Why Did Bank Stocks Crash during COVID-19?

• 成果类型: Article
• 署名作者: Acharya, Viral V.; Engle, Robert; Jager, Maximilian; Steffen, Sascha
• 署名单位: New York University; Frankfurt School Finance & Management
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae028
• 发表日期: 2024
• 页码: 2627
• 关键词: CAPITAL SHORTFALL; liquidity risk; credit; lines

摘要

A two-sided credit-line channel-relating to drawdowns and repayments-explains the severe drop and partial subsequent recovery in bank stock prices during the COVID-19 pandemic. Banks with greater exposure to undrawn credit lines saw larger stock price declines but performed better outside of crises periods. Despite deposit inflows, high drawdowns led to reduced bank lending, suggestive of capital encumbrance upon drawdowns. Repayments of credit lines unencumbered capital which explains the stock price recovery starting Q2 2020. Bank provision of credit lines resembles writing put options on aggregate risk, and we propose how to incorporate this feature into bank stress tests.