Bank Systemic Risk around COVID-19: A Cross-Country Analysis

Pandemic-driven financial contagion and investor behavior: Evidence from the COVID-19

“…As the once in a 100 years catastrophic event, the COVID-19 pandemic has attracted considerable attention from scholars, policymakers, and risk managers ( Cheng et al, 2022 , Duan et al, 2021 , Polyzos et al, 2021 , Samitas, Kampouris et al, 2022 , Samitas et al, 2022b , Samitas et al, 2022c ). The research related to the financial contagion driven by pandemic events (such as SARS in 2003, H1N1 in 2009, Ebola in 2014, and ZIKA in 2016) is limited until recently, when there has been a surge of interest in studying it after the outbreak of the COVID-19 ( Akhtaruzzaman et al, 2021 , Aslam et al, 2020 , Duan et al, 2021 , Guo et al, 2021 , Liao et al, 2021 ). Wang, Yuan, Wang (2021) investigate the financial contagion between oil and stock markets during the COVID-19 and show that the magnitude of financial contagion exceeds that during the 2008 financial crisis.…”

COVID-19 and policy responses: Early evidence in banks and FinTech stocks

“…Overall, these empirical findings contribute and extend the literature on COVID-19 and its impact on banks and FinTechs. In contrast to Duan et al (2021) , who examines changes in systematic risk in banks globally due to the pandemic, our study disaggregates the systematic and idiosyncratic risks to reveal that bank stocks responded early to the pandemic followed by FinTech stocks and then the overall market.…”

“…Furthermore, we also find that various policy actions resulted in contrasting effects on the stock returns of FinTechs, large and small banks. While Demirgüç-Kunt et al (2021) as well as Duan et al (2021) use a global context and Acharya et al (2021) focus on the U.S. setting, we concentrate on the impact of the pandemic, including the subsequent policy reactions in Australia. In addition, we extend the emerging literature on the impact of pandemics with additional insights by contrasting FinTechs and bank stock performance, by differentiating between systematic and idiosyncratic risks, as well as comparing large and small bank stock reactions.…”

“…These results are consistent with our findings in the Australian context. Duan et al (2021) show the systemic risk in banks around the world increased due to the impact from the pandemic and this risk was mitigated by factors including bank regulation, ownership structure, and informal institutions. Berger and Demirgüç-Kunt (2021) suggest that future research needs to evaluate the effect of the crisis on FinTech and bank business models.…”

COVID-19, bank deposits, and lending

“… Hasan et al (2021) find that syndicated loan spreads increased as either the lender or the borrower became more exposed to the pandemic. In addition, Colak and Öztekin (2021) study the effect of the pandemic on global lending by analyzing banks from 125 countries and Duan et al (2021) examine changes in banks’ systemic risk for over 1500 listed banks from 64 countries. Focusing on European banks, Dursun-de Neef and Schandlbauer (2021) show that worse-capitalized banks increased their loan supply significantly more during the pandemic while holding their delinquent loans lower than their better-capitalized peers, which is attributed to zombie lending by worse-capitalized banks in an attempt to avoid write-offs on their capital.…”