The U.S. bank stress tests aim to improve financial system stability. However, they may also affect bank credit supply … Hypothesis, under which stress-tested banks reduce credit supply – particularly to relatively risky borrowers – to decrease their … credit risk. The findings do not support the Moral Hazard Hypothesis, in which these banks expand credit supply …

dimensions: (i) the role of under-capitalized banks, (ii) effects on zombie firms, and (iii) spillovers and distortions for non …

We provide evidence consistent with a “credit-line drawdown channel” to explain the large and persistent crash of bank … stock prices during the COVID-19 pandemic. Stock prices of banks with large ex-ante exposures to undrawn credit lines and … large ex-post gross drawdowns declined more, especially of banks with weaker capital buffers. These banks reduced new …

We study the crash of bank stock prices during the COVID-19 pandemic. We find evidence consistent with a "credit line … drawdown channel". Stock prices of banks with large ex-ante exposures to undrawn credit lines as well as large ex-post gross … drawdowns decline more. The effect is attenuated for banks with higher capital buffers. These banks reduce term loan lending …