COVID-19 and credit risk variation across banks: International insights

This paper focuses on utilizing non-performing loans (NPLs) as the primary indicator of credit risk to analyze how various bank and country-level characteristics influence changes in credit risk within and between banks across China, Europe, and the U.S. during the COVID-19 period. Over 4959 bank-quarter observations (from Q4 2019 to Q4 2021), it becomes evident that COVID-19 significantly contributes to the variation in NPLs, underscoring its adverse impact on credit risk. This pattern is consistent across all countries; however, Chinese banks exhibit more robust capabilities in managing credit risk exposure compared to their European and U.S. counterparts. These findings offer significant implications for policymakers, investors, and regulators who are concerned about the repercussions of global pandemics on financial institutions.