Banking Sector Performance During the COVID-19 Crisis

Demirguc-Kunt A, Pedraza A, Ruiz-Ortega C. Banking Sector Performance During the COVID-19 Crisis. World Bank Policy Research Working Paper 9363.

49 Pages Posted: 12 Sep 2020

See all articles by Asli Demirgüç-Kunt

Asli Demirgüç-Kunt

World Bank

Alvaro Pedraza

World Bank

Claudia Ruiz Ortega

World Bank; World Bank - Development Research Group (DECRG)

Date Written: September 9, 2020

Abstract

This paper analyzes bank stock prices around the world to assess the impact of the COVID-19 pandemic on the banking sector. Using a global database of policy responses during the crisis, the paper also examines the role of financial sector policy announcements on the performance of bank stocks. Overall, the results suggest that the crisis and the countercyclical lending role that banks are expected to play have put banking systems under significant stress, with bank stocks underperforming their domestic markets and other non-bank financial firms. The effectiveness of policy interventions has been mixed. Measures of liquidity support, borrower assistance, and monetary easing moderated the adverse impact of the crisis, but this is not true for all banks or in all circumstances. For example, borrower assistance and prudential measures exacerbated the stress for banks that are already undercapitalized and/or operate in countries with little fiscal space. These vulnerabilities will need to be carefully monitored as the pandemic continues to take a toll on the world’s economies.

Keywords: Bank stock returns, government announcements, liquidity premium, COVID-19 pandemic

JEL Classification: G01, G14, G21, G28, E58

Suggested Citation

Demirgüç-Kunt, Asli and Morales, Alvaro and Ruiz Ortega, Claudia and Ruiz Ortega, Claudia, Banking Sector Performance During the COVID-19 Crisis (September 9, 2020). Demirguc-Kunt A, Pedraza A, Ruiz-Ortega C. Banking Sector Performance During the COVID-19 Crisis. World Bank Policy Research Working Paper 9363., Available at SSRN: https://ssrn.com/abstract=3689789 or http://dx.doi.org/10.2139/ssrn.3689789

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Alvaro Morales

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Claudia Ruiz Ortega (Contact Author)

World Bank ( email )

1818 H Street
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, NW
Washington, DC 20433
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2,658
Abstract Views
6,257
rank
6,333
PlumX Metrics