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

52 Pages Posted: 20 Oct 2020 Last revised: 24 Apr 2021

See all articles by Yuejiao Duan

Yuejiao Duan

Nankai University - School of Finance

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Haoran Li

Nankai University - School of Finance

Xinming Li

University of South Carolina, Darla Moore School of Business, Department of Finance

Date Written: October 16, 2020

Abstract

Using 1,584 listed banks from 65 countries during the COVID-19 pandemic, we conduct the first broad-based international study examining the effect of the pandemic on bank systemic risk. We find the pandemic increases systemic risk across countries. The effect operates through government policy and bank default risk channels. Additional analysis suggests that the adverse effect of the pandemic on systemic stability is more pronounced for large, highly leveraged, riskier, high loan-to-asset, undercapitalized, and low network centrality banks. However, this effect is moderated by formal bank regulation (e.g., deposit insurance) and ownership structure (e.g., foreign and government ownership), and informal institutions (e.g., culture and trust).

Keywords: Banking, COVID-19, International, Systemic risk, Regulation, Informal institutions

JEL Classification: G21, F30

Suggested Citation

Duan, Yuejiao and El Ghoul, Sadok and Guedhami, Omrane and Li, Haoran and Li, Xinming, Bank Systemic Risk around COVID-19: A Cross-Country Analysis (October 16, 2020). Available at SSRN: https://ssrn.com/abstract=3713218 or http://dx.doi.org/10.2139/ssrn.3713218

Yuejiao Duan

Nankai University - School of Finance ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

Sadok El Ghoul (Contact Author)

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Haoran Li

Nankai University - School of Finance ( email )

38 Tongyan Road, Jinnan District
Tianjin, Tianjin 300350
China

Xinming Li

University of South Carolina, Darla Moore School of Business, Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

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