Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis
Philip E. Strahan and
No 27256, NBER Working Papers from National Bureau of Economic Research, Inc
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.
JEL-codes: G2 (search for similar items in EconPapers)
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Published as Lei Li & Philip E Strahan & Song Zhang, 2020. "Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis," The Review of Corporate Finance Studies, vol 9(3), pages 472-500.
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