Impacts of COVID-19 on Banking

Abstract

COVID-19 has had major impacts for banking, with the United States government making various efforts to shore up the financial system. These have included temporary and permanent rule changes, easing Capital requirements in an effort to spur lending and maintain bank solvency. Using publicly available data on bank holdings, we constructed tests for the changes in lending and allocation for pending loan loss. Our study finds that there has been a significant increase in loan loss reserves, yet the ratio of these reserves to total lending is not significant. This work will be extended with 2020-Q2 data when it becomes available.