Policies in Support of Lending Following the Coronavirus (COVID-19) Pandemic

57 Pages Posted: 24 May 2021

See all articles by Katarzyna Barbara Budnik

Katarzyna Barbara Budnik

European Central Bank (ECB)

Ivan Dimitrov

European Central Bank (ECB)

Johannes Groß

European Central Bank (ECB); Fraunhofer FIT

Martina Jancokova

European Central Bank

Max Lampe

European Central Bank (ECB)

Bianca Sorvillo

Bank of Italy

Anze Stular

European Central Bank (ECB)

Matjaz Volk

Bank of Slovenia

Date Written: May, 2021

Abstract

This paper looks at the impact of mitigation policies implemented by supervisory and macroprudential authorities as well as national governments in the euro area during the coronavirus (COVID-19) pandemic to support lending to the real economy. The impact assessment concerns joint, and individual, effect of supervisory measures introduced by the ECB Banking Supervision, a reduction in macroprudential buffers put forward by national macroprudential authorities, and public moratoria and guarantee schemes. The analysis has been conducted in the first half of 2020, in a situation of high uncertainty about how the crisis will develop in the future. Against this backdrop, it proposes a method of addressing such uncertainty by assessing the impact of policies across a full range of scenarios. We find that the supervisory, macroprudential and government policies should have helped to maintain higher lending to the non-financial private sector (around 5% higher than lending in the absence of policy measures) and, in particular, to non-financial corporations (12% higher than lending in the absence of policy measures), preventing further amplification of the recession via the banking sector. The national and supervisory and macroprudential actions have reinforced each other, and have been jointly able to affect a broader share of the banking sector.

JEL Classification: E37, E58, G21, G28

Suggested Citation

Budnik, Katarzyna Barbara and Dimitrov, Ivan and Groß, Johannes and Jancokova, Martina and Lampe, Max and Sorvillo, Bianca and Stular, Anze and Volk, Matjaz, Policies in Support of Lending Following the Coronavirus (COVID-19) Pandemic (May, 2021). ECB Occasional Paper No. 2021/257, Available at SSRN: https://ssrn.com/abstract=3851028 or http://dx.doi.org/10.2139/ssrn.3851028

Katarzyna Barbara Budnik (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Ivan Dimitrov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Johannes Groß

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Fraunhofer FIT

Germany

Martina Jancokova

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Max Lampe

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Bianca Sorvillo

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Anze Stular

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Matjaz Volk

Bank of Slovenia ( email )

Slovenska cesta 35
Ljubljana, 1505
Slovenia

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