COVID-19 and lending responses of European banks

H. Özlem Dursun-de Neef and Alexander Schandlbauer

Journal of Banking & Finance, 2021, vol. 133, issue C

Abstract: This paper examines how European banks adjusted lending at the onset of the pandemic depending on their local exposure to the COVID-19 outbreak and capitalization. Using a bank-level COVID-19 exposure measure, we show that higher exposure to COVID-19 led to a relative increase in worse-capitalized banks’ loans whereas their better-capitalized peers decreased their lending more. At the same time, only better-capitalized banks experienced a significantly larger increase in their delinquent and restructured loans. These findings are in line with the zombie lending literature that banks with low capital have an incentive to issue more loans during contraction times to help their weaker borrowers so that they can avoid loan loss recognition and write-offs on their capital.

Keywords: COVID-19; Bank lending; Europe; Bank capitalization; Zombie lending (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426621001953
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:133:y:2021:i:c:s0378426621001953

DOI: 10.1016/j.jbankfin.2021.106236

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().