Policies in support of lending following the coronavirus (COVID 19) pandemic

Katarzyna Budnik (), Ivan Dimitrov, Johannes Groß, Martina Jančoková, Max Lampe, Bianca Sorvillo, Anze Stular and Matjaž Volk

No 257, Occasional Paper Series from European Central Bank

Abstract: This paper looks at the impact of mitigation policies implemented by supervisory and macroprudential authorities as well as national governments in the euro area during the coronavirus (COVID-19) pandemic to support lending to the real economy. The impact assessment concerns joint, and individual, effect of supervisory measures introduced by the ECB Banking Supervision, a reduction in macroprudential buffers put forward by national macroprudential authorities, and public moratoria and guarantee schemes. The analysis has been conducted in the first half of 2020, in a situation of high uncertainty about how the crisis will develop in the future. Against this backdrop, it proposes a method of addressing such uncertainty by assessing the impact of policies across a full range of scenarios. We find that the supervisory, macroprudential and government policies should have helped to maintain higher lending to the non-financial private sector (around 5% higher than lending in the absence of policy measures) and, in particular, to non-financial corporations (12% higher than lending in the absence of policy measures), preventing further amplification of the recession via the banking sector. The national and supervisory and macroprudential actions have reinforced each other, and have been jointly able to affect a broader share of the banking sector. JEL Classification: E37, E58, G21, G28

Keywords: banking sector; COVID-19; impact assessment; real-financial feedback mechanism (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mac
Note: 1355359
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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