-19 Pandemic, especially in countries with better healthcare systems, more advanced financial systems and better institutions.
Journal ArticleDOI
The Impact of COVID-19 Pandemic on Bank Lending Around the World
Gönül Ҫolak,Özde Öztekin +1 more
TL;DR: In this article, the influence of the pandemic on global bank lending and identifying bank and country characteristics that amplify or weaken the effect of the disease outbreak on bank credit was evaluated.
ReportDOI
The Risk of Being a Fallen Angel and the Corporate Dash for Cash in the Midst of Covid
Viral V. Acharya,Sascha Steffen +1 more
TL;DR: In this paper, data on firm-loan-level daily credit line drawdowns in the United States expose a corporate "dash for cash" induced by the COVID-19 pandemic.
References
More filters
Journal ArticleDOI
Bank Lending During the Financial Crisis of 2008
TL;DR: This article showed that new loans to large borrowers fell by 47% during the peak period of the financial crisis (fourth quarter of 2008) relative to the prior quarter and by 79% relative to peak of the credit boom (second quarter of 2007).
Journal ArticleDOI
Bank Lending During the Financial Crisis of 2008
TL;DR: This paper found that new loans to large borrowers fell by 37% during the peak period of the financial crisis (September-November 2008) relative to the prior three-month period and by 68% compared to the peak of the credit boom (Mar-May 2007).
Journal ArticleDOI
Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking
TL;DR: In this article, the authors argue that since banks often lend via commitments, their lending and deposit-taking may be two manifestations of one primitive function: the provision of liquidity on demand.
Journal ArticleDOI
Bank Liquidity Creation
TL;DR: This paper found that bank liquidity creation increased every year and exceeded $2.8 trillion in 2003 and that the relationship between capital and liquidity creation was positive for large banks and negative for small banks.
Journal ArticleDOI
Liquidity Risk Management and Credit Supply in the Financial Crisis
Marcia Millon Cornett,Jamie John McNutt,Philip E. Strahan,Philip E. Strahan,Hassan Tehranian +4 more
TL;DR: In this article, the authors conclude that efforts to manage the liquidity crisis by banks led to a decline in credit supply, and that off-balance-sheet liquidity risk materialized on the balance sheet and constrained new credit origination.